Reuters Money

Jake Engle has some sobering news for bright-eyed families eager to ditch their tiny houses for sprawling four-bedroom homes in the suburbs: you might be sorry.

As a financial planner at Wealth Planning & Management in Portland, Oregon, Engle has a unique perspective on the financial blunders people make in the name of having a family, particularly when it comes to the idea of owning a home.

“We’re sold this fiction that bigger is better and that two or three people need a 3,000-square-foot home,” he says. “And that’s deceptive. Banks will let you ruin your life by letting you get a house you can’t afford.”

It’s not that experts have anything against happy homeowners. The problem is what happens when the desire for a “McMansion” eclipses other financial goals, like saving for college, putting aside money for retirement or even having enough cash to pay for emergency expenses. Thousands of Americans found that out the hard way when the housing bubble burst, setting off a wave of foreclosures and underwater mortgages.

But the quest for the American dream lives on.

“Once you start having kids, that emotional level of wanting your own place rises exponentially,” says Mark Berg, president of Timothy Financial Counsel in Wheaton, Illinois. “It’s a hugely emotional decision.”

As a father of three, Berg understands the allure of a bigger home, but he tries to get clients thinking about their time horizon. Families with growing teenagers often feel the biggest push to move into a bigger home, but they should be realistic about how much longer they’ll be tripping over gym bags and skateboards – chances are, it will only be a few years until the kids move on to college and parents will be left alone in a five-bedroom house.

“I tell clients: do you buy something for the rule or the exception?” Berg asks. In other words, as a rule, parents with teenagers will be empty-nesters in a few years, except for the few occasions when they come home for holidays or family events

Other key points to consider:

Emotional buying.

There are few things in life that can justify a decision more than family, particularly when it comes to providing a bigger home.

“When people say, ‘I’m doing this for my family,’ you can’t argue with that. It becomes a conversation-stopper,” says Tim Maurer, a financial planner at Financial Consulate in Hunts Valley, Maryland.But Maurer warns against self-deception: “You can’t fool yourself into thinking that just because you’re having a second child you need a five-bedroom house with 3,000 square feet,” he says.

Try to focus on the positive aspects of remaining in an affordable home: more financial flexibility, added cash for savings, and the possibility that your children may even like to bunk in the same room.

“Think about the benefits of having your children sharing a room. It creates closeness and fosters a nice family feeling,” says Stacey Bradford, author and financial blogger.

Timing.
As Berg points out, timing is everything. If your children are college-bound in two or three years, consider the fact that your home with outgrow your family very quickly. Until then:  “It’s okay to be crowded for a little while to make your financial picture realistic,” says Jim Heitman, a financial planner with Compass Financial Planning in southern California. “As far as I know, no child has died from sharing a room with a sibling,” he adds.

That’s not to say having opposite-sex siblings share the same space is ideal; parents faced with the prospect of needing separate bedrooms for their 16-year-old daughter and 14-year-old son may have to consider the cost of an addition versus that of buying a bigger house.

Location, location, location.
Moving to the suburbs might seem like a good idea until the first traffic jam doubles your commute to the office. Think about the hours you’ll spend getting to and from work and ask yourself if it’s worth the expense of time away from your family.

School district.
“One of the first things I would ask before considering a move is, ‘Do I like my school district?’” Good schools may be worth the trade-off of cramped living conditions, Bradford says.

The need for quality education is a common driving factor when contemplating a new house — and for many urban families, moving out of the city is the only way to gain access to quality public education systems and avoid the cost of private tuition, Berg says.

Added costs.
Engle likes to use the acronym “PITIMU” to sum up the list of costs homeowners face when deciding to upsize: Principal, interest, taxes, insurance, maintenance and utilities.

“You can own your home outright, but taxes and insurance never go away,” he says. And don’t forget about every homeowner’s nightmare: leaky roofs or flooded basements are just a few of the unplanned costs that can put a significant dent if your wallet.

Long-term goals.
One of the biggest mistakes families make when upsizing their home is losing sight of their complete financial picture. Often times, saving  for college and retirement takes a hit and other goals like paying down debt or building up an emergency cash reserve go by the wayside.

“Twenty years from now are you going to be saying, ‘I’m so glad we have that bigger house – but how are we going to pay for college?’” Bradford says. Ask yourself what you have to give up for a bigger home, she advises.