How Much House Do You Need?

by Ryan Guina

My wife and I are considering relocating to be nearer to her family. That means a lot of work for us in the near future, including prepping our house for the market, selling our house, and searching for a new home.

I’ve never gone house hunting before and so far I feel somewhat overwhelmed with information. Very quickly I discovered the need to eliminate as many options as possible so we can more easily narrow our search. One of the first criteria is location, and in our case, that means relatively close to her family and in an area with good school districts and a little land. The next two major criteria are home size and price. We’ll cover the first one today, and soon we’ll ask the question, “how much house can you afford?”

How Much House Do You Need?

I’ll start this off by saying each family has a unique situation. Some families are expanding, some are set for the next decade or so, and others are contracting. My parents recently sold the home we grew up in because they no longer have any children living at home. They downsized from a 5 bedroom home with a playroom and open office area to to a 4 bedroom home with an office. They still have guest rooms for us when we visit, but they have less overall square footage and less upkeep, which suits them perfectly.

On the other hand, my wife and I live in a 2 bedroom town home with our daughter and are planning on increasing the size our family in the next few years. We need to buy a larger home and relocating is the perfect time to do that.

Here are a few considerations when looking at how much house you need.

How many rooms do you need?

My wife and I have one child and we are considering buying a 4 bedroom home. That sounds large until you know the full situation. We are planning on at least one addition to the family and I will need a home office for my home based business. We will also consider a 3 bedroom house with a dedicated den/office, so long as it can be closed off for privacy. The key to considering the number of rooms is by looking at both immediate and future needs. If you are planning on growing or downsizing your family in the near future, then consider buying a home with an additional room, or one less room.

How much square footage do you need?

Large homes can be nice because they feel more spacious and can give growing children room to spread out. But there are downsides as well. For example, it costs a lot more to heat and cool a larger home, more square footage and rooms can increase your property taxes, and the tendency for many people is to fill any empty space with clutter – sometimes to the point that people buy a larger house to store their “stuff.”

Storage space is another consideration. Does the house have attic or basement storage? If so, you may be able to purchase a home with less square footage and utilize those unfinished storage spaces.

How much land do you need?

Each situation is different. If you have children and pets you may want a decent size parcel. If you live in the city you may be comfortable purchasing a town home with no land. Be sure to consider how your family situation may change int he next few years before deciding how much land you need.

How much house can you afford?

This is a big topic that will be discussed in a future article, but it is a major consideration that should be mentioned here. It’s easy to look at the final mortgage payment and say, “yep, we can afford that.” But that can be a costly mistake if you don’t delve deeper into the numbers. You also need to consider mortgage interest rates, property taxes, maintenance, homeowner’s insurance rates, utilities, homeowner’s association (HOA) fees, and other related costs. Depending on where you live, these costs can easily double your mortgage payment.

My recommendation: Start your house search on the small end of the scale and work your way up. In my opinion, many people buy larger homes than they need and end up spending hundreds of thousands more than they need to over the course of their mortgage and the time they live in the home. Larger houses usually are associated with larger mortgage payments, higher property taxes, more expensive homeowner’s insurance premiums, larger HOA fees, greater utility costs, and the desire to fill every corner of the house with “stuff.” Buying a smaller home can save you hundreds of thousands of dollars over the years and requires less upkeep.

Do you have any tips regarding home size?

Published or updated May 23, 2011.
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{ 21 comments… read them below or add one }

1 Traciatim

I kind of like to use 300 sq. ft. per person. Usually that ends up being about 100 sq. ft. of private space (Example, a 10×10 bedroom) and then 200 sq feet of combined living area (Family Room, Kitchen, Dining area, etc.).

Then you tack on any additional needs like your home office since you have a home based business. But wants should fit in to the 300. It’s a pretty good rule of thumb, nothing set in stone and pretty flexible either way, but as a starting point to your search to sit down and say “I have 4 people, so 1200 sq ft or something near there is a good place to start looking”.


2 Ryan

Traciatim, that’s an interesting way of looking at it, and definitely something I will talk to my wife about. We’re still formulating our wants and needs. We “want” a play room for children, but isn’t 100% essential. Same thing goes for lot size and other factors.


3 Doug Warshauer


You did an excellent job covering all the major considerations that go into determining the size of house you need. The recommendation of not buying too big a home is a solid one, too, but with one caveat: make sure, especially as you are expanding your family, to buy a home that you’ll want to live in for close to ten years. Moving sooner than that destroys wealth because of the transaction costs involved in buying and selling.

If you determine that the size house you need is beyond what you can afford, you could either look at different neighborhoods, as home size isn’t the only factor affecting price, or you could rent for a few more years while you save more money toward your down payment (and hopefully increase your income, too!)

Happy Hunting.


4 Ryan

Thanks, Doug. The 10 year time frame is what we are looking at, which is why we are considering a 4 bedroom house. We won’t use all 4 bedrooms when we first move it, but it will give us enough room for expansion. Renting is always a possibility, but we have enough saved for a solid down payment, closing costs, and other considerations. So for us, it’s all about finding the right match. 🙂


5 Ace @

Great article Ryan. This has got to be hands down one of the biggest places that people from a finance point of view. It’s too easy to convince ourselves that we need more house. Even if you start at the low end it’s so tempting to expand your search if you’re not seeing anything that you’re interested in. I think it’s important to set hard cut-off lines and to not even look at homes above it.


