Big homes can bring unrelenting debts

DEAR HARRY: I have just recently become a married man. My wife and I are living with her parents so we can save enough for a down payment on a home. The question has come up about how big a home we should buy. My in-laws are urging us to buy as expensive a home as we can because it's the best investment around. My parents want us to buy a home that we can easily manage if one of us should stop working for whatever reason. My parents were so conservative in this regard that they never used mortgages. I know this is a tough question, but are homes a good investment, or should we go with my parents' advice and have our major investments in stocks and bonds?

What Harry says: A home is primarily a place to live. There's a lot of money that goes into a home, and in many cases, a lot of debt. That debt is unrelenting. Miss a couple of payments, and your credit rating gets hit hard. As an investment, home appreciation through most of the nation has been well below stock index funds for the last 40 years. On the other hand, your parents were excessively conservative. Go for the safety of a 20 percent down payment without having to stretch to make your monthly payments. Do not count on your home's appreciation to fund your retirement, although it will help. Do not buy to stay a step ahead of the Joneses.