Real Estate the Ramsey Way - You Can Build Wealth No Matter Where You Are in Life

Episode Date: February 17, 2025

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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. Timothy is joining us in Erie, Pennsylvania. Timothy, how can we help? Hi, Ken. How, George? How are you guys?

We're having a blast today. What's going on with you? Great, man. Well, I appreciate everything he has to do. I've been phoned you since I was 18. I just turned 19. not too long ago. So I'm freaking out right now. Uh-oh. What are you freaking out about? Everybody likes to share a little bit of details of, you know, their input on life and everything

that's going on. And I'm really, really, really trying to get, like, you know, a place to live. I'm going to be proposing to my girl soon. So I'm trying to figure out whether I'm renting or buying. I'd really like to buy, but I'm trying to follow you guys as much as I can. And, like, I don't want have a credit score or a credit card, but, you know, I've called two places, and they've given me two different answers, and there's just a lot going on, so some advice to be crazy. Yeah, you got, my guess is you get some, you get some cooks in the kitchen that are on the family side and friend side weighing in as well as my guess? Yeah, okay.

What is the urgency to buy a house now at 19? Yeah. Yeah, like I said, I'm proposing to my girl soon, so that's the main one. I have like a year to figure this all out, but I'm just trying to... Is there a law in Pennsylvania that says you can't rent if you're married? No, there's no law. No, no, I just don't know, like, I want to be putting as much as I can into savings, right? So I don't know if I should be, how long I should be renting for if I should.

Like, I know I'm okay to do with that, but... Let me free you. There's no timeline for this. The right time to buy a house is when you're financially ready. If that's at 19, you're crushing it. If that's at 25, you're crushing it. And so I just want to free you from this idea that this has to happen now and I've got to propose in the next two months and I have to buy a house five months later. I can feel that on you of just the aggression toward your goals.

And I want to redirect that towards a healthier approach. Yeah, and Timothy, just full disclosure, my wife and I spent three years in an apartment, one in one city, two in another city before we bought. And it was because of what George said. we were renting until we were able to buy a home. So tell us about your financial situation. Sounds like you're debt-free. Yeah, yeah. I'm debt-free. I'm working for an amazing company that they'll pay for me to go to school if I want to. I'm going to pursue a career in like, I'm adjusting and I'll pay for me to do that too. Great. What's your income?

The income right now is about like $35,000. I work two jobs. I work at a restaurant. Okay. And how much do you have in savings? And then savings right now, I have about $15,000 in my regular savings. fund and then I have $4,000 in retirement and a couple thousand in my emergency fund. Okay. What's the 15 for? Is that for a ring or other stuff? No, that's just for the house. I actually have a fund for ring. Okay, but you don't have a fully funded emergency fund. We got this twisted. We got to get the emergency fund first. Then we can start saving for the house. Okay. Yeah, what's three to six months of expenses for you? Right now, I know it's lower, but I mean,

right now it's about like a thousand and some change a month. Okay. Well, let's pretend like we're in the real world. You got rent to pay. You got bills as you move into this next phase. Let's call it $15 grand as your emergency fund and you have $4,000 for your down payment. Is that more fair? Sure.

We could do that. And we also need to buy a ring for this lovely lady, right? Right. But he says he's got a ring fund. How much is in that? Yeah. Yeah, I've been saving up for that one for a while. I have about like 3,000 ready for that.

Perfect. That's all ready to go. You're crushing it. Okay. So if I was in your shoes and I've been in your shoes, here's what I would do. I would pause and I would rent. Maybe it's for a year. Maybe you renew for two years and you stack up a nice big down payment as you get to be married

and experience all of that joy in chaos because it's going to be a wild ride. So to add on home ownership on top of that, that's a lot at your age. but I love where you're going with it. And I also know you don't have a credit score because you're debt-free, and you're saying, are you worried about not being able to buy a house because of that? Yeah, I'm terrified.

Like, they, there's, you know, I mean, I keep hearing stuff, like people keep telling me, like, higher interest rates for, you know, even though I can do manual underwriting, but then they'll be like, yeah, expect higher interest rates, but I don't know.

Okay, can I ask you this? Have any of them actually done it? No. Okay. Can I tell you this? I've actually done it. So would you trust my experience over theirs? Georgia, I trust you any day.

That means the world. Yeah. So let me tell you this. There are a few hoops to jump through, one being verification of income. You have that for 12 to 24 months? Yeah, coming up on me, yep. Great. You'll need rental payment history, on-time rental payments for at least 12 months.