6 Ryan

Ace, I think a hard budget is a great idea. It’s easy to get into the heat of the moment and buy a larger or more expensive home just because “it feels right” or gives you an emotional buzz. I admit there is an element of emotion when it comes to choosing a home, and there should be. But there should also be a lot of thought regarding the financial aspect. I don’t think it’s wise to buy a house based purely on economics or emotion. There should be a mix.


7 Ace @

I think you put that much better than I could have myself. =P In the end personal finance needs to be personal, and if you lose sight of that then you lose the ability to enjoy your money (and at that point what’s the point??). I was also very surprised once I looked into the other numbers beyond just the mortgage payments.


8 Ryan

The other numbers are the key. The area where we are considering moving has substantially higher property taxes than we are currently paying (about twice as much), home values are higher, and other costs are higher as well.

9 Kirk Kinder

Closer to the wife’s family, eh. My in-laws live in the neighborhood behind our house. It can be a blessing and a curse. I remember running to the back deck one morning thinking a racoon was getting into the trash. It was just my father-in-law. 🙂

I just read an article on Yahoo finance (sorry couldn’t find it) describing how large homes are a major deterrent to building wealth due to many of the reasons you mentioned such as higher taxes. Other factors are higher interest payments, upkeep, and filling up the bigger space with more consumer goods.

Dr. Stanley discusses this in The Millionaire Next Door as well. Most millionaires live in middle class homes that they have owned for several years. They don’t move often and usually pay off the mortgage. Boring is beautiful when it comes to building wealth.

Of course, you need to enjoy your home as well. So there is a balancing act.


10 savvysavingbytes

I would think upkeep would be a major factor too. The more rooms you have and the bigger they are, the more there is to clean and maintain. Also the more land you have, the more mowing and weeding and tree upkeep.

The advantage of renting is that the landlord takes care of all the major maintenance: painting, pipe and roof and flooding, etc. problems. Leaving the renter with more time to enjoy other things.


11 Ryan

Upkeep is a huge factor. Fewer and smaller rooms are much easier to deal with than large rooms, and smaller lots are also easier to maintain.

Renting is always an option, but it can be difficult to find the right rental and in some cases, you are at the mercy of the landlord if they decider to sell the place, raise rent, etc. (There are some protections in place, but it all depends on how the rental agreement is written).


12 basicmoneytips

This is always a good question to ponder. My wife is a stay at home mom and we live in a house that is rather small for what I earn, but I like the flexiblity it gives us financially.

I have friends who live in the biggest most expensive house they can afford. The reason is they feel like the house will appreciate, and if a your house has a higher cost base you tend to make more. Of course your house has to increase in value… and the last few years have taught us that is not always the case.


13 Ryan

I would prefer *not* to be in the largest house I could afford. I think that would stress me out too much. I prefer to have more financial flexibility because in the long run, that flexibility will enable us to achieve financial freedom much more quickly.


14 Money Smarts Blog

Great article Ryan.

I like how you are trying to evaluate what you need before you get into the heat of the house search.

There are often other market factors which may end up influencing your choices (ie maybe there are no N bedroom houses in your range) but doing this kind of thinking has to help.


15 K.C.

Here is an additional consideration if you plan to stay in a house the rest of your life: number of levels. Stairs can become problematic as one ages. This is not something I would have considered when I was house hunting twenty-five years ago, but at age 57, I am glad that the house we chose is a single level structure.


16 Ryan

Great point, K.C. I’m 30 and I want fewer stairs! We currently live in a 2 story town home with a basement. Our rooms are upstairs and our washer/dryer are in the basement – so it’s up and down 2 flights of stairs to do laundry and similar tasks. I would love to find a 4 bedroom ranch with a basement, but newer homes with that layout and in our price range can be difficult to find in many areas.

This was also a consideration my parents looked at when they recently bought a new home. They sold their 5 bed two story home for a 4 bedroom single story home. They are looking at this as their retirement home, and I know fewer steps is appreciated!


17 Charles@MoneyGreenLife

I unfortunately bought my house in 2006 when the housing boom was at its peak. The value has gone down almost 20% and is eating up my equity. I’m just hoping that i don’t have to sell my house any time soon and that i’ll be able to ride out the housing bottom. It was a starter home and now it’s affecting my financial plan.


18 Ryan

Our house was purchased around the same time and we will take a big hit when we sell. But hopefully we will make up for it on the other end when we buy our next home. I hope things improve in your area and you are able to wait it out!


19 Elizabeth Ayala

Good advice,
We are military moving and we hate to rent. I love big houses but now that I think about it the big the house the more everything else goes up in price. Now can you shine some light on homes with basements.. The house we are currently looking at has a basement. Although the basement has a funny smell.. can you advice there?

Thank you


20 Evan

I always get a laugh when I think about how our society has convinced us with need bigger houses (I am REALLY guilty of it too). All you have to do is google average home size and thengoogle average family size to see as the typical American family gets smaller our houses are getting bigger…


21 Linda

Some great tips. TV and all these flipping and make over shows have us convinced we need a huge home, but really what for? Your outline will probably leave a lot of new home buyers surprised that they don’t need the size of home they once thought they did.

I always say, with a bigger house comes more junk and more time to clean and maintain it. Last time I checked my life’s happiness was not derived from mowing grass or vacuuming :).


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