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Ask Dave

Cash For a Home

Rachel can't figure out if she should rent and save up the cash for a home, or just put in the down payment and get in sooner.

QUESTION: Rachel and her husband are in their mid-20s and want to save for a home, paying cash for it. It would be another 10 years at their current income. Should they just put a down payment in or keep renting and save up? Dave gives her some good news.

ANSWER: You can either continue to save, or go with a 15-year fixed rate mortgage where the payments are no more than a quarter of your take-home pay. It won’t however, take you as long as your calculations make you think. Your income will go up. Your income may go down if you stay home with the kids, but you have to look at how cheaply you rent and other things.

Paying 100% for a house can be done, and most people I’ve known can do it by saving for five years or less. Keep working on that, but remember … what’s wrong with a 50% down payment? That’s not because I think it’s good to go into debt, but I won’t scream at a 15-year fixed rate mortgage.