Pay off debt first

After taking a closer look at their budget and debts, Craig and his wife are having second thoughts about finalizing a deal on a house. He calls in from Miami, FL, and Dave offers his opinion on the situation.

QUESTION: Craig calls in from Miami, FL, with a mortgage question. He and his wife have made an offer on a house they really like through a first-time buyers program. Now, they’re having second thoughts after looking at their budget and debts. They haven’t turned in the paperwork yet, and Craig asks Dave if they should go ahead and buy. Can you guess Dave’s answer?

ANSWER: I wouldn’t go through with it, Craig. I would tell you to become debt-free before you buy. I want the house to be a blessing to you, not a curse. When you have debt hanging around your neck and no money, you’re just asking for trouble. Everything that can go wrong will go wrong. That’s Murphy’s Law, and he’ll move into your spare bedroom along with his three cousins — Broke, Desperate and Stupid.

Homeownership when you’re broke is not a good idea. And basically, that’s what you’re telling me. You’re in debt, and you have to squeak into something with a first-time buyers plan. Translation? You have no money. Get the debts paid off, build up an emergency fund and save up a good down payment. Then, when you buy a home, it will be a blessing. It won’t be chasing you around the block every time something comes up.

I know that’s not a popular answer. I know it doesn’t feel right because you’ve got house fever and you’re all excited about this house. That’s how most young couples feel, and everyone acts like you’re the biggest moron on the planet if you don’t go get a house. But I’m the guy who says don’t go get a house in such a way that the house gets you.

That means debts paid off, build an emergency fund and save up a good down payment. See how solid that feels? It feels like wisdom. And you want to know why? Because it is.