The Ramsey Show - App - Tips for First-Time Home Buyers (Hour 1)

Episode Date: May 3, 2023

Dave Ramsey & Jade Warshaw answer your questions and discuss: "What should I do with $100k in savings?" Tips for first-time home buyers, "Do I make enough working at a non-profit?" Doing an interest-rate buy-down, "How much of our inheritance do I owe my sister?" "Should we use our house as a rental when we move?" "Our homeowner's insurance went up $4k! " Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET Join a Personality-led FPU class. Click here! Enter The Ramsey Cash Giveaway for a chance at $3,000! https://bit.ly/TRSgvwy Shop our bestsellers during the $10 Sale! https://bit.ly/TRS10Sale Enter The Ramsey Cash Giveaway for a chance at $3,000! https://bit.ly/TRSgvwy Shop our bestsellers during the $10 Sale! https://bit.ly/TRS10Sale Want a plan for your money? Find out where to start: https://bit.ly/3cEP4n6 Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6 Interested in advertising on The Ramsey Show? https://ter.li/s64ye3 Learn more about your ad choices. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy

Live from the headquarters of Ramsey Solutions, broadcasting from the POTS moving and storage studios, it's the Ramsey Show, where we help people build wealth, do work that they love, and create actual amazing relationships. Jade Warshaw, Ramsey personality, is my co-host today. We're going to be talking to you about your life and your money. It is a free call. The phone number is 888-825-5225.

That's 888-825-5225. Caesar starts this hour in Chicago. Hi, Caesar. How are you? I'm doing great. You know what? That's Cesar. Is it C Chicago. Hi, Caesar. How are you? I'm doing great. You know what? That's Cesar. Is it Cesar or Caesar?

Caesar. It is Caesar. Like Julius Caesar. Got it. Okay. I did not mess it up. Good. How can I help?

Thank you so much. Yeah, I'm 26 years old, tuned in from Chicago. I have approximately $100,000 in my savings. I have approximately $50,000 in mutual funds that are parked in a Roth IRA, Roth 401k. And I feel like I have a lot of options. There's a lot of pressure to buy. I'm thinking about buying the building. And it's putting a lot of pressure on me, but it's a lot of options. I really don't know what to do at the moment.

And I would like your advice about my situation. Do you have any debt? Zero debt. Zero debt. Way to go. Are you married? I am not married. Why hasn't some woman snapped you up?

I know. That's right. No, there's a woman. Trust me. You see? Yeah. Man, you're killing it. Way to go.

You're killing it. Way to go. I'm proud of you. So is your personal residence paid off as well? Or are you a buyer yet? I am renting at the moment in Chicago, and this is my situation for renting. It's a two-bedroom. It's $1,000 a month, and I'm splitting it

with a roommate, five hundred dollars each. Wow. Stole that. So you're not in a hurry to get out of that. No, that's a deal. I know. So what... I assume they're not shooting down the street, are they? No, no, they're not actually. They're not shooting down the street. So what exactly is your question? Like, what are you hoping to get from this call? Okay. There's a general question and a specific question. I'm feeling a lot of pressure to buy my own building, a multifamily unit home, and to move into that.

Who is pressuring you? You know, that's a great question. It is. In Chicago, it's, like like the thing to do you know like well among 27 year olds is the thing to do but that doesn't mean that's smart so i mean dude you you have really good instincts you have really good skills you are so far ahead of normal normal sucks is, is broke, has no money. I mean, you got some money piled up. You've done a great job.

Way to go. If you want to buy a condo to live in, that's fine. But don't buy it because the society that's stupid thinks you should. Okay. You got to buy it because you looked at it and you said, I like these numbers. I mean, you're the guy living in a $500 rental situation in Chicago. You're that guy. You're the smart guy.

You're the smart guy. Be listening to him. He's got more going on. So if you want to go buy you a condo, that's great. You've got $100,000 to put down, or you need to set back an emergency fund of three to six months of expenses and set back anything else you need to purchase if you're thinking about buying a car, you're thinking about buying whatever, so that you don't go into debt for the future items.

