Why You Probably Can’t Afford the House You Want

[Music] brought to you by the every dollar app start budgeting for free today one thing the Ramsay all enjoy and certainly Rachel's husband Winston and I enjoy his real estate and we love the real estate market um I like building things and buying things is part of my almost if I had a side gig I guess that's what it would be I've had something under construction for about six or seven years now um next week I will finish a project and it'll be the first time I haven't had a construction project going in seven years and a long time yeah you like it I'm overdue I need to find something to something to stick in the dirt somewhere but the uh uh real estate is fun and it's it's pretty confusing out there right now when you're thinking about buying a home it's hard say there's a lot of emotion around it it's hard yeah price I mean interest rates not only are up but houses themselves like what your buying you know the price of a house versus what it was 10 years ago 5 years ago just like oh three years ago two years ago so it's just it can it can feel like one of the most defeating subjects I think financially right now for people where they think oh my gosh I don't know if I'll ever own a home right like this these this um kind of negative mindset because of how hard the numbers are it's it's real when you adjust and you adjust your income and you adjust where you choose to live in order that you can get your income in a place in ratio to the house price in the area you're choosing now to live in order to buy a house then you put yourself in a position to do that and it can still be done and we still have people on here in their 20s that have bought homes and paid them off we have people on 26 years old did a debt free scream house and everything the other day so it still is being done but uh but it's it's it's a very um I think it's as much it it is mathematically tough right now it is economically tough but I think more than those two it's just psychologically tough right now because there's just this perception this Dark Cloud over the subject of buying a house right now and uh houses are selling and houses have not gone down in value there's still a shortage of housing they've not gone down they they've gone up in value well I mean there was a time what 18 months ago said a bubble they said they were going to crash you just I'm just going to wait house prices come down they're not going to come down we told you and they haven't come down they've gone up we told you this we've told you and told and told you and told you so here's some good rules of thumb if you're buying a house don't buy a house and we've said this for 30 years this hasn't changed and it'll help you get the house by the way until you get out of debt don't buy a house where you have to buy an extra bedroom for Sally May cuz you can had a student loan so long you think it's a pet you know you're sitting there with a stinking car payments around your neck a bass boat payment and piding for last week last year's Disney vacation on your credit card and you're still and you can't figure out why you can't afford a house well I just told you why you can't afford a house you don't have to go after Disney you're stinking over spending well I can go after Ford but I can't go after Disney the beach what's wrong it's um okay go anywhere you want to go but you're spending money you don't have to do crap you don't need to be doing and you go in debt to do it and then you're broke and you can't figure out why you can't buy house so first thing you got do is clean up the debt you get out of debt and you build an emergency fund of three to six months of expenses no time in 35 years that I have said that formula to anybody like it 100% of the Decades that I've been doing the show people went well that's not very realistic no but it's smart because if you move in a house without an emergency fund your hot water heater will go out that week and the next week the rof will leak you're going to learn about home ownership baby Murphy if it can go wrong it will we'll come visit you and if you want to if you want to do it really right I'd love to see you put down 20% now firsttime home buyers that's very difficult a lot of first-time home buyers listen to Ramsey we don't yell at you for putting down five or 10% but here's the reason we say put down 20 because you avoid PMI private mortgage insurance is insurance that pays the bank in the event they have to foreclose on you and they lose money it's foreclosure in insurance is what it is and it's not for you it's for them but you have to pay for it and it's a it's about $75 per 100,000 per month so we're talking like you know $225 a month for a $300,000 loan just for the PMI because you don't put down 20% so that that's a big deal uh now so that that's why we tell you to do that now we understand some of you are going to pay PMI but I'm just telling you you can't just automatically sign up for something that expensive and not know what you're doing cuz it benefits you zero it it's for the bank you are paying for the bank's insurance policy to cover them in the event you get foreclosed on then figure out 25% of your take-home pay and never have a payment more than a fourth of your take-home pay on a 15-year fixed rate mortgage not adjustable rate not a balloon have y'all noticed rates are going up why would you sign up for a rate that goes up that's what your adjustments going to be that's just dumb don't do that well they might go down yeah they might go down then you can refinance so you date the rate and marry the house get the right house and if the rate goes down refinance there's your adjustment but don't let the bank pass on the risk of higher interest rates to you with an adjustable rate mortgage so you can get a cheaper rate so you can get screwed later you're kicking the can down the road you're going to get your face kicked in don't do it don't do it this is straight guys I'm just telling you I want the house to be a blessing not a curse and I meet too many people that their home is a curse all because they said in the name of It's Always smart to buy real estate no it's not when you are broke in debt don't have an emergency fund and sign up for a mortgage payment you can't afford that is not smart real estate that's going to slow down your wealth building bring anxiety to your home stress to your relationships it just takes all the bad stuff out I mean it brings all the bad stuff in yeah and I think that this part of the formula is where people feel like oh my gosh like as they run out their income of 70,000 or whatever it may be their you know their household income um but the truth is be even though incomes you know cuz wages have not kept up necessarily right they haven't kept up so that means getting into the market going to look different than it did three years ago to our Point earlier earlier and so there is a part of that that sucks and I think you know we have felt that feeling with inflation like there's things that happen that we can't we don't have control over but this but doing this it allows you for your especially this 25% but here here's the here's the accurate appraisal of that okay wages have not gone up as fast as prices and interest rates which means you can probably no longer afford the home that that app you can that you live in right now that's how I mean like you can probably no longer afford the home that um well that's just interest rate only there yeah okay that's not price uh but the uh um but you can probably no longer afford the home you thought you were going to get yes I think that's it and it's you're probably not moving in that neighborhood you're probably moving in a different neighborhood or you're moving a little bit further out of town or you're going to compromise somewhere else in order to become a homeowner later it's not like you it's none of this is forever yeah right lat youre of and andys and you never have a forever home the only forever is the only forever home is heaven that's it that's your only forever home because as soon as you build your forever home as soon as you build your dream home your dreams will change you build your forever home your kids are going to grow up and leave if you're a good parent they're going to leave and so then then you got this big old house and there you go so okay it all you need to you need to make sure you're on top of your closing costs you need to factor in the other Home Insurance ownership costs people act like you don't have you have extra costs when you own that you don't have when you rent maintenance utilities all this and we always tell you to do a Fanny May a conventional mortgage FHA and VA are more expensive mortgages in fees and in interest rates than a Fanny May the conventional mortgage so do a conventional mortgage and if you're going to get some if you're going to get into this real estate market and now is a really good time actually to get in yeah if you're in this position to do it do it do it yeah and use one of our roast uh Ramy trusted Pros real estate agents to help you with that so we'll put some Link in the show notes uh for you guys to check that out or if you're listening Ramy solutions.com agent but have somebody in your corner in this because again if you are in this position to do it get in now get in now there it is create your free every dooll budget today the simplest way to budget for your life