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Empty-handed homeowners

Lenders and real estate agents often will tell you to stretch yourself when you buy a house. "Buy all the house you can afford!" they'll say. "Borrow to the limit!"

It's bad advice and you should ignore it, financial experts say.

"House poor" is the term for those who spend too much on house payments and maintenance. It's a common affliction. Sufferers starve their retirement accounts and miss out on pleasures such as dining out and taking nice vacations. Being house poor can even fracture a marriage.

In home ownership, as in all things, moderation is best, says Tahira Hira, professor of personal finance and consumer economics at Iowa State University.

"Nothing in excess is good, even if it's a good thing," she says _ and she adds that home ownership is a good thing. So are relaxing vacations, delicious restaurant meals, comfortable furniture and sufficient retirement savings. Devote the right amount to each.

"For every dollar that you put into a house, that's a dollar that you can't use for other things," Hira says. "Ask yourself: Is this where you want to spend that dollar?"

Some folks who seek debt counseling pay $600 to $700 a month on tricked-out pickup trucks, says Rudy Cavazos, spokesman for Money Management International, which runs debt-counseling services in Arizona, New Mexico, Illinois and Texas. "I think, oh my God, it's a pickup," he says. "But they say, "It's my pride and joy.' "

Don't let your pride and joy turn into a money-munching monster, whether it's a pickup truck or a house. Cavazos' rule of thumb is that the house payment _ principal, interest, taxes and insurance _ should add up to 28 to 30 percent of take-home pay.

That leaves 70 to 72 percent for pickup truck payments, leisure, savings and all those expenses that renters often don't consider: maintenance, repairs, homeowner association dues, bigger utility bills and lots more.

Financial planner John Sestina says to count on spending double the cost of principal and interest. If you calculate that principal and interest on your mortgage will cost $500 a month, "figure that maintenance, taxes, et cetera, will cost another $500 a month," he says.

"The cost of ownership is a major problem that people do not forecast when they're looking into homes," Sestina says. "They have to buy a lawn mower and insurance, and then the roof leaks _ the thousands of things that basically cost double the mortgage."

Sestina, who calls himself the father of fee-only financial planning and is president of John E. Sestina & Co. in Columbus, Ohio, offers this rule of thumb: Don't buy a house that costs more than 2{ times your salary. That's your current salary, not what you think it will be someday.

"A premature purchase of a house is probably the No. 1 financial stress factor in a person's life," Sestina says. He notes that money troubles are at the root of many divorces.

That point is seconded by Elizabeth Lewin, author and co-author of several books about financial planning, most recently Family Finance: The Essential Guide for Parents.

Lewin felt house poor in the early 1970s, before her divorce. "The house seemed to gobble up everything, and there wasn't the money for vacations and eating out because we were house poor." That financial condition, she says, contributed to the divorce.

Real estate agents rely on commissions, and lenders make more money on bigger loans, so both will encourage house shoppers to spend as much as possible. "People have to stick to their guns," Lewin says. "You can always move up."