But after that, the rest of that money is your down payment on a condo or whatever, if you want to buy something. But when you say buy a building, you know what I'm hearing? You've been reading real estate investment crap on Tic Tac. That's what it sounds like no it's that my grandfather owns a multi-family home a lot of people in my circle you know a lot of a lot of them uh the older generation owns a multi-family home so i was thinking why don't i house pack get a renter on the top floor live on the first floor and rent out the basement. That's not a bad idea, but you should do it because as you looked at it, you thought,

A, that's how I want to live because the great news is your tenants are attached to you. The bad news is your tenants are attached to you. Exactly. They're going to be knocking on the door at 2 a.m. if they don't like something, unless you really set some real clear boundaries. It's very difficult to manage a multifamily that you live in from a boundaries perspective. So if you want to do that, that's fine. There's nothing wrong with that.

But there's nothing that says if you don't do that, that you're stupid, because you ain't stupid, dude. I know that's right. People need to be listening to you instead of you listening to what they're saying. So if you want to take 75,000 bucks, what do you make? So I make approximately 75,000 a year through my full-time job,

and I also own a business. And what does it make? I'm combining the income from both. Oh, so you make 75, including owning a business, not also. Including a business. So if you so you make 75, including owning a business, not also. Okay. So if you want to take 75,000 of the hundred, leave 25 for an emergency fund and you know, you continue out of your monthly budget, doing investing into your retirement plan at your

workplace, then, uh, and you want to go buy your multifamily and live on the main floor. There's nothing wrong with that. It's not a bad plan at all, but this idea that you know i i don't i here's here's a good rule of thumb okay whatever everyone else in america is doing do the opposite and you'll probably have some money true that now can i play devil's advocate here why because i'm sitting here thinking well here's my thought i'm like okay if he was buying a personal residence and he knows that he can afford it without a rent without any rentals you know just on his own great but if he's buying this building that's more expensive and he's depending on the rent coming in should he not pay cash for this property no no it wouldn't matter if it's your residence and you're going to

take out a mortgage as long as you can pay the payments and if you have to have the rent to pay the payments no that's what i want that's what my thing with caesar i want to make sure he doesn't need the rent from the other people living upstairs or downstairs you don't go buy something that you can't if your renters all don't pay you can't be up a creek right so he's got to you got to be able to afford this regardless if you have renters, Cesar. That's just a little thought there. That'll keep you. Because when you have an empty apartment and you have to make payments,

you become desperate. And when you become desperate, right after that you get stupid, and that's when you put the wrong tenant in and you create a bigger mess than an empty apartment created. That's true. And so if you don't have to make the payments if you don't have to have somebody to stay alive right you know inside the inside the unit there then you make better decisions on who goes in to the unit well

he's got his family but i'm also thinking your family is also the ones that is like hey this month's a little tight give me till next month so there's just a little there's a little tight. Give me till next month. So there's just a little stuff there that he might need to consider before going in. Absolutely, absolutely. But overall, do it because it's the lifestyle you wanna live. I wanna live on the first floor. I'm willing to do that at this phase of my life.

I'm willing to deal with tenants next door. I'm not doing this because my grandpa did it. Right, yeah. I'm not doing this because my grandpa did it. Right. Yeah. I'm not doing this because I saw it on Tic Tac. We're not doing that. And, you know, until we arrived on the Tic Tac scene about a month ago, you could pretty well say that whatever was said on there was useless.

Garbage. We're trying to displace it with some wisdom. So I've had a few things posted on there that did 10, 20 million views and that kind of stuff. Thank you guys, I guess. I think I should thank you. Yes, thank the people because they're making the views go. Yeah, well, I mean, we've got to put something good

on there to try to redeem the platform. But yeah, it's more full of get-rich-quick crap than anything I've seen since Midnight Cable. This is The Ramsey Show. Hey, you guys. Health insurance costs are only moving one way, and that way isn't down.

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things we talk about, click on get started at ramseysolutions.com. Completely free. We'll help you figure out the best next step for your financial journey based on exactly where you are today. RamseySolutions.com. Click get started. Our question of the day comes from Jacob in the Ramsey Baby Steps Millionaires group on Facebook. He says this. He says, I'm 20 years old and I'm looking to buy a house within six months to a year. Besides having 20% down, what other tips would you recommend for a first-time homebuyer?

