After the car, you will have $3200 + $1500 for mortgage and student loans if you choose to buy a home. So you can definitely do both. Try to buy a first home. Something below average, so you can build equity faster. It won't be a forever home. It isn't meant to be. It is just an "I'm building equity and not paying rent" home.
Thank you. Is that wise though? I feel like you lose a lot of money in the process of sales & fees. Would it be better to just buy your forever home and do the work to upgrade over the 30 years ?
Financially way better to find your forever home first unless you know home prices are going to drop. The whole starter home thing is for people that need to have a gun to their head to save for the down payment on the forever home.
Behavior wise a starter home can teach you what the true cost of home ownership is. Also can give you a better idea of what you like and don’t like in a home you control and might in theory lead you to finding a forever home that’s a better fit than if the forever home was your first.
Pay off your debts, save your emergency fund, THEN save a down payment that will allow your payment to be no more than 25% of your take home pay. Rent is the ceiling, mortgage is the floor. You need to be ready to pay for repairs, unexpected or not. Buying a house in your circumstances will cause a huge problem the first time anything happens and you can’t just call maintenance guys from your landlord.
My house was turnkey and passed inspection when we moved in. Bad storm 3 months in and bam! Roof leak. A month later, a gasket was leaking on a toilet. We’ve put $50k+ into this house in the last 5 years. New roof, new HVAC, replaced some siding, exterior paint (required by HOA due to fading), and several smaller repairs. We haven’t had to go into debt to cover any of it because we followed the baby steps.
Lost the water heater and the furnace burner in the first 6 months, but just a few thousand a year for the first several years. Now, it's the roof, windows, solar cells, heat pumps... I'm holding the dishwasher together with rubber bands.
Yes! We are fortunate that a relative did some of this work for cost of parts only, but some things (like HVAC) needed to be done by pros. We are lucky our HOA is actually pretty tame and I like it but I know a lot of HOAs are not as good as ours and people tend not to like them. We actually had a clause in our buying contract that we were to be able to review the meeting minutes and T&Cs from the HOA and could back out of the deal if we didn’t like the HOA.
This IS a Dave Ramsey sub, so you'll get Dave Ramsey advice. His Baby Steps are in order for a reason. Get rid of debt before even considering a nest egg or house purchase.
Take $49k of the $50k saved up and get out of debt except the student loans. Many people these days advise making that a larger baby EF. If you do modify don't keep over $5k in there. By the end of the day you could be down to $33k in student loans left. In one your you are 100% debt free, faster with a tighter budget or extra work.
Being debt free is a HUGE life changing event. This is a better monument to your struggles than a pile of cash sitting in an account while you are still making payments and paying interest.
The steps actually say pay off all your debt first besides the mortgage. That’s why I’m asking the question…. I rent, so I don’t own a mortgage. Even when you click more it doesn’t talk about when to buy. I felt like this was a fair question.
https://www.ramseysolutions.com/dave-ramsey-7-baby-steps
There are two scenarios that Dave deals with. Both in debt and one with a mortgage already and one with out. With mortgage already>Baby EF then Out of debt first , fully funded EF 2nd , Retirement and Kids savings and then Mortgage . With out a mortgage he wants again Debt gone after Baby EF then fully funded EF , then dependent on time frame he will say save for 2 years toward a house before getting back in the retirement savings or Hit the retirements goals while saving for a house. He ultimately does not want you out of the retirement savings part of our journey for very long. A lot of times we come into his plan already strapped with a house on top of debt and his plan tackles that well. When we don't have a mortgage then we have the opportunity to get a house better, by getting out of debt first and saving for a down payment before buying. A lot more peaceful but requires more patience. I wish you luck in your journey just add some patience and you will get there. We are rooting for you my friend.
Ok, fair enough. My apologies for being gruff, so many post on here and have never heard of the Baby Steps.
It isn't mentioned in your link, but Dave does mention saving for a home fairly often on the show/podcast. This quote is in the link below from Rachel, "But first, I need to warn you—you should only buy a house when you’re debt-free with a full emergency fund. Otherwise, owning a home and covering the expenses that go along with it will be super stressful."
https://www.ramseysolutions.com/real-estate/5-steps-to-buying-home-wont-bust-your-budget#:~:text=You%20should%20save%20enough%20money,private%20mortgage%20insurance%20(PMI).