You'll have that once you've rented, right? Okay. You have a 12-month history of your bank statements and saving statements. Your debt-to-income ratio is amazing because you don't have any. And then you have something else you're paying for, like a cell phone bill or an insurance. bill regularly? Yeah, insurance. Great.

That's all it takes to do manual underwriting. So anyone else who's saying otherwise has not done it. And if you call Churchill, I'm sure they told you that. They said, hey, you do need on-time rental payments. Was that the one that threw you off because you didn't have that? Yeah, yeah. And they suggested what I could do is I could, you know, pay a little bit of money and how to track record to my mom and dad and, like, pay them and they could put that

in the savings. You could pay your parents 400 bucks a month for 12 months, and that could count. Yeah. And so just rest assured, it's not as scary as you think. The rains aren't going to be astronomically higher. I've done it myself. I had a great rate when I did this back in 2019. It was a very easy process. Churchill makes it super easy. They'll walk you through everything you need to know. But I would not let that be the stress point. You got enough on your plate right now. I would continue saving. I'd get, I'd propose, get married, pay cash for the wedding, rent for a year or two. And then you guys will have a fat stack of money and you'll be able to do it. from a place of strength. And the key there, Timothy, is what George just laid out for you. The time it's going to take to save up the down payment, the right kind of down payment, you're going to have all of those qualifications taken care of. So deep breath, exhale, and don't listen to all the voices that want to throw an opinion at you. George just gave you the absolute truth. There is no other opinion you need to be considering. Period. Okay. You got it?

Yeah, would you recommend what they were saying with, like, you know, living at home for a little bit and then giving them money, or would you say, like, get on my own? I would, I mean, you're, you have a salary? I'd say it's healthy and independent for you to get on your own. If you want to stay home until you have the next step of proposal or engagement, that's totally fine. But I would start making payments to your parents just so that you're not caught off guard, you know, come six months from now. But I do think it's going to take more time to get a down payment, you know? Fifteen grand's not. going to cut it in today's housing market. And so we've got tons of resources for you, Timothy, log on to ramsysolutions.com slash real estate. We have an entire home hub for you there. And I'll even give you Ramsey Plus, which will include my video course on how to buy a home the right way. And watch that. You can watch it with your soon-to-be fiancé and go, hey, this is going to be on our radar in the next few years. I'd love to watch this and get prepared and see what you think of it. And Timothy, the only thing I'd add is I don't want you to take

some of this nervous energy, and let's put it into making more money. You're working two jobs and pulling down 35,000. I want to see that change. You need to be getting more money for your time. And so put all that energy into increasing your income right now. You have everything else under control, and that focus on making more money will help with your nerves. George gave you a lot of clarity. And the clarity that George gave you should give you confidence now, right? So we want confident Timothy going out there. He's got a plan and let's go make more money because more money allows us to advance the plan quicker. That'll increase your savings rate. He'll get that down payment faster. So it's a great call, Timothy. Thank you for that question. You're far beyond most Americans at 19s.

I want to encourage him there. And to that the interest rate question, my interest rate, I actually ran the numbers with the folks of Churchill. And they told me, if you do our plan, 15-year fixed rate loan with at least 10% down, you will get the same rate as someone with excellent credit. So he disproved it with facts, but, you know, people don't care about facts in the face of their feelings a lot of the times. Well, it's just people don't know what they're talking about. And so that's why they come here and George just dispels the fake news, folks. Buck the system. I'm all about it. There it is. That's why he wrote the bestselling book, Breaking Free from Broke. Go get it. Listen to the man. He's wearing corduroy. That's

That's all you need to know. It's all the credibility you need. Call us up. AAA 825-5-2-2-25. We'll see what Grant thinks. He's in Chicago. Grant, how you doing? All right.

Hey, George. Hey, Ken. Thanks for taking my call, guys. I'm really excited to say that right before Christmas, I paid off my house. So I'm officially on babysitting. Way to go. Strong golf clap for that one right here.

You got how many kids? I got six kids ranging from 12 years old all the way down to 10 months. Wow. Eight of us living in this beautiful paid-off house. Good for you. My question is, I know I could save up for another eight years and pay cash for a bigger, better house. But by then, my kids are going to start graduating. They're going to move out.

Then you'll be downsizing. Would it ever make sense under the Ramsey plan to upgrade to a bigger house with another mortgage, or is it better to just stick drinking this debt-free Kool-Aid and eventually pay cash? Well, in a perfect world, if Dave was on air, he'd say, well, I wouldn't want you going back into debt, but also it's not a sin to revert back to Baby Step 6 for a few years and knock out the mortgage. And so as long as you're doing it, you know, 15-year fixed rate, the payment's no more than a quarter of your take-home pay. And with all the 100% equity you have in the house, roll that into the next one plus any savings and try to minimize the mortgage and then knock it out quickly. So what are we talking?