Also, is there anything that I need to look out for? Yeah, I would say there's a couple of things to keep in mind. I think it's great that you're putting 20% down. We would say to do a deal where your payment is no more than 25% of your take-home, and that's taxes, insurance, all included in a conventional loan. And I love that you're putting 20% down because then you can avoid PMI, which is private mortgage insurance, and it's just an additional cost there. But with 20% down, you can avoid that. But I feel like you're in pretty good shape. I mean, other than that, it sounds pretty good to me.

Yeah. A couple of things. Good idea. Good question, by the way 15 year fixed rate 25 of your take-home pay um always everyone anytime you buy a piece of real estate get title insurance 100 of the time anytime you're buying a piece of property that is not a traditional subdivision lot meaning it's very very predictable um always get a survey so if you you know i bought three acres that turned out to be 1.75 no that yeah no we uh we you get a survey on it okay now you got a standard subdivision lot that is pre-platted and has changed hands three or four times you don't have to worry about that it is what it is but uh if you're buying something otherwise get a survey get title insurance and get a home

inspection get a home inspection you're 20 years old you're not an expert on much of anything in that house uh unless you just happen to be an electrician or something and then you would be right but um yeah get it get a home inspection period. I've bought and sold several thousand pieces of real estate. I get a home inspection. Last house I bought, I got one, okay? I can go in there and scratch around in the crawl space and try to figure it out, but for what it costs, let somebody else do it, right? That's the thing.

Don't buy a house that is a great price but is ugly from the street. First house I bought was that. I got a great deal, and this house was ugly from the street. There's no fixing ugly. You can't fix ugly, okay? It's just still going to be – No, don't try to fix ugly. Ugly, you just look like, oh, had plastic surgery and you shouldn't have bothered. Oh, don't do it.

You know what I mean? Oh, I mean, don't. You just can't fix it. Leave it alone. Just don't. It's not a good buy. Because if you get a good buy on it now, when you get ready to sell it, you know what you have? An ugly house.

And you're going to give somebody else a you know what you have an ugly house and you're going to give somebody else a good deal because nobody wants an ugly house so that there's a reason it was cheap when you bought it and there'll be a reason it's cheap when you sell it so good and that's also true with the actual floor plan i bought a house one time no actually i didn't buy i rented it one time that was a four bedroom but to get to one of the bedrooms you had to walk through the other bedroom oh yeah that's terrible this is uh we used to call these country built houses where you just keep adding on adding on adding on and you just go yeah well there there was actually no plan from the beginning and then you've got no plan so be careful with that kind of stuff you can

you can get excited particularly on your first buy and uh try to buy something that's a little bit boring that's good advice you know don't try to like reinvent the world i'm gonna do a rehab oh god no well i mean you could pick you could pick something that's got things that you can fix like if the carpet's super ugly there's things that are outdated like you can you can change that but you can put or you can put the gutters up that's fine but don't tell me you got to change the whole no yeah i gotta tear out i gotta add no no no no just you just boring means less risk going in and less risk going out and so a nice little house with a little picket fence and little bushes out front.

And you look at it from the street and everybody goes, oh, that's cute. That's where you want to start. What do you think about corner lots? Because when we bought in our neighborhood before we came here, we thought we had a good lot because we were on the corner by the gate. And for us, it was great. We thought, oh, we could take the dog out. It's easy access. But then when we got ready to sell, it for less lots are a mixed blessing because generally corner lots present well from

the street right but you have no freaking backyard you got this little tiny triangle back there where they crammed the house back inside at a 45 and so it depends on the subdivision depends on the lot size right all those kinds of things but speaking, you get a nice presentation from the front, and then you're pinched in the back. Yeah. That's generally what you get. So watch for that. That's not the end of the world, but watch for that.

Again, if you've got a concern when you're looking at it, know that the buyer, when you get ready to sell, it's going to have the same concern. So just don't get so excited you rationalize your way into stupidity. I know a guy who's done that a lot in his life, and that's how he has a radio show, so be careful. Open phones at 888-825-5225. Jason is up next in Detroit.