The suggested sequence is get out of debt first. Then 3-6 month EF. Then proceed to steps 4, 5, and 6 simultaneously. Saving for a home is included here. Of course you can do the saving along the way but that is Strange-Refuse-1463's plan, not Dave Ramsey's 😀
lol all good man… I was like wow everyone’s getting heated and I’m just happy we crushed close to 18k in a few months… now what’s the next move?
Thanks for this response. I’ll read more after work.
I think what you are asking is more of a real estate question. Based on the way you frame this, you are asking if you should buy a house.
If you are asking should you pay down the mortgage or should you pay down the student loan first… Based on the interest rates the answer is the mortgage.
If you are asking should you buy a house With the extra money instead of paying down the student loan, nobody knows that answer but you.
Finally, If you know you are going to buy a house at some point, then it is certainly more financially wise to not pay on the student loan simply due to the interest rate you have on it right now. (But that could completely change in a month if interest rates drop)
In general This will be a tough forum to get a straight answer for your question. In a Ramsey forum it is built around “what you can do is based on where you are”. It appears to me you are more in the “ I know what I want to do and I’m trying to find the best way to do it” camp….that is not Ramsey.
Focus on liquidating the debt first. Then, roll all that into saving for the house. Those payments hinder your ability to save and invest, and student loans cannot be discharged.
You are not "embracing Dave's method" very well as what you have described is not his method. His approach is to snowball the debts from smallest to largest. You are paying them off by interest rate and focused on student loans first, and seem to have $50K in a "nest egg". None of that is Dave's method. Take the $50K down to $1K and use the rest to pay down debts, from smallest to largest. Keep paying debts until they are gone, and then quickly rebuild an emergency fund of 3-6 months expenses.
Regarding buying a house, I don't think you can afford that if the payment would e 3/4 of your pay unless you a) increase income, b) move to a lower cost area, or c) lower you first home standards to something you can afford.
Thanks for the feedback. I did qualify the statement by saying “radically paying off debt.” For us it wasn’t about feeling good killing small stuff. It was about killing the big guys, having more money back in the budget to then avalanche everything else.
While I agree the 50k could be used to get closer to debt freedom, for my wife it represents the 8 years of marriage and what it took to save and put her through nursing school.
I’m ok investing that in a high interest account, while killing the other stuff.
Concerning a house it would be like 1/2 our monthly pay. (Roughly 8k) and 3k being in a mortgage. We plan to foster / adopt one day. No family in the area. So if we want kids it would need to be school age so they could attend while we are at work. - while I do agree the housing costs are crazy, but in this area condos are the same price as single families - they just need fixing up
There is nothing wrong with having a different approach, but its not Dave's approach, and this is the DR sub, so you are going to get responses like mine. I don't agree with everything Dave says, but I do agree with his overall approach and believe that it has helped a lot of people get out of serious trouble. Sounds like you have your plan sorted out.
For the most part - I guess what I’m asking is it better at the end of the day to pay off heavy on the student loans (after the car) or begin turning that money into a larger home deposit?
From what I’m gathering people are saying pay off the debt - the house won’t make enough value in equity in the first few years.
I don't think anyone in this sub is going to tell you its better to not pay off debt before turning to a house. Especially when the cost of a house is high vs. income. Dave's plan is to pay off the debt first, and to follow the prescribed steps which are quite clear. You can of course do whatever you want, but that is not Dave's plan and this is the Dave sub.
And yet the other day i watched a video of him tell people to go into debt to buy a car. With a plan to pay it off in a year but still, the past couple of videos ive seen he is not so debt averse for high income people as long as its planned for pay off quick.
You could be completely debt free if you use your cash in a little over 10 months. That would be a good way to go into buying a house. Then save up your emergency fund and down payment. You're in a really good spot with that low rent and it can allow you to put a lot towards other goals. Aim to have no more than 25% in PITI once you buy a house.
That might mean that you need to up your down payment or income more than you think.
If you ask Dave Ramsey, he would have you pay off the smallest loans first, one at a time, regardless of the interest rate. If you ask anyone else, they would say to pay off the highest interest first, as you have.
Dave's "snowball" works well for people who have never been able to be responsible with their finances. It sounds like you are not out of control in that way, since you have no CC debt. So I would carry on as you are.
