Ramit Sethi doesn’t think buying a home is for everyone.
The host of Netflix’s How To Get Rich and YouTube Channel How To Get Rich clarifies his opinion: Episode 111 on his channel.
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In the video, Sethi talks to Jonathan and Shalom, a Seattle-based couple who have just traded their $1,800 monthly rent for a $4,150 mortgage payment. As a result, Jonathan says he suffers panic attacks almost every night and fights with his wife over whether to buy furniture.
Sethi said the couple tended to trap many buyers and made purchases based on property marketing rather than how much they could afford. To avoid making the same mistake, Sethi recommends: aspiring homeowner Answer a series of questions before you buy.
5 questions to ask before buying a home
Sethi lists five questions to help determine if you’re ready to buy a home. The answer may tell you that you need more time.
That said, it’s important to take advice from online experts and experts with a grain of salt. Sethi calls himself a personal financial advisor, but his background is in psychology and technology. All of his advice is common sense, but keep in mind that when it comes to money, the best advice you’ll generally receive comes from a professional. Professional financial advisor Someone who reviewed your situation and talked to you about your goals.
1. Are you going to live there for more than 10 years?
Sethi says buying a home should be viewed as a long-term move. why? Because it costs money to buy and it takes time to recoup the sunk costs.these Important but often overlooked expenses This includes (but is not limited to) closing costs, home furnishings, and moving costs.
2. Is your total monthly housing cost less than 28% of your gross monthly income?
Many financial institutions consider mortgages affordable as long as your monthly payments are no more than 28% of your monthly gross income. This is also called “front-end ratio”.
But just because it’s less than 28% doesn’t mean housing is affordable. Even if the lender approves, the mortgage may still be over budget. Lenders’ calculations don’t include major non-debt expenses, such as childcare or groceries. In other words, Please calculate to confirm Mortgages fit the entire budget.
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3. Have you saved the 20% down payment?
“Unless you have saved a 20% down payment, you are not ready to buy a house,” Sethi’s website says. He put this number aside, Denial of Private Mortgage Insurance (PMI)Shows you know how to save money.
Buyers should keep in mind that they may still be approved for a mortgage with less than 20% savings, but the higher the savings, the more keep down moneyloan terms will be better (and more affordable).
4. Can you afford to lose the value of your home?
One of Sethi’s most insightful tips is: do not have Assume your home will go up in value. Yes, home prices will increase by an average of 4.3% per year. Federal Housing Finance Agency. But growth isn’t always linear, and unpredictable market trends (think rising interest rates or a glut of available housing in the local market) can make it difficult to sell.
5. Excited to buy?
Finally, Sethi tells you to abort the process if you feel frightened. Falling in love with a home can cloud your judgment and inevitably lead to some degree of buyer regret, so it can be difficult to do an emotional as well as financial inventory.
But if you I don’t think I should rent it, so I buy itthere is pressure to jump into the deal.
And if you want to move for any reason other than a healthy financial move that has many positives for you and your family, don’t do it.
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This article is for information only and should not be construed as advice. It is provided without warranty of any kind.