Hey, Jason, welcome to The Ramsey Show. Hey, guys, thank you so much for the call. I appreciate it. Sure. Dave, you and God have changed my life I appreciate all that you've done over the years pretty fortunate

to live completely debt free including my house at 48 years old thanks my wife and I have worked pretty hard to kind of get there financially. I've actually been in full-time ministry most of my adult life, and currently I am part-time on staff in a church, and then part-time I operate a food pantry. And I absolutely love my work. I love what I do.

The issue that I struggle with a little bit is I hardly make any money being in two nonprofit situations. My wife's a schoolteacher and has been for 20-plus years, so she's kind of at the top of the income scale. We're doing all the things. We have zero debt. We're, you know, she has the pension and then we've got some other investments and that sort of thing. But my question is, you know, I literally, I mean, with what I do, I take home a couple thousand bucks a month at this stage in the game. And I'm about 30 years into my career. And I guess I'm just trying to decide, is that okay for me? You know, I don't, well, I guess that's what I'm saying.

You're calling about it, so you don't think it is. Well, I'm just, I guess I's what I'm saying. You're calling about it, so you don't think it is. Well, I guess I just need some perspective. I love what I do, and I get to help people every day, and it's extremely rewarding work. And I can see myself doing it until I die. I want to die with my boots on, but, um, without any debt and, you know, still being able to set aside, you know, funds for the future. Um, I guess, um, I would love to make more money, but I just don't know if I'm ever going to find that in kind of a nonprofit world. Um, so I guess I just was hoping for a little insight on that. Well, you're obviously a good man.

You're obviously a guy who loves to help people. You're pastoring. You run a food pantry. You've got a big old heart, and there's no question about that. Eighty percent of pastors in North America are bivocational. They have a day job. That's a wild number. And did you start this food pantry?

I did not start it. However, I took it over and had to completely revamp it. It's kind of yours. Yeah, I thought so. I kind of smelled that the way you were talking about it. There's nothing wrong spiritually, morally, ethically with what you're doing. Nothing wrong with that at all. There's also nothing wrong with exploring some other avenues that you could utilize that wonderful large heart of yours to help people.

And in the process of serving them, you made more money. There's nothing wrong with that either. That's the seat I sit in. So, I mean, there's lots of ways you can help people, uh, and love people well, and they love paying you for it, by the way. Um, so maybe a counseling ministry, maybe some other things you can add on. I don't know what it is, but I would look towards that kind of a thing thank you for joining us america open phones at 888-825-5225 annie is next in nashville hi annie welcome to the ramsey show hi how are you guys doing today better than than we deserve. How can we help? So my husband and I are first-time

homebuyers. We just started the process and I've been talking to a local mortgage broker and he gave us some information on 30-year versus 15-year mortgages. We want to do the 15-year. We're trying to follow the plan. We have a sizable down payment. But he did say, which I thought this was kind of strange. I just don't understand this, that if we want the 15 year, we are required to do a rate buy down to get like a little lower interest rate. So I just didn't know what that was. I'd never heard of that before. He said it would be about a point or point and a half to get the rate buy down. You need to call Churchill Mortgage and get with a new mortgage broker. Okay. There are two things you can do to buy down rates uh i think i'm hearing

that he just wants you to pay points that is not a true buy down that's just points each point is one percent of the loan amount and will reduce your interest rate by about an eighth between an eighth and a quarter, somewhere in there, but usually around an eighth of a percent, which means it takes you eight years to recoup that. No, thank you. I'll pass. So paying points is not a good thing. And I'm pretty sure, by the way, that increases what goes in his pocket at the closing. That's why I'm rolling my eyes a bit here. I don't know if you can hear it over the radio, but I was. And so an actual buy-down is like a 3-2-1 buy-down,

and it would be a 3% reduction the first year or a 2-1 buy-down, 2% reduction the first year, 1% reduction the second year, and then it goes on up to the regular rate. And all that is is you're just giving yourself some money up front to subsidize yourself now if the seller pays your 2-1 buy down like in the old days when things were a little calmer than they are right now a builder might pay for a 2-1 buy down okay in other words they would pay two percent pay the you know just at 0.02, right? What it's going to cost you to reduce the rate by 2% and then 0.1. So it's going to cost them 3% out of pocket to do a 2-1 buy down or 6% out of pocket to

do a 3-2-1 buy down. If the seller pays that, that's free money. You got a deal, okay? But if you're going to pay for your own buy down, that's not as bad as points, but there's no reason to do it. Okay. Does that make sense? You understand the difference in what I'm saying? Points are prepaid interest.