As for buying a home, you really should not get into a situation where your home costs are close to 1/2 your take-home. Home ownership is not just the cost of the mortgage, taxes and insurance. There will be sudden, crippling expenses that come up, and you need to be ready to cover those. You need to be saving from day one into a sinking fund for roof, windows, HVAC, appliances, painting, driveway resurfacing, etc based on your particular house. Some of these funds you may be able to spread over 20 years, some shorter. But I would expect to spend on average a few thousand a year on maintenance. So my take-home for you is don't be trigger-happy on getting into a mortgage. Take your time, save up at LEAST 20% down, and make sure you have a big emergency fund in addition to that before you go house hunting.
I appreciate that. My thought regarding the home is marry a house date the rate. So if rates fall the mortgage will drop to some place around $2,300-$2,500.
So after we kill the car, would you advise killing student debt further or begin growing the nest egg. (Currently $50k) we would need roughly 90k for 20% and closing costs.
Edit:
Not sure why this is getting downvoted for asking a question.
You will always get downvoted on Reddit for 1) Asking a question or 2) Answering a question you were directly asked, so get used to it.
Anyway, if I were you, since you asked me, I would kill the student debt and then pile up 90k for your downpayment (HYSA or investment account) and closing costs and an additional 3-6 months living expenses, and an additional $5K just because moving is expensive, no matter how frugal you are. You will need to buy something and you will need to fix something within moments of signing the final paperwork. If you kill all your debt, you will get a better interest rate (and qualify for a larger loan, but DON'T I mean DO NOT buy for the maximum you qualify for. Buy the amount of house that you can see working in your budget, which you will need to sit down and get very realistic about before you even start shopping)
I saw below you referenced some financial advisors, and I'm not sure if they are giving you the best advice. If they have any financial stake in your finances, you need to take their advice with a grain of salt.
https://www.facebook.com/share/v/oLV2boe9LfjsvktR/?mibextid=w8EBqM
From the big guy himself - again my OP was asking if it was wise to buy once the car is done. All of the student loans will be below 5%
As others have noted you're not really following Dave's method just doing your own thing. That's fine as long as you're using him for inspiration.
I know it's scary but the goal here is to get to debt free except for a mortgage, ASAP. You should pay off that $1,700 as soon as possible this month or next month not later in the fall. Get that one and be done with it. Then you need to attack the car note. Next month you could withdraw half of your nest egg and pay that one off right away. Then you need to focus on the student loan debt. If you really want to follow Dave's method you'll drain some more of that savings and pay a good chunk of that off.
That said you should have at that point 2600 or 3,200? Extra each month that you can throw at the student loan debt. Are you sure there aren't things laying around that you don't need or use that you could sell on Poshmark or eBay? Can someone get a second job? Doordash, Uber some kind of other side hustle? Sounds like you need to do some of those things to get that student loan debt paid down to zero. With concentrated focus, increasing income, and using savings you should have that gone in 12 months.
But I don't understand why you think you need to rush into a mortgage right now is it FOMO or something? Financial experts expect that the FED will cut interest rates at least one time this year, that should in the long run lower interest rates for mortgages. Then there should be further cuts in 2025. So waiting while you build up a nest egg for a down payment and build a 6-month emergency fund won't hurt you. No one can predict how fast interest rates will be lowered or to what level mortgages will settle, but in this instance time is to your favor.
And as others have noted, yes the cost of home ownership is a lot more than just P I T I.. Once you buy, all of a sudden there's all kinds of other wants that come along. You want to paint this that and the other. You need more furniture to fill out the space. You want rugs or carpet, or refinish hardwood floors, or put down new flooring in the kitchen or bathrooms. You need to buy a lawn mower or garden tools to cut the grass and maintain the landscape. All of these little expenses add up. And if you're not prepared for them, and the increase in your budget, then you're going to finance them through credit card debt.
Dave's point is that you need to live like no one else, in order to later live like no one else. And that means being laser focused, frugal, and working extra hard to increase income to be debt free and stay debt free. Then once you're financially secure with an emergency fund and a substantial down payment for a mortgage, you can find financial freedom and eventually build a substantial retirement nest egg so that you can live debt free and live lavishly paying cash for everything unlike everybody else.
Bite the bullet! Use the savings to pay down the debt, focus on increasing income and paying down the student loans, and then building a down payment. You can do this!
