What is your current housing situation like?  Are you a renter? Home-owner?  We currently rent (and likely will be renting for the next few years).  Although we hope to own our own home in the future, the idea of buying a house and navigating real estate and mortgages feels so daunting! This week Dave shares his tips for buying and selling your home, as well as the best (and worst) mortgage options.

First things first, there’s nothing wrong with renting! Buying a house when you’re not ready, or rushing into something as big as homeownership can be a disaster.  Dave recommends waiting to buy a home until you are out of debt and have a fully funded emergency fund of 3-6 months of expenses. At this point, you can start saving for a big down payment. Once you’re ready to start house-hunting, try to stick to these tips.  Buy in the bottom price range of the neighborhood and you can get a better bargain if you’re able to overlook the ugly carpet and outdated wallpaper (these things can be easily changed). Always have the home inspected mechanically and structurally and make sure you buy title insurance! Make sure you are communicating with your spouse or accountability partner and being realistic about what you can (or cannot) afford.

When it comes to figuring out your mortgage, remember to still avoid debt. The best plan is paying 100% down, but if that’s not realistic for you, make sure your monthly payment is 25% or less of your monthly income on a 15 year fixed rate loan, with at least 10% down.  The mortgage options to avoid? Adjustable Rate Mortgage (ARM), interest-only loans, reverse mortgages, and accelerated or bi-weekly payoff program.

When it comes to selling your home, think like a retailer. When a potential buyer walks into your home, you want them to easily envision themselves living there. Take a look at your home from the street- what could improve it’s curb appeal?  Paying attention to these details can significantly increase what someone may pay for your home. Lastly, get a real estate agent. A quality realtor will be able to get your house more exposure and get you more money.

Buying a home can be overwhelming, but it’s also a great investment and a better long-term option than renting.  If you have more questions or would like more resources, visit FPU’s website.

Action Items This Week:

Calculate your mortgage payoff.  Homeowners: use the online Mortgage Calculator at FPU Central to determine how much you will pay in interest over the course of your loan. Also, use the calculator to see the impact of extra payments every month. Non-Homeowners: Use the online Mortgage Calculator at FPU Central to determine how much house you can afford and to see the impact of different down payments and extra monthly payments. Just remember not to buy until you’re ready, and always follow the Baby Steps!

Discuss your housing calculations. Share your housing calculations with your spouse or accountability partner and review the impact it has on your monthly budget.

Celebrate your financial turnaround. Fill out the Financial Reality Check in your workbook. Be sure to share the results in class or leave them in the comments section.


Let's Discuss!

  1. Many American families are currently living in a home that they cannot afford. What are some situations that might cause someone to become “house poor,” and what are some solutions?
  2. There are often two extremes when it comes to renting. Some people think it is always a waste of money, and others choose renting as a long-term way of life. When is it a good idea to rent instead of buy? Why are we sometimes in such a rush to buy, even when we cannot afford it?
  3. Look at the “Housing” category on your zero-based budget. Based on your overall financial condition, would you consider your housing situation to be a blessing or a curse? Are you living the American Dream or teetering on the edge of an American Nightmare?