George Kamel - Don’t Buy A Home Until You Watch This

Episode Date: October 14, 2024

💵 Start your free budget today. Download the EveryDollar app!  Before you buy that starter house and begin planning the ultimate housewarming party—hold your horses, House Hunters. In this episode, find out the hidden costs of owning a home and how much you really need saved to buy with no regrets. Next Steps:   🎥 Watch my video The Newest Trend in the Mortgage World (It’s Scary). Connect With Our Sponsors:  🔒 Get 20% off when you join DeleteMe.  💸 Learn more about opening a high-yield savings account with Laurel Road.  📱 Visit Tello for more details. Explore More From Ramsey Network:  🎙️ The Ramsey Show    🍸 Smart Money Happy Hour  💸 The Ramsey Show Highlights  🧠 The Dr. John Delony Show  💡 The Rachel Cruze Show  💼 The Ken Coleman Show  📈 EntreLeadership    Ramsey Solutions Privacy Policy  Learn more about your ad choices. Visit megaphone.fm/adchoices

Do not buy a house, dot, dot, dot, until you know exactly what it's going to cost you. 43% of recent homebuyers say they've struggled to make mortgage payments on time. And honestly, I'm not that surprised. That's sad. Home ownership is expensive, and I'm not just talking about the price of the house and your monthly mortgage payment. In today's video, we'll talk about the sneaky hidden costs of home ownership

and how much you really need to save before buying a house. And as we dive in, hit those like and subscribe buttons and share this video with the sneakiest person you know. before they share it with you. That's some sneaky friend behavior right there. Sneaky, sneaky, sir. All right, the first sneaky cost of owning a home, HOA fees. About 75.5 million Americans live in a community

that is governed by a homeowner's association, aka HOA, LOL. That's about 30% of houses in the U.S., including mine. And if you don't believe me, here's an email I got from the HOA, letting me know that I'll be fined if I don't trim up the old clover patch. Your yard must be 90% crap. Who makes the rules? How am I supposed to know? What is 90%? What's the other 10%? What can that be? Don't ask why. Just do.

Anyway, the HOA is in charge of maintaining and improving the shared properties in a community. And everyone pitches in by paying the HOA fee, which will vary based on your location, the type of community, and the amenities they provide. The average monthly HOA fee is 170 bucks. And most homeowners with an HOA pay less than 50 bucks a month. But they can be way more than that. Now, I don't love my HOA fee, but I do love that my neighbor can't store their 1993 Winnebago Warrior, five feet from my driveway. Your HOA fee can also pay for things like a pool, playground, landscaping, walking trails, fitness center, pickleball cords, pet spa, and that little no soliciting sign that for some reason the door-to-door pest control salesman conveniently never seem to notice.

Here's a hot take. Door-to-door sales is rude. How about you give me your address so I can show up at your house without an appointment, ring your doorbell when your baby's napping just so I can give you free financial advice. Huh? Yeah, that's what I thought. Wait, that actually sounds good to you. I'll happy to do it. Love to. So before you buy a home, make sure you find out if there's an HOA and what the fees are. Even if the fee is small, it's still an added expense to consider and it can go up over time. Never down for some reason.

Next on the list of sneaky home ownership fees, utilities. I'm talking about things like natural gas, electricity, water, trash collection, internet, and cable if you're 111 years old and can't imagine not using this remote to watch Murder Ahoi on TCM. If you don't know what TCM is, you're definitely under 60. I am officially old. So why do I consider utilities a sneaky con? Well, when you're renting, sometimes your rent includes a couple of utilities, or maybe you split the cost with roommates. But when you buy a home for the first time, you might be caught off guard when the cost of your utilities goes way up.

And if you're already a homeowner and you're upsizing to a bigger house, you'll probably upsize some of those utility bills as well. Next up on the list is lawn care. If you're moving somewhere where the yard, you'll need a plan for getting that lawn in order. Lawn in order! Okay, go with me here. This dad goes around town cleaning up the weed. No more clover patches on his watch. HGTV, call me. Let's talk pitches.