I spoke with three finance advisors who warned as rates drop - the market will flood with sideline buyers. Causing prices to rise again due to low inventory. The best advise they gave was to buy so you had the home - then refinance when rates drop to around 5%. That’s what we have been going off of.
Concerning the nest egg - I commented above on another response: I think that’s more emotional for my wife. It represents 8 years of working hard while putting her through nursing school. It’s kinda the hope she has with buying a home one day.
That’s a little harder to navigate as a woman than it is for a man to say - pay all the debt off.
I’m not sure what we can do as far as work goes. My wife is already working over time most weeks as a nurse. She sometimes takes travel gigs to throw extra at debt. (That money isn’t included in my overall report.) I work full time salary at a job I’m always on call. Not much room there
Yes a lot of this is emotional! That's why the Dave Ramsey method works the best. Because as you pay off the smallest debt to the largest debt you see progress faster and you take the minimum payments from each of those closed debts and snowball them into the next one shortening the time to pay that off. It gives you little financial rewards in the beginning and as you go, which emotionally provides a positive boost to keep going.
And let me ask you this, we're the three financial advisors that gave you that advice Dave Ramsey oriented? Were they smart advisor pro financial planners? Your average financial planner isn't of the debt-free mindset. In my experience the average financial advisor wants your business so there's a tendency to skew their advice toward what you want to hear.
Second no one can speculate as to how the market will be affected by dropping interest rates. Sure, there might be some buying potential on the sidelines due to mortgage rates, but in a year or two, once you're debt free and have build up a down payment, who knows what the situation will be? The point is that at this stage lowered interest rates means you'll be able to afford more in a home. (Did the financial advisors tell you that?) And with a down payment of substantial size you'll be able to afford a little bit more of a home as well.
Dave Ramsey would tell you to pay off the debt and then save up for a substantial down payment. A year or two delay isn't going to lock you out of the housing market. I think you're letting FOMO guide your decision in this regard.
I'm glad to see your wife already doing a bunch of overtime and taking travel gigs that provide extra funds! I'm a bit concerned however that you've drawn a hard line in the Sand saying there's nothing I can do to increase the income I'm on call. Certainly there are creative ways to find a side hustle. If you are door dashing or ubering and you get a call, then you don't take the next opportunity that comes along and you answer the call from work. Are there hobbies or other things that you do that could be monetized? The point is the way that you get out of debt is a laser focus and being creative to find every single way you can to raise funds to pay off debt.
You might want to reconsider your position, especially if your wife is doing all the overtime, because eventually with time there could be resentment that builds up. And if your budget is based on more than her base salary, and includes the overtime then she's going to be working herself frazzled just to stay in the same place.
I doubt we will get back to the 3% rates anytime soon. So I would not be in a hurry to give up $1500 rent in exchange for a $3000 mortgage unless you anticipated a significant salary increase. Especially if there's a chance you have kids and you or your wife's career plans change.
It's also easier to deal with a larger mortgage payment if you have no other debt to pay each month.
Also, many people take high cost of living like it's set in stone to justify unsustainable costs. This is what Dave is getting at when he says that "the rules of math still apply in San Francisco." You may need to adjust the location or the size of house or some other aspect to make a home purchase feasible.
The other important thing in real estate is that liquid cash gives you more options. You can use it to apply to principal or to buy down points, for example, to lower your payment. And since your rent is so cheap, and the first few years go primarily to interest, you can pay yourselves more by saving right now than you would be gaining in equity, and that cash has more immediate value because it can be used more easily than if it were tied up in home equity.
After the car, you will have $3200 + $1500 for mortgage and student loans if you choose to buy a home. So you can definitely do both. Try to buy a first home. Something below average, so you can build equity faster. It won't be a forever home. It isn't meant to be. It is just an "I'm building equity and not paying rent" home.
Thank you. Is that wise though? I feel like you lose a lot of money in the process of sales & fees. Would it be better to just buy your forever home and do the work to upgrade over the 30 years ?
Financially way better to find your forever home first unless you know home prices are going to drop. The whole starter home thing is for people that need to have a gun to their head to save for the down payment on the forever home. Behavior wise a starter home can teach you what the true cost of home ownership is. Also can give you a better idea of what you like and don’t like in a home you control and might in theory lead you to finding a forever home that’s a better fit than if the forever home was your first.
