Adhering to a few straightforward principles while purchasing a home can help you sidestep potential heartache and financial difficulties if the housing market falters again.

Let’s rewind to 2007: the iPhone was launched, the last Harry Potter book hit the shelves, and I was on the verge of losing my house. I wasn’t the only one; amidst pop culture chaos, millions of American homes plummeted in value.

While I won't delve into all the grim details, we lost a significant amount of home equity, halted mortgage payments, and underwent a loan modification struggle. It was a tough time, but we managed to keep a roof over our heads, albeit with little savings left. Unfortunately, many others faced far worse outcomes.

We fell victim to lax lending practices, inflated home prices, and fraudulent activities on Wall Street, but we also made some severe errors.

Now that home prices have surged back to pre-crisis levels and there’s talk of loosening financial regulations, I worry we might be repeating history. That said, buying a home is still a viable choice — we just purchased one again in October.

However, there are a few key mistakes from our first experience that we made sure to avoid this time. Here’s what we did differently:

Choose Your Location Wisely

The 2007 housing market in San Diego was utterly chaotic: $500,000 could buy you a one-bedroom “condo conversion” in a decent area. Finding a two-bedroom was a challenge, and we were limited to small spaces under 900 square feet. To stretch our budget, we opted for a decent house in a less desirable neighborhood with great potential.

I'm not exaggerating when I say we faced drive-by shootings (including one incident where a bullet struck our garage), frequent car break-ins, and our home was regularly vandalized.

Despite the challenges, the community was vibrant and full of culture. We cherished our neighbors and were excited about several upcoming redevelopment initiatives.

While the neighborhood had investment potential, it wasn’t shielded from the economic downturn. Property values across the city plummeted, and our home value crashed from $550,000 to just $130,000 within a year. In contrast, more desirable areas rebounded faster and experienced fewer foreclosures.

For our second home purchase, rather than selecting the best house on a poor street, we followed the age-old advice and bought the “worst” house on a great street. This neighborhood fared much better during the housing bubble burst, maintaining consistent demand. If another downturn occurs, we’re less anxious about being stuck in an unsellable property or losing our investment.

If you’re house hunting, prioritize securing a spot on a better street.

Think Long-Term

Timing is notoriously tricky in real estate; knowing when to enter and exit the market is vital. Initially, we aimed to sell our first house for profit within five years. This time, we're adopting a long-term mindset. Homeownership is no longer about a continuous cycle of buying and selling to upgrade our neighborhood. With our latest purchase, we intend for it to be our forever home.

If the market dips again, we’ll remain in our current house. It’s a safe environment with good schools, and we don’t have any pressing reasons to move. We might live here for the long haul — and I’m completely fine with that.

I’ve let go of aspirations to upgrade, especially since we’re settled in a nice neighborhood. I'm not even contemplating a future property because that might not happen. Our financial plans are independent of moving; we’re not betting on timing the market for profit.

Adjust Your Income Expectations

Our original plan to climb the property ladder relied on the unrealistic assumption that our incomes would continually rise. That dream crumbled when my husband lost his job in 2008, two years into our homeownership.

As he searched for new work, we faced a 30 percent drop in income. Job opportunities in his field were scarce, and those available offered lower salaries.

Now, our future plans don’t hinge on the expectation of increased earnings. We’ve prepared a contingency plan for significant income drops. While we hope to advance in our careers and boost our salaries, our lifestyle, savings, and retirement strategies aren’t built on that assumption. Worst case, we’ll tighten our budget, but we’ll still have our home.

Reevaluate Your Housing Budget

Many financial experts suggest a 30 percent rule for determining how much you can spend on housing, meaning no more than 30 percent of your income should go to housing costs. We applied this rule when buying our first home, and it turned out to be a major blunder.

We welcomed our first child during our first year of homeownership and foolishly thought we could maintain our budget based on this 30 percent guideline. Once our daughter arrived and we included daycare costs, student loan repayments, and other fixed expenses, I decided to become a stay-at-home parent. This shift significantly altered our financial landscape.

What had been a 30 percent mortgage payment ballooned to nearly 50 percent, leaving us with a home that was no longer affordable. Looking back, it was a foolish mistake, and we fully accept responsibility for it. We won’t repeat that error.

This time, we didn’t rely on rigid percentages to determine our budget. Instead, we took a comprehensive view of our finances and honestly assessed our future plans, deciding not to expand our family or pursue further education — tough choices we discussed for years. For us, these are the necessary sacrifices of homeownership.

When asked if we plan to have another child, we now say, “No, we have a house instead.” It’s bittersweet, but we realize we can’t have everything. However, considering our journey and where we stand now, we’ve come pretty close.