Both of these are prepaid interest. Points are a form of prepaid interest, and one point will reduce roughly an eighth of a percent APR for the life of the loan. A true buy-down is just, it's a 2-1 buy-down. You take your current rate, let's call it 6%. It'd be 4% the first year, 5% the second year, and 6% from then on. And you pay that difference up front at the closing which you could have just done that for yourself if you're just swapping pockets so actually let me think about this then if the seller's not paying it we're going to do neither of these that's the moral of the story okay is a

seller paying it he acted like i was to get the 15 year this is something i would have to do why do a rate 15 years generally cheaper than a 30 year anyway and are they saying you can't qualify so he said he said that the 30 year would be 6.875, and 15-year would be the same unless I did this rate buy-down, then I could get like 6.5 or something. That doesn't sound right. New mortgage broker. New one. Okay.

He just lost the business, yeah. Because 15-year quoted at what we call a par quote, 0.0 origination is always cheaper than a 30 year 90 of the time he is okay and for you you know he's monkeying with you to put he'd line his pocket that's what i think i mean i'm not a hundred percent sure but having done about a bazillion of these i'm pretty sure yeah i i go to church hill talk to them and see if they give you the exact same thing if they do i'll shut up and say that i was wrong about the guy's character but

when is it better to just make a larger down payment as opposed to attempting a three two one the larger down payment uh doesn't reduce well it would reduce the payment but it doesn't reduce it as much mathematically um so actually it would be no it wouldn't it wouldn't because i guess what i'm saying is there is there math that you need to do to find out what that point would be now it's it's don't subsidize your own loan is the moral of the story both of them are a form of subsidizing your own interest rate prepaying it by prepaying it in their different forms points or buy downs so if the seller is paying points or the seller is paying a buy down, that's different. And all things being equal, meaning

no points, no origination, which is called a par quote, your 30 should match your, your 15 should be a little bit less. It should be a quarter of a point, half a point less on your APR. Generally speaking, it is. Now there might be a glitch in the environment at this moment in the bond market that's doing that. I'm not 100% sure, but most of the time throughout 30, almost 40 years of being in the real estate and around real estate business, that's what my experience has been. But double check. You need to get another quote. I just smell. It doesn't smell right. That's all right, Dave. Just leave it at that.

All right. Jake is in Milwaukee. Hi, Jake. How are you? Hi, Dave. Hi, Jade. Hi. I'm on baby step two, and I'm kind of in a little situation where I don't know how much I owe.

I, my father passed in 2016 and he didn't have a will. The only thing he ever did, he told me is that he was going to set me as a beneficiary. And if anything happened that, you know, I would have to take care of it for, for my sister, for myself and my sister. Um, and I mean, so he's only ever told me that verbally. And well, when he passed, we got 200,000, um, in a policy and it's coming up. I've been paying my sister monthly so she can go and finish school debt free, which she has now graduated.

And so there's about $5,000 left on just the half, so $95,000 paid. And I kind of don't know how much more I owe her because all the things I've done with the money have been kind of commingled with my own finances. Well, you're certainly over the $5,000, right? Because that totals $100,000. Yeah, no doubt. Okay. Then have you invested the money during this time?

I did. I invested $100,000 of it in real estate. Okay. That would be your 100 000 and then i invested others parts in stock well okay and well i would have been i would have done better with your four fund portfolio but i i've actually lost money on the part i invested in stock because okay i mean i and i don't know what you owe her you don't owe her anything legally morally you told your dad she would get half the money so we know she's getting the five thousand

even if you screwed around lost some of her half then you would still cover that five thousand morally if you're doing what your dad asked you to do right. So how much money have you made on the real estate? On paper, I mean, before, you know, selling fees and all that, it's probably like $75,000. Okay. What do you make a year? Actually, I make about that, $75,000. What do you think the right thing to do is hello i mean probably just probably just cut that in half and then say and get and divert half of that yeah i think you

invested your half into real estate personally. And I think you lost some of her half. So I think you cover the five. And if you want to throw another 10 on there for fun to make you feel better, that's fine. But I don't think you owe her anything much more than that. And I'm certainly not going to have to sell the real estate to get her half out of that. That's so convoluted and wicked. No, thank you. Thank you for joining us, America. Jade Warshaw, Ramsey personality, is my co-host today. Open phones at 888-825-5225.