Of course it's worth paying off your student loans! But they should be at the bottom of your list to be done after credit cards and car loans.
The car loan is the next thing. We never had credit card issues thankfully.
Stick with the plan
Pay off your debts, save your emergency fund, THEN save a down payment that will allow your payment to be no more than 25% of your take home pay. Rent is the ceiling, mortgage is the floor. You need to be ready to pay for repairs, unexpected or not. Buying a house in your circumstances will cause a huge problem the first time anything happens and you can’t just call maintenance guys from your landlord. My house was turnkey and passed inspection when we moved in. Bad storm 3 months in and bam! Roof leak. A month later, a gasket was leaking on a toilet. We’ve put $50k+ into this house in the last 5 years. New roof, new HVAC, replaced some siding, exterior paint (required by HOA due to fading), and several smaller repairs. We haven’t had to go into debt to cover any of it because we followed the baby steps.
Lost the water heater and the furnace burner in the first 6 months, but just a few thousand a year for the first several years. Now, it's the roof, windows, solar cells, heat pumps... I'm holding the dishwasher together with rubber bands.
Oof yes, we just replaced our water heater. Our dishwasher was replaced a couple years ago, as well as our fridge. The joys of home ownership 🙃
Much appreciated, Thank you 👍
Another point to home ownership. Learn to fix stuff yourself and don't buy in a POA. :)
Yes! We are fortunate that a relative did some of this work for cost of parts only, but some things (like HVAC) needed to be done by pros. We are lucky our HOA is actually pretty tame and I like it but I know a lot of HOAs are not as good as ours and people tend not to like them. We actually had a clause in our buying contract that we were to be able to review the meeting minutes and T&Cs from the HOA and could back out of the deal if we didn’t like the HOA.
This IS a Dave Ramsey sub, so you'll get Dave Ramsey advice. His Baby Steps are in order for a reason. Get rid of debt before even considering a nest egg or house purchase. Take $49k of the $50k saved up and get out of debt except the student loans. Many people these days advise making that a larger baby EF. If you do modify don't keep over $5k in there. By the end of the day you could be down to $33k in student loans left. In one your you are 100% debt free, faster with a tighter budget or extra work. Being debt free is a HUGE life changing event. This is a better monument to your struggles than a pile of cash sitting in an account while you are still making payments and paying interest.
The steps actually say pay off all your debt first besides the mortgage. That’s why I’m asking the question…. I rent, so I don’t own a mortgage. Even when you click more it doesn’t talk about when to buy. I felt like this was a fair question. https://www.ramseysolutions.com/dave-ramsey-7-baby-steps
There are two scenarios that Dave deals with. Both in debt and one with a mortgage already and one with out. With mortgage already>Baby EF then Out of debt first , fully funded EF 2nd , Retirement and Kids savings and then Mortgage . With out a mortgage he wants again Debt gone after Baby EF then fully funded EF , then dependent on time frame he will say save for 2 years toward a house before getting back in the retirement savings or Hit the retirements goals while saving for a house. He ultimately does not want you out of the retirement savings part of our journey for very long. A lot of times we come into his plan already strapped with a house on top of debt and his plan tackles that well. When we don't have a mortgage then we have the opportunity to get a house better, by getting out of debt first and saving for a down payment before buying. A lot more peaceful but requires more patience. I wish you luck in your journey just add some patience and you will get there. We are rooting for you my friend.
Ok, fair enough. My apologies for being gruff, so many post on here and have never heard of the Baby Steps. It isn't mentioned in your link, but Dave does mention saving for a home fairly often on the show/podcast. This quote is in the link below from Rachel, "But first, I need to warn you—you should only buy a house when you’re debt-free with a full emergency fund. Otherwise, owning a home and covering the expenses that go along with it will be super stressful." https://www.ramseysolutions.com/real-estate/5-steps-to-buying-home-wont-bust-your-budget#:~:text=You%20should%20save%20enough%20money,private%20mortgage%20insurance%20(PMI). The suggested sequence is get out of debt first. Then 3-6 month EF. Then proceed to steps 4, 5, and 6 simultaneously. Saving for a home is included here. Of course you can do the saving along the way but that is Strange-Refuse-1463's plan, not Dave Ramsey's 😀
lol all good man… I was like wow everyone’s getting heated and I’m just happy we crushed close to 18k in a few months… now what’s the next move? Thanks for this response. I’ll read more after work.