What would it take for you guys to upgrade to a home that's like, all right, we got room. Six kids. We got room for all eight of us with room to spare. But for all eight of us, it looks like if we hit something in the $400,000 range based off of our location, we'd be stepping up from 1,800 square feet to somewhere approaching 3,000 square feet, like 2,800, 29. How many bedrooms? That's what our market's looking like. Four bedrooms, at least. That's what we've got right now. There's tiny bedrooms.

But do you need five bedrooms, six bedrooms? Well, you got multiple boys? No, one boy. The rest are lovely girls. Oh, I was going to say, because if it was mostly boys, you just pile them on top of each other. They don't care. They live like rats anyway. I got two boys.

I can say that. I could live under a bridge. Yeah. Yeah, I literally was going to go that direction. But the girl thing, I only have one girl, and I don't know. I feel like I'm on thin ice if I recommend that. But, you know, but I think you're still going, all right, for the house that we would want. What's your current house worth?

current house is worth 270. 270. And let's say the next house was $450, right? And let's say you want to do that. How long do you have? Is this a year from now? What's the urgency? You know, the urgency?

Yesterday? I'm living my best life now. It's just close quarters. You're very cheery for a guy with six kids. I'll be honest with you. How do you have time to make this call? I got no payments. Okay, that's good.

Yeah, but you also don't have any sleep either. Are you, oh, here's a question America wants to know. I know this. Are you done? having kids or are there more on the way? No, no. If the Lord wants me to have more kids, I'll have some more. God bless the Catholics. There we go. Whoa. I'm kidding. I'm kidding.

Wow. Thank you, Grant, for that. You just dropped Catholicism on him. I just thought maybe, you know, they're like, let's have more babies, more and more. But hey, I'm happy for you guys. He's living his best life. So you think there's a possibility that more kids are coming? Well, everybody tells me, like, you know what causes that, right? And I say, yeah, and I'm not willing to give it up. Well, you've got a 10-month-old and a 12-year-old. There's a bit partial information. No one says you've got to give it up, but there are other things you can do. Maybe you should seek

a family planner as a side of this call. Ken will give the advice off air for that one. Yeah. Hang on the line. I'll give you a couple tips when we go to commercial break. Thank you for that. All right, Grant. He's not willing to give it up. Let's talk fast. That's the best thing I've heard in a long time. You're in Baby Step 7. Do you guys have a bunch of money in savings outside of your emergency fund? So not a bunch of money and savings. Why? Because I got a little gazelle intense

on paying off the house there at the end. I have three to six months of expenses because I have no expenses. But yeah, so savings are a little low right now. Okay. You know, $6,000 in the bank. How much could you save up in 12 months for, you know, as a kind of a down payment

plus your equity? Plus equity? I would be approaching 20, 285. So you could save up, you're saying 15 grand in the next 12 months? I think so. Okay. So just set a goal and you're married? You have a wife?

I am. I am. You didn't know the answer to that? You never know. Thought we had covered that earlier. But I would set a goal with her and say, hey, here's what we're wanting to do. We want to upgrade about a year from now. Here's how much I think we can save. We're going to take all of our equity plus the savings and throw it at the next one.

and then there likely will be a gap of, let's say, $50 to $100,000, and here's how we're going to tackle that. We're going to attack that in two years or three years, whatever it is. Just set a goal and don't let this linger, and don't do a 30-year with as little payment as possible. Get aggressive and get rid of it and get back to Baby Step 7 in no time. Yeah, yeah, yeah. But you have canonized blessing that you're not, you know,

it's not going against the Ramsey plan to get another mortgage and to be temporarily in Baby Step 6. You guys have done such a great job You sound like you're a young family You've got a 10-month-old How old are you two? I'm 36 Amazing

And so if we say Hey, by 40 we're going to be debt-free again Back in Baby Step 7 The house will appreciate And so I would go down that path That's a lot of kids to bunk In a 1800 square foot helmet He's a better man than I

I'll tell you You'd be out of there? Well, I reached my max capacity As a father at three I readily admit that I'm glad we have three I do think people are hard wired for a certain number. There's no question. That guy right there was born and created

to father a lot of kids. He's very, very bubbly, a very positive young man. I'm a curmudgeon with one child. No, you're a commugent. Pure. Without children. Right. We were hoping that your sweet little princess knocked off some of the mudgeon. She has. She brings me joy. Yeah. Yeah, she's a sweet boy.