Alex is with us in Fort Worth, Texas. Hi, Alex. How are you? Doing all right, Dave. How are you guys doing? Better than we deserve. How can we help? Well, Dave, I got a little love note from my mortgage company with our annual escrow account disclosure. Apparently, we had a shortage on our escrow account.

Usually, it's a couple hundred bucks a year. It's usually fairly close to the actual and projected amounts. But this year it's like a difference of over $4,000. And, um, did your taxes or your insurance go up? Uh, insurance taxes. It was short by like 150 bucks, which I totally get. But, um, the insurance though, just absolutely floored us, and they're saying our mortgage is going to go up about $600.

Your homeowner's insurance went up $4,000 in one year? Yeah, and that's what we're really lost on, because I called my neighbor who has the exact same floor plan as us, different insurance provider. Well, did you shop the homeowner's insurance and change it? Yeah, that's what we're definitely doing right now. I'm talking to like four different companies right now, but it's clear that we're not going to keep this company.

But at the same time, we're trying to figure out what do we do in the meantime. It's like we could dip into the emergency fund and pay off that shortage just to kind of get rid of it. No, it's not a shortage if you change the policy. Okay. Have they already paid the premium, the $4,000 extra premium? I think they've paid part of it, and I think they're wanting us to make up the rest. Yeah, I'm not sure. To be honest, when it comes to escrow,

escrow is one of those things that I usually am lost on. It typically is in arrears, and so what that means is in reverse. And so they're billing you now for what they've already paid because they're billing you now for what they've already paid because when you for they're billing you now for last year, because when you set up, when you got the loan, you set up an escrow account as part of your closing costs and you paid out that you went ahead and paid out. So it may be what I would want to do is I want to get on the phone with them and get through exactly what has been paid because i'm going to cancel this policy and get a reasonably priced policy and then that's going to change your escrow back to close and you'll just change it and then they just need to do an audit and set it up they only they don't need to withhold you know four or five six hundred dollars a month if they only need $100 a month,

in which case you would permanently change your payment by enough to cover your taxes and insurance. But you need to get the right payment on the books, the right health insurance plan, I'm sorry, homeowner's insurance plan on the books first, and then you've got to pay for whatever you paid. But if you cancel that homeowner's insurance in the middle of the year, you're only going to have paid for it for half of the year not for the whole year so what i'm saying is i want to get into it now and cancel it as soon as possible so that i don't and if they haven't already paid for it for a whole year at four thousand dollar increase then you're only going to have like a one thousand dollar increase because you're canceling it. Right. Okay.

All right. Yeah, because we were just looking at them, and we're like, there's no way we're going to stay with them. Yeah, it's – No. Yeah, they're taking us for a ride. So what you need to do is go to RamseySolutions.com and click on insurance for P&C.

It's property and casualty, and get with one of our insurance ELPs. They're independent insurance brokers, and that means they'll shop around among several different companies and get you, in your particular situation, the best deal. And usually you bundle it with your cars, too, and the typical person shopping against some of these other companies, they'll save $800. In your case, you may save $4,000. That would be great.

Yeah, and then so what you're going to do, and then you're going to take that new policy and then get with the mortgage company and find out how much of the old policy has actually been paid or earned, and you've got to pay the portion that's actually been used. So if that policy with that $4,000 increase has been on the books for three months, then it's only going to be, you know, one-fourth of $4,000 increase. You follow me?