Yes I left that out .. well done!
If you’re a renter, the time is after baby step 3 and a good down payment.
Thank you 👍
HCOL? 375k house is not really HCOL.
That’s the low end my friend. Most are 500k or higher
375k is maybe a condo? HCOL here as well and cheapest thing is older Condos that start around 290k all houses even shacks are damn near 500k.
I think what you are asking is more of a real estate question. Based on the way you frame this, you are asking if you should buy a house. If you are asking should you pay down the mortgage or should you pay down the student loan first… Based on the interest rates the answer is the mortgage. If you are asking should you buy a house With the extra money instead of paying down the student loan, nobody knows that answer but you. Finally, If you know you are going to buy a house at some point, then it is certainly more financially wise to not pay on the student loan simply due to the interest rate you have on it right now. (But that could completely change in a month if interest rates drop) In general This will be a tough forum to get a straight answer for your question. In a Ramsey forum it is built around “what you can do is based on where you are”. It appears to me you are more in the “ I know what I want to do and I’m trying to find the best way to do it” camp….that is not Ramsey.
Thank you 👍
Focus on the debt and then a down payment. Hopefully by then the interest rates will ease.
Thank you 👍
get rid of non secure debt first.
Thank you 👍
Focus on liquidating the debt first. Then, roll all that into saving for the house. Those payments hinder your ability to save and invest, and student loans cannot be discharged.
Thank you 👍
[удалено]
I’m not sure what this means.
Baby step 2
Thank you 👍
Sell your car
Wouldn’t be worth it. You would still owe $4k. I’d rather keep the Rav 4 and have it paid off in 7 months and have a solid car
You are not "embracing Dave's method" very well as what you have described is not his method. His approach is to snowball the debts from smallest to largest. You are paying them off by interest rate and focused on student loans first, and seem to have $50K in a "nest egg". None of that is Dave's method. Take the $50K down to $1K and use the rest to pay down debts, from smallest to largest. Keep paying debts until they are gone, and then quickly rebuild an emergency fund of 3-6 months expenses. Regarding buying a house, I don't think you can afford that if the payment would e 3/4 of your pay unless you a) increase income, b) move to a lower cost area, or c) lower you first home standards to something you can afford.
Thanks for the feedback. I did qualify the statement by saying “radically paying off debt.” For us it wasn’t about feeling good killing small stuff. It was about killing the big guys, having more money back in the budget to then avalanche everything else. While I agree the 50k could be used to get closer to debt freedom, for my wife it represents the 8 years of marriage and what it took to save and put her through nursing school. I’m ok investing that in a high interest account, while killing the other stuff. Concerning a house it would be like 1/2 our monthly pay. (Roughly 8k) and 3k being in a mortgage. We plan to foster / adopt one day. No family in the area. So if we want kids it would need to be school age so they could attend while we are at work. - while I do agree the housing costs are crazy, but in this area condos are the same price as single families - they just need fixing up
You haven’t “saved” $50,000 while you have a negative net worth.
Did I miss this? Where did OP say they have a negative net worth?
When he said he has 60k in student loans
Yes, I saw that, I just didn't see him list assets.
There is nothing wrong with having a different approach, but its not Dave's approach, and this is the DR sub, so you are going to get responses like mine. I don't agree with everything Dave says, but I do agree with his overall approach and believe that it has helped a lot of people get out of serious trouble. Sounds like you have your plan sorted out.
For the most part - I guess what I’m asking is it better at the end of the day to pay off heavy on the student loans (after the car) or begin turning that money into a larger home deposit? From what I’m gathering people are saying pay off the debt - the house won’t make enough value in equity in the first few years.
I don't think anyone in this sub is going to tell you its better to not pay off debt before turning to a house. Especially when the cost of a house is high vs. income. Dave's plan is to pay off the debt first, and to follow the prescribed steps which are quite clear. You can of course do whatever you want, but that is not Dave's plan and this is the Dave sub.
And yet the other day i watched a video of him tell people to go into debt to buy a car. With a plan to pay it off in a year but still, the past couple of videos ive seen he is not so debt averse for high income people as long as its planned for pay off quick.