Oh, no thanks. We're good. Now, you could hire a landscaping crew, or you could mow it yourself with a sweet Cub Cadet, 54-inch, 24-horsepower, gas-powered Ultima Zero-turned mower with ergonomic handgrips and a bagger attachment. Either way, it's going to cost some money. If you decide to outsource the mowing, like I do, it will likely cost between $40 and $200 per visit

for a standard-sized yard, or about $125, on average, according to Forbes. Now, that sounds high to me personally, but what do I know? I'm no lawn expert, unlike the people at Forbes, apparently. Of course, the exact cost is going to depend on where you live, how big your yard is, what type of work needs to be done, and the frequency of the visits. And if you do decide to do it yourself, you could probably find a decent used mower on Facebook marketplace or Craigslist if you want to save some money.

Either way, you've got to make sure you take lawn care into account when you're home shopping. The next sneaky cost of home ownership, maintenance and repairs. Now, this can be one of the biggest adjustments when you go from renting to owning. Because now you can't just call up the landlord when your HVAC goes out or dishwasher leaks or when a family of squirrel starts having babies in your attic and Steve from Critter Getters tells you it's going to be $14,000 to relocate the entire scurry because they can find their way back to your house even if you drop them off in a field 15 miles away. These squirrels are good.

I'd have our, I'd need Google Maps to find my way home 15 miles away. You'd find me in that field 15 miles away. I'd be kissing a volleyball at that point. So make sure you're prepared to pay for unexpected repairs and maintenance. A great way to do this is to keep a line item in your budget for regular home maintenance. For example, my HFAC just went out, and it was so nice to look at our every dollar budget and know that we had the money in our maintenance sinking fund. So if you want to learn more about that, you want to check out every dollar for free, I'll drop a link in the description below. And by the way, if the maintenance repairs a big expense, don't feel bad about dipping into that emergency fund if it's a true emergency.

That's what it's there for. Next up on our list is property taxes. Yes, most people know about these and they're usually included in your monthly mortgage payment. But I'm considering this one sneaky for a couple of reasons. Number one, your property taxes can increase over time. And if they increase a lot, it could make your monthly mortgage payment very high. So if you can barely afford the mortgage right now, you could be one property tax hike away from being in a real bind. I mean, hypothetically, let's see you inherit a home.

You might not be able to afford the ongoing costs due to the property taxes. So it's something to look out for. Number two, even when you pay off your mortgage, you still got to pay the property taxes as long as you own that property. So when you reach that milestone of having a paid-for home, remember, you're done paying the bank, but you're not done paying Uncle Sam. Next on our list, homeowners insurance. The average annual cost of U.S. homeowners insurance is $2,728 or $2.27 per month. Now, again, like property taxes, this is usually included in your mortgage through escrow.

But much like property taxes, it can go up over time. According to data from the Bureau of Labor Statistics, the National Producer Price Index for Homeowners Insurance premiums has gone up 11.5% since 2022. And this is another one of those things you'll have to pay for it even after you pay off the mortgage. All right, last but not least on our list of sneaky expenses is PMI or private mortgage insurance. This is something you'll pay if your down payment is less than 20% of the home's value on a conventional loan. Mortgage insurance protects the lender, not you, in case you stop making payments on your loan. So it's basically a riskier borrower fee that gets

added to your monthly mortgage payment. So make sure you take this into account before you buy a home. And know that you don't have to pay PMI forever. You just have to get that loan to value ratio below 80%. then you can contact your mortgage folks and say, hey, get rid of the PMI. I'm done with it. Now, all of the things on this list are reasons why you shouldn't compare monthly rent to monthly mortgage. It is simply not apples to apples. Think about it this way. Rent is the most you'll pay on top of utilities and renter's insurance. And you've got less risk and more flexibility. But when you buy a home, your mortgage is only the beginning of what you'll pay due to all of the expenses I mentioned above. So to all of you renters out there, hear me say, you're not wasting money. I know you feel the pressure and the FOMO. It may seem like you're behind,

compared to some of your friends, and your family might be saying, you're throwing away money on rent. But guess what? They don't pay your bills. And that means they don't get a vote in the biggest financial purchase of your life. And you're not throwing money away. You're buying patience. You're paying for a roof over your head and for a place to store all of your funco pops. And listen, renting shows patience and responsibility as you get your financial house in order and save up for that down payment. So if you want to own a home, great. I highly recommend it. But don't rush into it and do something you'll regret. Keep saving and wait until you're financially ready.

Now, I'm about to tell you how much you really need to save before you buy a home. But first, I'm going to tell you about Delete Me. Did you know there's websites out there that sell your personal info for a profit? Well, those sites are a great way for spammers, scammers, and stalkers to get access to your data. And all they got to do is pay for it. But Delete Me finds and removes your info from hundreds of these data broker sites, and they send you a report detailing what they deleted from where and how much time they saved you. I use Delete Me personally for my family, and I love it.

