I'd say buy the least expensive house that meets your needs. The home you live in is generally a poor investment. While (good) real-estate tends to at least keep pace with inflation there are many costs associated with it that people fail to consider when looking at the price increase alone. Coinsider:

• Upkeep: you will likely need a new roof at some point, for example (usually a bigger house means a bigger roof)
• Property taxes, as a home owner you get the privilege of paying these every year and they go up when your home increases in value
• Fees fees fees. You pay when you buy and when you sell based on the value of the home and/or size of the mortgage
• As Pete B mentions, you will be paying PMI as well on a 12% down payment. That's pure loss on your part
• Renovations: you will never recoup what you put in on a lot of these.

After you consider all this and the time value of money (you pay these costs all along and maybe get a payout much later) the appreciation on a home looks a lot less appealing. The goal with a home should be value retention. Strive to get what you put in out of it. If you happen to make out, great job! Buy yourself something nice.

Another consideration here is what your plan is for retirement. Are you going to stay in this home? If so, you should absolutely forget about it as an investment. You won't get anything out of it until you sell and you won't be selling it. You could do a reverse mortgage but there are real risks of losing your home with those. In addition, are you going to be cleaning this place yourself? I moved into a larger home, and I now have twice as many toilets to clean. More toilets is nice but only when you aren't cleaning them.

If you are planning to move after retirement. Get a smaller home. I doubt your plan is to retire after you are 80 so consider a 15 year mortgage. Watch your cash-flow, though. You need cash to maintain a home, don't stretch yourself too thin. You should also diversify your investments. Real-estate, contrary to popular opinion is not risk-free. Consider the poor souls who discover their driveway or foundation contains radioactive phosphorus slag. They won't be retiring with money from the sale of those houses.

Lastly, as far as value retention and appreciation is concerned focus on location, location, location. It's worth paying more for location. Don't buy the biggest or nicest home in the area and be very careful buying in an area with one dominant employer.

I'd say buy the least expensive house that meets your needs. The home you live in is generally a poor investment. While (good) real-estate tends to at least keep pace with inflation there are many costs associated with it that people fail to consider when looking at the price increase alone. Consider:

• Upkeep: you will likely need a new roof at some point, for example (usually a bigger house means a bigger roof)
• Property taxes, as a home owner you get the privilege of paying these every year and they go up when your home increases in value
• Fees fees fees. You pay when you buy and when you sell based on the value of the home and/or size of the mortgage
• As Pete B mentions, you will be paying PMI as well on a 12% down payment. That's pure loss on your part
• Renovations: you will never recoup what you put in on a lot of these.

After you consider all this and the time value of money (you pay these costs all along and maybe get a payout much later) the appreciation on a home looks a lot less appealing. The goal with a home should be value retention. Strive to get what you put in out of it. If you happen to make out, great job! Buy yourself something nice.

Another consideration here is what your plan is for retirement. Are you going to stay in this home? If so, you should absolutely forget about it as an investment. You won't get anything out of it until you sell and you won't be selling it. You could do a reverse mortgage but there are real risks of losing your home with those. In addition, are you going to be cleaning this place yourself? I moved into a larger home, and I now have twice as many toilets to clean. More toilets are nice to have but only when you aren't cleaning them.

If you are planning to move after retirement. Get a smaller home. I doubt your plan is to retire after you are 80 so consider a 15 year mortgage. Watch your cash-flow, though. You need cash to maintain a home, don't stretch yourself too thin. You should also diversify your investments. Real-estate, contrary to popular opinion is not risk-free. Consider the poor souls who discover their driveway or foundation contains radioactive phosphorus slag. They won't be retiring with money from the sale of those houses.

Lastly, as far as value retention and appreciation is concerned focus on location, location, location. It's worth paying more for location. Don't buy the biggest or nicest home in the area and be very careful buying in an area with one dominant employer.