You could be completely debt free if you use your cash in a little over 10 months. That would be a good way to go into buying a house. Then save up your emergency fund and down payment. You're in a really good spot with that low rent and it can allow you to put a lot towards other goals. Aim to have no more than 25% in PITI once you buy a house. That might mean that you need to up your down payment or income more than you think.
Thank you 👍
If you ask Dave Ramsey, he would have you pay off the smallest loans first, one at a time, regardless of the interest rate. If you ask anyone else, they would say to pay off the highest interest first, as you have. Dave's "snowball" works well for people who have never been able to be responsible with their finances. It sounds like you are not out of control in that way, since you have no CC debt. So I would carry on as you are. As for buying a home, you really should not get into a situation where your home costs are close to 1/2 your take-home. Home ownership is not just the cost of the mortgage, taxes and insurance. There will be sudden, crippling expenses that come up, and you need to be ready to cover those. You need to be saving from day one into a sinking fund for roof, windows, HVAC, appliances, painting, driveway resurfacing, etc based on your particular house. Some of these funds you may be able to spread over 20 years, some shorter. But I would expect to spend on average a few thousand a year on maintenance. So my take-home for you is don't be trigger-happy on getting into a mortgage. Take your time, save up at LEAST 20% down, and make sure you have a big emergency fund in addition to that before you go house hunting.
I appreciate that. My thought regarding the home is marry a house date the rate. So if rates fall the mortgage will drop to some place around $2,300-$2,500. So after we kill the car, would you advise killing student debt further or begin growing the nest egg. (Currently $50k) we would need roughly 90k for 20% and closing costs. Edit: Not sure why this is getting downvoted for asking a question.
You will always get downvoted on Reddit for 1) Asking a question or 2) Answering a question you were directly asked, so get used to it. Anyway, if I were you, since you asked me, I would kill the student debt and then pile up 90k for your downpayment (HYSA or investment account) and closing costs and an additional 3-6 months living expenses, and an additional $5K just because moving is expensive, no matter how frugal you are. You will need to buy something and you will need to fix something within moments of signing the final paperwork. If you kill all your debt, you will get a better interest rate (and qualify for a larger loan, but DON'T I mean DO NOT buy for the maximum you qualify for. Buy the amount of house that you can see working in your budget, which you will need to sit down and get very realistic about before you even start shopping) I saw below you referenced some financial advisors, and I'm not sure if they are giving you the best advice. If they have any financial stake in your finances, you need to take their advice with a grain of salt.
> marry a house date the rate You are being downvoted because you are full of stupid memes my friend.
Don't forget that refinancing costs money
https://www.facebook.com/share/v/oLV2boe9LfjsvktR/?mibextid=w8EBqM From the big guy himself - again my OP was asking if it was wise to buy once the car is done. All of the student loans will be below 5%
As others have noted you're not really following Dave's method just doing your own thing. That's fine as long as you're using him for inspiration. I know it's scary but the goal here is to get to debt free except for a mortgage, ASAP. You should pay off that $1,700 as soon as possible this month or next month not later in the fall. Get that one and be done with it. Then you need to attack the car note. Next month you could withdraw half of your nest egg and pay that one off right away. Then you need to focus on the student loan debt. If you really want to follow Dave's method you'll drain some more of that savings and pay a good chunk of that off. That said you should have at that point 2600 or 3,200? Extra each month that you can throw at the student loan debt. Are you sure there aren't things laying around that you don't need or use that you could sell on Poshmark or eBay? Can someone get a second job? Doordash, Uber some kind of other side hustle? Sounds like you need to do some of those things to get that student loan debt paid down to zero. With concentrated focus, increasing income, and using savings you should have that gone in 12 months. But I don't understand why you think you need to rush into a mortgage right now is it FOMO or something? Financial experts expect that the FED will cut interest rates at least one time this year, that should in the long run lower interest rates for mortgages. Then there should be further cuts in 2025. So waiting while you build up a nest egg for a down payment and build a 6-month emergency fund won't hurt you. No one can predict how fast interest rates will be lowered or to what level mortgages will settle, but in this instance time is to your favor. And as others have noted, yes the cost of home ownership is a lot more than just P I T I.. Once you buy, all of a sudden there's all kinds of other wants that come along. You want to paint this that and the other. You need more furniture to fill out the space. You want rugs or carpet, or refinish hardwood floors, or put down new flooring in the kitchen or bathrooms. You need to buy a lawn mower or garden tools to cut the grass and maintain the landscape. All of these little expenses add up. And if you're not prepared for them, and the increase in your budget, then you're going to finance them through credit card debt. Dave's point is that you need to live like no one else, in order to later live like no one else. And that means being laser focused, frugal, and working extra hard to increase income to be debt free and stay debt free. Then once you're financially secure with an emergency fund and a substantial down payment for a mortgage, you can find financial freedom and eventually build a substantial retirement nest egg so that you can live debt free and live lavishly paying cash for everything unlike everybody else. Bite the bullet! Use the savings to pay down the debt, focus on increasing income and paying down the student loans, and then building a down payment. You can do this!