So help protect yourself from the risks of online scams and data breaches with Delete Me. And right now, they're giving joy. George Camel fans 20% off if you go to join delete me.com slash George. That's join delete me.com slash George or click the link in the description below. And before I tell you how much to save, let's talk about where you can save it to earn some sweet interest. If you're saving for a down payment on a house, that is a good chunk of money that should not be sitting in a checking or a dumb old savings account.

It should be working for you. And for that, I recommend a high yield savings account like the one offered by Laurel Road, one of the sponsors of today's video. And right now, your account balance earns 4.8% APY. Plus, there's no minimum balance required to open an account, your deposits are FDIC insured, and there's no hidden fees. If you want to learn more, go to laurel road.com slash George or click the link in the description. Okay, so how much do you really need to save before you buy a home? Well, for starters, you should be completely consumer debt-free and have an emergency fund of three to six months of expenses.

Why? Well, because your dream of home ownership can quickly become a nightmare if you don't have your money in order, especially if squirrels start reproducing in the attic. Doot-to-do baby squirrel do. Stuck in your head all day long, you're welcome. How can you do this to me? Once you're debt-free with the emergency fund, now we can save up for that down payment.

Now, I recommend 20% or more to avoid that PMI that I mentioned earlier. But before you get your acorns in a cluster, 5 to 10% down is okay if you're a first-time home buyer. Beyond the down payment, you still got to save up for closing costs, which will probably add 3% or 4% to the home sale price. And don't forget moving expenses, which on average costs around $1,700 bucks unless you bribe your friends with Papa Johns to help you move your phone.

cop pop collection for free. In that case, it would cost you roughly the price of three extra large stuffed crust pepperoni pizzas, which can vary based on location and availability of seasonal promotions. Save money on moving. Lose some friends. I call it a win. Why do you hate us? Higher movers, by the way, guys. You're 22 moving in your first apartment. You got one couch that's cute. Have the girlies help out. You're 34, Brandon. You have a job. You have a 401k. Save up a thousand bucks, my guy. You can't tell me how to live my life. Now, you know if you're watching this channel that I'm not going to tell you any debt is good. But if you have to take out debt for a home, the one debt I won't yell at you for is a 15-year fixed-rate conventional

mortgage where the monthly payment is no more than 25% of your take-home pay. And when I say take-home pay, let me be clear. I'm talking about your after-tax income, but before any other paycheck deductions like retirement contributions or health care premiums. So if you have a gross household income of $90,000 and your after-tax monthly income is around $6,000, then your mortgage payment, which is principal, interest, property taxes, homeowners insurance, PMI, HOA, should be no more than $1,500 a month. Now, before you jump in the comments, like, George, what century do you live in?

Do you know what a house cost these days? There's no way I can get a home on a 15-year fix. 25% of take-off? Are you serious? Have you seen the interest? Hey, hey, slow it down, bud. Come here. Come here.

I'm going to be okay. I really needed that. Here's the deal. You're right. It's difficult. So if you can't do that, don't do it. Now, I'm not saying give up on owning a home forever, but what I am saying is maybe now's not the time. You've got a lot going on, clearly.

Now, look, I get it. It is very frustrating. It's anger-inducing, and you want to punch a hole through the drywall, but I wouldn't do that because you can't afford to patch that hole. Thanks for reminding me. I just don't want you to make a mistake that you'll be paying for years down the road. And I know there's not much you can do about interest rates or home prices, but in the meantime, there are a bunch of things you can do, like save up a higher-down payment, which will make your

mortgage payment lower. You can increase your income, which will help you with that 25% parameter. You can adjust the home budget, the home type, look at a more affordable area. And I know that's easier said than done, but if home ownership is worth doing, it is worth doing right. And I live in the real world. I take calls on the Ramsey show where people say, George, we bought a home before we should have, and now the payment is 50 or 60% of our take-home pay, and I think we have to sell because we are stressed out of our minds.

So I don't want that to be you. So buy a home the right way at the right time to make it a blessing, instead of a burden. And whatever you do, do not fall for the newest trend in the mortgage world. Keep watching this next video to see what it is

and why you'd be better off renting for life than falling for it. I'll also drop a link in the description below. Thanks for watching. We'll see you next time.