The short answer is, it’s okay to buy less house than what HGTV tells you you need. The world is full of humble houses, in hard-working neighborhoods, and I’d be quicker to buy some good solid 1940’s-and-older houses than I would be to buy something built in the last ten years.
The long answer: If my home was in the “right” neighborhood, in a big city-- I wouldn’t be able to touch it for less than a million. But my home is in a poor, rural town in the middle of nowhere… and we bought it for $60k. At foreclosure, after it had sat for 2 years, gone to auction three times, and bounced around five or six different realtors, because the sellers couldn’t get their asking $250k price, and it had fallen into major disrepair. People were starting to break in by the time we finalized the sale… we had to replace 17 vintage light fixtures. Like, amazing vintage 1920’s light fixtures that had been sold for scrap for drug money…
Should we have passed on it? Should we have let it continue to fall into disrepair, and sit vacant? Few people in our town could afford the house, and its repair, and its taxes, and its utilities, and its upkeep… But it’s “that” house in town, where everyone you run into has memories of playing with the kids who used to live there, and how it used to be back in the day, and it’s cool to take something that might otherwise only be fit for the bulldozer if it continues on its course, and reclaim it as a beautiful place to live and raise a family.
I think it’s prideful and imprudent to spend more than you can afford on “things”— whether it’s a house, or a car, or a vacation, or clothes, or whatever. Then again, I also think it’s a bad idea to saddle yourselves with 30 years’ worth of debt… or a second mortgage… etc. Live within your means, and help others. Don’t be trapped by material goods.
If you want to exercise heroic charity, exercise heroic charity. Buy a $500 used car, and give the difference to the indigent. Live in a $200/month rented room, and spend the other money in your housing budget on the homeless. Eat beans and rice, and spend the other money in your grocery budget on the hungry. But if you’re not going to be heroic, settle for being sensible.