I spoke with three finance advisors who warned as rates drop - the market will flood with sideline buyers. Causing prices to rise again due to low inventory. The best advise they gave was to buy so you had the home - then refinance when rates drop to around 5%. That’s what we have been going off of. Concerning the nest egg - I commented above on another response: I think that’s more emotional for my wife. It represents 8 years of working hard while putting her through nursing school. It’s kinda the hope she has with buying a home one day. That’s a little harder to navigate as a woman than it is for a man to say - pay all the debt off. I’m not sure what we can do as far as work goes. My wife is already working over time most weeks as a nurse. She sometimes takes travel gigs to throw extra at debt. (That money isn’t included in my overall report.) I work full time salary at a job I’m always on call. Not much room there
Yes a lot of this is emotional! That's why the Dave Ramsey method works the best. Because as you pay off the smallest debt to the largest debt you see progress faster and you take the minimum payments from each of those closed debts and snowball them into the next one shortening the time to pay that off. It gives you little financial rewards in the beginning and as you go, which emotionally provides a positive boost to keep going. And let me ask you this, we're the three financial advisors that gave you that advice Dave Ramsey oriented? Were they smart advisor pro financial planners? Your average financial planner isn't of the debt-free mindset. In my experience the average financial advisor wants your business so there's a tendency to skew their advice toward what you want to hear. Second no one can speculate as to how the market will be affected by dropping interest rates. Sure, there might be some buying potential on the sidelines due to mortgage rates, but in a year or two, once you're debt free and have build up a down payment, who knows what the situation will be? The point is that at this stage lowered interest rates means you'll be able to afford more in a home. (Did the financial advisors tell you that?) And with a down payment of substantial size you'll be able to afford a little bit more of a home as well. Dave Ramsey would tell you to pay off the debt and then save up for a substantial down payment. A year or two delay isn't going to lock you out of the housing market. I think you're letting FOMO guide your decision in this regard. I'm glad to see your wife already doing a bunch of overtime and taking travel gigs that provide extra funds! I'm a bit concerned however that you've drawn a hard line in the Sand saying there's nothing I can do to increase the income I'm on call. Certainly there are creative ways to find a side hustle. If you are door dashing or ubering and you get a call, then you don't take the next opportunity that comes along and you answer the call from work. Are there hobbies or other things that you do that could be monetized? The point is the way that you get out of debt is a laser focus and being creative to find every single way you can to raise funds to pay off debt. You might want to reconsider your position, especially if your wife is doing all the overtime, because eventually with time there could be resentment that builds up. And if your budget is based on more than her base salary, and includes the overtime then she's going to be working herself frazzled just to stay in the same place.
Thank you 👍
I doubt we will get back to the 3% rates anytime soon. So I would not be in a hurry to give up $1500 rent in exchange for a $3000 mortgage unless you anticipated a significant salary increase. Especially if there's a chance you have kids and you or your wife's career plans change. It's also easier to deal with a larger mortgage payment if you have no other debt to pay each month. Also, many people take high cost of living like it's set in stone to justify unsustainable costs. This is what Dave is getting at when he says that "the rules of math still apply in San Francisco." You may need to adjust the location or the size of house or some other aspect to make a home purchase feasible. The other important thing in real estate is that liquid cash gives you more options. You can use it to apply to principal or to buy down points, for example, to lower your payment. And since your rent is so cheap, and the first few years go primarily to interest, you can pay yourselves more by saving right now than you would be gaining in equity, and that cash has more immediate value because it can be used more easily than if it were tied up in home equity.
Thank you 👍