Micas

This gets into the territory of off-topic home buying, but I guess I'll bite.

There's a lot of factors that are involved in buying a house. Sometimes it doesn't even make sense to buy a house. It depends on what your long-term goals are and your lifestyle. Sometimes renting a house, or simply living in an apartment makes sense if your life and work are more volatile. A standard rule of thumb is that you shouldn't buy a house if you don't plan to live in it at least 10 years. If you buy and sells houses at a more rapid pace, you start losing a lot of money in closing costs and such.

Maybe I'm still not getting you, but your asking why not buy a 200k house instead of the 220k house? Why stop there? Why not buy a 150k house, or a 100k house. It all depends on what you want. There are generally good reasons why one home may cost more than another. There may be location value differences, or ammenities that are worth more in one house than the other.

The way you know how much you can spend on a house is to get pre-qualified for a loan. Generally, real-estate people won't talk to you if you haven't got a pre-qual letter so they know you are serious and know how much you can actually buy. One of the problems that caused the recent housing bubble is that people were buying homes at the limit of their qualification. A bank will pre-qual you for your maximum amount, and since they get higher returns the more money you borrow, they'll pre-qual you to the point where you'd be just barely able to make the payments. It's always better to buy less home than you can afford for a lot of reasons.

When you get pre-qualified, there are variations in the amounts and terms of the loan. You can buy a more expensive house on a 30 year note than you can on a 15. You have to decide what's in your own best interest. A 15 year loan will have a lower interest rate than a longer term. My house is on a 15 year note at 5%. I will own it outright in a few years.

I think it's important that people think long-term in their spending, and a car is a huge financial out-lay. Consider it taking a big stack of 100 dollar bills and setting fire to it. Only the buyer can decide the "worth" of the driving experience, and the satisfaction they get from a car.

Again, I'm very preachy about this topic, but I continually see people buy cars that cost many thousands of dollars by looking at the "monthly payment". If they never break that mentality, they'll always be burning even more piles of 100 dollar bills in paying interest. My point is that if you start young and discipline yourself to never paying interest on anything but a home, you'll be so much ahead of the game.

It's all relative really. I paid 40k cash for my G35 in 2003. I've had it 6 years, and everything I've done over the last 20 years allows me to pick pretty much any car I want and just write a check for it. I could afford a turbo 997, a GTR, heck, I could buy pretty much any car south of a Veyron for cash, but I'm focusing on a car that will probably cost me ~$38k + TTL. I'm deliberately limiting myself in order to be even further ahead when I get to my 50's, because I eventually want to retire with zero worries.

Live well below your means, and profit in the long run.