Homes are first a place to live, so buy what you can afford for the long term

I'm getting more questions from homeowners who can afford their monthly mortgage payments, have no reason or plans to move, and yet wonder whether they should walk away from their home because its value has dropped.

During a recent online discussion, one reader who identified herself as "Florida Chick" wrote that her house cost $550,000 when she bought it new in 2006. She put down 20 percent. She has a 30-year fixed mortgage of 6.125 percent.

Her house is now worth about $350,000.

"Orlando values cratered," she wrote. "I am going broke using savings to pay this mortgage. I want to walk and rent. Why shouldn't I? I do not want to be an American sucker." There might be gaps in the story that Florida Chick didn't fill, but if she is using her savings to pay her mortgage, that indicates she was in trouble long before the housing bubble burst.

I'm hearing the same frustration from a lot of other people: They feel as if they were duped because the value of their homes has dramatically decreased. Because others have walked away, the Florida homeowner thinks she's within reason to negate her promise to pay.

This walk-away strategy is relevant only if you can't pay the mortgage. The value of your home matters only if you need to move and you can't sell the home for enough to pay off the mortgage. In both cases, you have a serious problem.

Before the recession and the equivalent of a housing-market earthquake, many borrowers bought into the notion that their homes would always increase in value. We now know that is not a rule you can live by.

There are plenty of reasons to stay put. To start, walking away will devastate your credit rating, making it more expensive to buy another home. It will probably cost you more to rent, because a landlord will check your credit and might demand a larger security deposit and higher rent to ensure you won't abandon your lease.

Walking when you are in the financial position to pay your mortgage is neither right nor wise. You don't get a free pass to indignation if you can afford your mortgage but want to split simply because the property's value is down. If you do this for that reason alone, you're not a sucker. You're foolish.

Here's another question from that same online discussion about moving from two incomes to one.

"I am quitting my $100,000-a-year job to stay at home with my 2-year-old and twins, who will be born this spring," the reader wrote. "We have no debt besides our mortgage (about $2,000 a month). My husband also makes $100,000 a year. However, I am frightened about what this will do to us. We don't spend frivolously, but we don't pinch pennies either. We have about $50,000 in savings, but plan to use some of that to buy a bigger car that will accommodate three (children's) car seats. How can we plan now so we're not struggling later?"

I have one word that will help anybody at any income level: