In over your head
Ever felt like that roof over your head is a tomb covering? It sure can feel like that if you’re not ready to own a home. And plenty of Americans fall into that category.
In 2000, 10% of homeowners were spending at least 50% of their income on housing. That’s bad enough, but it wasn’t the worst. Last year, that number had jumped to 37%! One out of every three people in the country have way too much house! That leads to not having money. Not having financial peace puts a strain on marriages and families, it leads to being an unproductive employee, and a lot of unnecessary pain. If you don’t buy too much home, you can avoid all that.
A good number to use is this: your house payment should never be more than 25% to 33% of your take-home pay on a 15-year, fixed-rate mortgage. That way, the payment stays manageable and doesn’t eat up too much of your paycheck.
A big reason for so many people overbuying is because too many people bought into the myth that you have a house. The myth that renting is just throwing away money, and that sophisticated people get a mortgage and the tax deduction.
You don’t rent a home just so you can rest on your laurels. If you are in an apartment or rental home, have a game plan for being able to buy a house. Make a budget so you know where your money is going. Save up your baby emergency fund, pay off your debts with the debt snowball. Then, when you are debt free, fully fund your emergency fund to 3-6 months of expenses. Then start saving up for the down payment on your house, which is at least 20%.
Don’t believe what people tell you about how you “have” to own a home. If you buy a home when you can’t afford it, or if you buy a home with debt and no savings, the house will become a curse. Murphy will move in your spare bedroom. The roof may start leaking or you may have termites. Since you have no money to fix it, you’ll borrow to make repairs, and your deep debt hole gets even deeper.
Admit it; you won’t sleep well at night if that happens. Don’t own a home just so you can say you own one, or because your broke friends say you should. Don’t think that there is only one perfect home out there that you simply MUST have right now. That’s not true. A house is a covering for your head. A home is what you build for you and your family. There’s a house around every block. Only you and your family can create a home.
Source: USA Today This article was written by Dave Ramsey......
Note from Lucy: I have know several people who purchased a house before they could really afford to do so and now they are going thru big financial troubles.