Is It Time To Buy A House?
Greg and his wife have saved up about $70,000, and Greg doesn't know what to do with the money. Should they put the money toward a down payment on a home?
QUESTION: Greg in Vermont and his wife recently moved from Canada to Vermont. They’ve saved up about $70,000, and Greg doesn’t know what to do with the money. They are currently living with his wife’s parents. Should they put the money toward a down payment on a home?
ANSWER: I would hold out six months of expenses as an emergency fund. I would put the rest down on a house. I would buy a 15-year fixed rate mortgage where the payment is no more than one quarter of your take-home pay. That’s after your down payment. Don’t let the mortgage on a 15-year fixed be more than one quarter of your take-home pay. If you do that at your age and save 15% o your income toward retirement, you will retire just fine. You don’t need any of this money to throw at it. Plus, you guys have shown a propensity and an ability to handle your money well. That’s pretty cool. You guys have been living on substantially less than you make, you’ve obviously earned a good living, but you’ve also cleared off all the debt and saved $70,000.