Monday, June 16, 2008

Living Debt Free--Part 4

Housing and the Debt-Free Life

This area I have absolutely NO experience in but I wanted to bring it up so that blog readers could share their ideas with me on this issue. Housing nowadays is so expensive that there are no easy pat answers. I know some people who rent for years and years, preferring to pour money into stock investments and others who buy right away and are swallowed up in big mortgage payments. I know people who are determined to pay cash only to build a house, but the saving up is slow, as building materials continue to sky rocket, and very few can actually do it completely loan-free. Who would deny that paying all cash for a house is the best way to go and yet who can actually do it? If living expenses take up most or all of your income, it's next to impossible.

Correct me if I'm wrong but I think that Dave Ramsey recommends putting 20% down on a home when purchasing. I think Crown Financial Concepts (Money Matters) recommends about the same, especially putting down at least 10%. Thinking of the cost of fixer-uppers in our little town that would mean King Jo and I would need to save up about $30,000 (20%) or $15,000 (10%) to put down on a house. At our current rate of ability to save ( a few thousand a year max) that would take us a lot of time and in that time home prices will have gone up even more. The only way I see this happening soon is if we were to receive a large inheritance or if King Jo suddenly got an amazing job that paid double the money he makes now.

Some people live with family members for a while, some people build, some start off in trailer homes, and some buy with nothing down, preferring to start building equity right away. Whatever you have chosen to do, you know that housing is expensive and buying a home is a huge committment. In our dual-income world it is especially difficult for families with a stay-at-home mom to purchase a home.

So, what's a young couple to do?

While I'm not sure exactly how or when God will lead us into buying our first home, I do know this:

1. We will buy only what we feel we can reasonably afford even if it will take lots of work. Even if the bank said we could have a loan for twice the amount of the cost of a fixer-upper in town, we would still take the fixer-upper provided it was a good buy and live-able.

2. We will make it our goal to pay off our mortgage as soon as possible. I like how Dave Ramsey says on his radio show, ".....Where the paid off home mortgage has taken the place of the BMW as the status symbol of choice." Rather than take pricey family vacations or blow unexpected bonus or tax refunds on shopping sprees or personal wants, we will try to put any extra money towards our mortgage. It will take a lot of time and a lot of dedication, but being completely debt-free (including the mortgage) is the goal.

If you have advice on buying a home or a neat testimony of how God has taken care of you in this area, please share!


Craig & Jessica said...

I know for our family, we were trained to work while you can so that you can work on raising your family when it comes along- with less worry about what you are going to do for a home. We decided that renting (for us) is a waste of money that could have otherwise been spent on paying down on our mortgage. The rent where we live is fairly high...some is even more than the mortgage we pay for currently. We DID save the 20% down ahead of time and our goal is to eventually pay off the home. I am so thankful that we worked our life this way.
My own opinion on living "debt-free" is that a person/family who pays any kind of rent or mortgage isn't actually living debt free, until you own the title free & clear ~ regardless of the bills, or lack-there-of.

The Three 22nds said...

Somebody (was it Larry Burkett?) wrote that it was okay to take a loan to buy something that increased in value (a home, land), but discouraged it for things that depreciated (cars, and nearly everything else).


Mrs. Jo said...


Way to go! Sounds like you guys made the best decision you could have regarding housing.

3 22nds,
I agree that putting your money into land or housing is a good investment!

Kristin said...

God has really blessed us in the area of housing. My husband has great knowledge in the real estate industry, plus he's a fixer-upper. So we have had luck with "flipping" houses (buying low, fixing up, reselling for more, making a profit) and also with rental properties. You really have to want to invest the time in doing rentals, because it is a lot of work. You have to find quality renters, make sure they pay rent on time, take care of the place, go unplug the toilet and drains, etc. But for us, our rentals give us income each month (the rent pays the mortgage payment plus extra) and we would be in a tight spot without that rental income.

I'm not saying these options are for everyone because it is a little scary buying and owning multiple properties, but after the first couple times it gets a little easier. (My husband like to take more risks than I do!)

Since the housing market is really down right now, houses are really starting to go down in price, because people are just wanting to get rid of them. Plus, living in a college town, there are always renters available. It's just being picky and finding the right ones!

I think there needs to be a distinction between "good" debt and "bad" debt. I don't think there is anything wrong in having debt if it's something that will continue to appreciate, such as real estate. I think the trouble comes in when people get in over their heads - buying a house far too expensive for their incomes, or buying brand new vehicles - then they just create more problems for themselves. I think sometimes people are so afraid of the word "debt" that they don't want to take any risks. But I can attest to the fact that sometimes "good" debt can really pay off.

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