Real Estate the Ramsey Way - I Feel Pressured To Buy A House

Starting point is 00:00:05 Dave Ramsey here and welcome to another episode of Real Estate, the Ramsey Way, where you'll learn how to make smart home decisions, avoid costly mistakes, and navigate homeownership with confidence. Dave is in Grand Rapids, Michigan. Hi, Dave. Welcome to the Ramsey Show. Hey, thanks for taking a call. Sure, what's up?

Starting point is 00:00:27 So my wife and I are living in a house. We're written from her parents, and we're thinking of buying the place. from them. But my wife is very nervous about the idea of getting into any sort of debt. And I'm not sure that we've actually saved up enough to do it. Are you debt-free? We are. We have always been. Good. How much money do you have saved? Well, we have our six-month emergency fund, and then on top of that, we have about $12,000.

Starting point is 00:00:58 Okay. And how expensive is this property? We're actually in the process of trying to determine that. Oh, come on. Give me a range. Honestly, it could be anything from 90 to 145. Okay. We don't know. It's not super expensive and 12 grand will get you into it. No, it's a...

Starting point is 00:01:15 What's your household income? I have been bringing home consistently about 64 a year, and I'm hoping to have that up above 80 this year. And she does not work outside the home? No, we have two kids under three. Cool. Okay. She works, but just not outside the home. Okay.

Starting point is 00:01:33 She does a lot of work, yeah. I can imagine. Oh, my gosh. The numbers all work. You could buy the house with $12,000 down on a 15-year fix. No problem, oh. Okay. No reason not to do it. The only question I've got for you is, if you were living in a one-bedroom apartment

Starting point is 00:01:53 and this house came on the market, would you be interested in it? Or are you just ending up here because it happens to be all in the family? No, I would be interested in it. only thing about it is that we're outgrowing the house. And so... Well, if you're in a one-bedroom apartment or two-bedroom apartment, you've got two little kids or three-bedroom, whatever, if you're renting somewhere you weren't emotionally attached to and had no relatives tied to it, would you come by this house? If the answer is yes, then buy it. You're financially ready. What do you think, George? Yeah. And if you want to save up a little more and do this in six months,

Starting point is 00:02:27 that's fine, too. You just got to weigh it out and go. We've got to get a little less house, but the mortgage payment's probably going to be about $1,000. So it's reasonable for your income. Yeah, you're in a, the numbers work on this. You can do this. On 15 year fixed and you're fine. But just don't buy something because it's handy and the in-laws said to do it. That's never a good reason. Buy it because of something you would have bought anyway. And if that's the case, then game on, baby. You're ready. You've done a good job. Man, that's cool. Today's question comes from Bobby in California. He says, should I purchase a home? I'm 48 years old and I have the cash to buy one outright. But my concern is I would be

Starting point is 00:03:07 H-O-A fees, property taxes, and insurance, which equal what I'm paying in rent now. I'm happy with my current apartment. Should I just keep my money in a high-yield savings and have less worries that way? Or should I bite the bullet and buy a home as an investment for my future? I love this question. So first off, I mean, no matter what, no matter what you do, if you buy a home, whether it's on payments or you pay it off or you buy outright and cash, you're always going to be on the hook if you have an HOA for the fees and the property taxes and the insurance. Like that's just part of the deal. As far as should you buy the house or should you just remain where you are?

Starting point is 00:03:46 I mean, you're 48 years old. You've got the money. There's no time like the present. And for me, I kind of break down home ownership into two areas. Number one, it's like we say all the time, it's the biggest line item on most people's budget, right? And so we want to create stability there. When you're renting, it's fluctuating. it's going up and down. You have to deal with lease agreements, all of that stuff. But when you

Starting point is 00:04:07 purchase a house, it's yours. You can lock in, especially when you're buying it outright in cash, right? And then the second purpose is it does help us build wealth. And so those are really, for me, the two primary purposes. And I think that you should do that. Otherwise, when you're renting in perpetuity, you really are at that point starting to throw money down the drain because there's no end to the process. You're not doing it as a means to buy time so that you can buy. So that's my answer. So, Bobby, if you're 48, think back to when you were 28 in 2005. What was that house worth then?

Starting point is 00:04:41 What did so forth then? Don't you wish you owned that now? That's the same thing you're going to have when you're 68 from 48. It's the same 20-year period of time. And so houses go up in value over time. Unless you buy in an area that is a neighborhood in decline of some kind, in general, good, reasonably purchased, reasonable neighborhood, single-family homes, over a 20-year period of time are a gold mine. They go up in value, period.

Starting point is 00:05:10 The other thing we can be 100% sure of, during the next 20 years, your rent is going to go up every year. Or almost every year. A hundred percent of the time your rent is going to go up. It does not go up when you own the house. The only thing that does go up is HOA fees and insurance and taxes, but that's not going to keep up with rent escalation. I think he more so has an issue. you know, you see that big nest egg in your account, and he likes the way it looks in his account as opposed to.

Starting point is 00:05:37 Yeah, but if that's, that's got to be invested at 10 to 12% to even keep up with what that house is going to grow to. And it's probably not. No, no. So I'm, I'm going to go buy that house 100% of the time in this situation because 20 years from today, not because two years from today, but because 20 years from the day, it's going to go way up in value, and 20 years from the day, your rent is going to have gone up in value. And as Jade says, you're stabilized.

Starting point is 00:06:01 the largest line item in your budget. She's exactly right.

Real Estate the Ramsey Way - I Feel Pressured To Buy A House

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