Should We Rent Or Buy?

Dave breaks down Paul's situation to help him determine whether he should rent for a year or buy right away once they move to California.

QUESTION: Paul has to move to California and has no debt. When they go there, housing will be over a million dollars. Their home right now is worth $400,000 and he makes $325,000. Should they rent for a year or get into a mortgage now and start paying down?

ANSWER:  I don’t recommend anyone going into debt, but a mortgage is something I’m a little easier on. If you take out a mortgage, don’t borrow more than on a 15-year fixed rate mortgage, and the payments shouldn’t be more than a fourth of your take-home pay. I’m not excited about you going back into debt, and I’ll tell you to pay it off as quickly as possible. But renting for a year is a good idea, and if the market in California stays soft, then rent for another year and watch the market drop even more.

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