Not Time to Buy

Dory and her husband have a $16,000 car loan and $12,000 in student loans. They have a home down payment and earn $2,000 a month. Dave warns Dory why buying a house now is the wrong move.

QUESTION: Dory in Roanoke is a stay-at-home mom, and she and her husband want to buy a house. They still have a $16,000 car loan and $12,000 in student loans. They have a down payment that was gifted to them and earn $2,000 a month. Dave warns Dory why buying a house before the debt is paid off is the wrong move.

ANSWER: I would not recommend buying a house before you’re ready, and here’s why. When you move into a house with debt hanging around your neck and no money, you’re going to wind up with all kinds of problems. A home can be a blessing, but it can also be a curse.

I’ve been broke too, and I know how it feels. When a broke person moves into a house, it just makes them broker. As soon as you move in, the water heater will go out or the roof starts leaking or the taxes go up. Something is going to happen. What appears to be a good investment when you don’t have any wiggle room because of your debt turns out to be not good.

You guys earn what you earn and have a $16,000 car debt. If I were you, I’d sell that car. If you have a car lease, you must find out what the early buyout on it is. Call your credit union to get that number so you can sell the car. The number you are given will not be the total of the payments. It will be a lot less.

Find out both the early buyout and what the car is worth. Let’s say, as an example, the buyout is $16,000 and the car is worth $14,000. That leaves you $2,000 in the hole. Talk to the credit union about loaning you that $2,000. That’s what it will cost you to get out of this mess. You guys need to get out of this debt.

Then you guys need to do two things. First, ask what kind of side work or part-time work you and/or your husband can pick up to add money to this equation to get rid of your $12,000 student loan.

The third part of your equation is to figure out what your husband can do with his career track to get your income up overall. I want to know what he’s doing five years from now to get his income up to twice what he’s making now. You must have a plan to aim at for that.