Right. And so, but if it's been on the books a whole year, then you bid it for a year. But I don't think it has. I think you're catching it because they come after you pretty quick with an escrow increase if they're on their game, and it sounds like they are. So yeah, get the policy changed, get it shopped, get with them, request an audit, and then write one check and do a true up, and then set your new, based on your current new homeowner's insurance and taxes, 150 more on the taxes, more on the homeowners, but not 4,000 more.

Now what should my payment be? Reset the payment to be the accurate amount. It is going to go up, but it's not going to go up as much as they came at you with because they were assuming you're stupid enough to keep that old policy. Escrow accounts almost all have errors in them. Yep. Ongoing. You constantly have to stay on top of it.

They almost all have errors, and when they discover Ongoing. You constantly have to stay on top of it. They almost all have errors, and when they discover an error that they're behind on, they always almost double dip and hit you. So he needed, it sounded like they needed about a $400 raise, and they were giving him a $600 raise in his payment. Yeah. I don't like dealing with escrow. Well, it's just, you're dealing with bureaucrats on the other end of the phone. That's another problem, too.

Tom's in Salt Lake City. Hey, Tom, how are you? I'm doing great. How are you, Dave? Better than we deserve. What's up? So long story short, my wife and I, we're debt-free. Our house and everything since 2021.

Way to go. Thank you. Yeah, it was a big help to your system. It worked out great. So we're currently now investing heavily to get our retirement caught up. We're also saving for what we would like to do for our forever home. So we want to buy a lot that we like and then build the house that we, you know, to be designed to put on that. Our question is, so a lot came house that we you know to be designed to put on that uh our question is

so we there a lot came up that um we looked at we were really really loving it it looked like it could have been perfect um but we let it go because financially we're not we don't have the savings to just cash cash flow and stay out of debt good um so so we we held. We let it go. And we felt good about it, but at the same time, we felt maybe we missed out. And we wanted to get your opinion. All debt is horrible, and I agree with completely, if at all possible ever. Mortgages, I feel like, can be a gray area of debt. And so with what would you recommend? Should we just keep on the track and just, if it takes us five years or 10 years to save up to get this lot that we want

and just keep passing on lots as they come along and stop looking? Or would you, if a perfect lot came along, should we take what we've saved, put that as a down payment, get a new mortgage, and keep the house as a rental? That would be the eventual. What we'd really like to do the best is keep the house we have now paid off as a rental and then move up to our new home. And have a mortgage on your home.

Right. Well, no. The idea would be to save up before we move and not have any mortgage ever again. Oh, and your old house is a paid-for rental and your new house is paid for. Right. So why couldn't you save up the lot price then, if you can save up the whole thing? So where we would like to eventually live is, like I said, it's going to be our forever home, so it's probably going to be... No, it's not.

The lot's going to be... forever home, so it's probably going to be where the lot's going to be. There's no such thing. Okay. Where we would like to be right now, the lot is... I got you. It's the nice move-up house. I'll go with that. And you're going to pay cash for it, so why can't you pay cash for the lot?

Well, we don't have it yet. I know. It's still four or five years out. I know, and you can't pay cash for the house either. No need to buy the lot until we're ready to pay cash for the lot. If you can't even pay cash for the lot, you're nowhere near paying cash for the house. So what's the hurry? Our plan was to pay for the lot and then start with, because we would like to have some really nice landscaping trees and whatnot.

It's one thing we missed with where we're at now. We have almost no trees. So our thought was find a place we like, buy a lot. It's not thing we miss with where we're at now. We have almost no trees. Our thought was, find a place we like. Buy a lot. It's not like in the subdivision. We're kind of looking up in the hills and the mountainsides. Buy the lot. You're missing the point.

You told me you were going to pay cash for this house that you're moving into. If you're going to pay cash for the house that you're moving into, you've got to at least have the money to pay cash for the lot first. So I don't see literally what the trip is, except you've got house fever and lot fever because you're out there riding around every weekend looking at stuff. Chill till you got the money.

That's what I would do. This is The Ramsey Show. Hey, what's up, guys? It's Jade. If you love the show and want a deeper dive on your money journey, we have a weekly newsletter that gives you trending and helpful articles and tips on following the Ramsey way. Just go to RamseySolutions.com today to sign up for our newsletter. Again, that's RamseySolutions.com to sign up for our weekly newsletter.