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Should newlyweds buy a home?

Dear Dave,

I am 20 years old and I am getting married in 3 months. My fiance and I are looking to buy a house. They are asking $80,000 for it. Now I know you don’t recommend buying a house in the first year of marriage, but right now we have saved $60,000 toward the down payment.

So, if we would do a 15-year mortgage like you recommend, our payments would be about $202 per month. The house is about twenty years old, so would it be advisable for us to finance $30,000 so that we could do some repairs on the house?

Robbie

Jackson, Miss.

Dear Robbie,

The truth is, I don’t recommend any of this. You were right in saying that. I don’t think this is a wise move.

I would not buy a house until I have been married for a year. You’ve done a great job in getting the $60,000. What if you left that in a mutual fund for a year and rented something really cheap in the meantime. You could use that year to save up a lot of money and to make sure you are debt-free. In that year you will also really get to know your wife, and you will decide how far you want to live from your mother-in-law. (It takes about a year to figure that one out.)

I really would spend the first year just loving on each other and getting to know each other. You will have that much more money in a year when it does come time to buy a house.

Be very careful not to touch the $60,000 in the mutual fund. It would be very easy to convince yourself that you need it, but leave it alone and your down payment in a year will be substantially greater.

Don’t fall into the trap of having to run out of the church doors from the wedding straight into the realtor’s office. That is a trap that many young people fall into and then regret two months later. Take time on this and make the right decision.

Dave


How to get out of a lease without hurting your credit

Dear Dave,

I am trying to find a way out of a car note situation that I have found myself in. I went and got a new car several months ago, but now I have changed my mind about it because I want to save up some money so that I can own a house within the next two years. I only put about $1,000 down for the car and it was worth about $13,500. Right now I still owe $11,000. Is there any way for me to get out from under this car note without hurting my credit?

Sean

Chattanooga, Tenn.

Dear Sean,

Sell the car. Then get a loan for the difference. Let me explain. If you still owe $11,000 on it, let’s say for the sake of argument that you can only sell it for $10,000. That leaves you with $1,000 in the hole. What you have to do is come up with $1,000 somewhere, plus you have to come up with some money in order to get another car to get around in.

The best way to sell the car is retail of course, to a consumer because you will get more for it that way. That is better than taking it down to the dealer who will buy it for wholesale. You just pay off the amount you owe on the car, get something else to drive and then pay off the amount of the loan you took out.

This is the only case where I would ever suggest you taking out a loan, because you are saving yourself money in the long run. If you leased the car, you can’t just give the car back to them. That is called a voluntary repossession, and that will create a huge mess for you. Do not do it that way.

I want you to be smart about this, Sean. Make sure you save up enough money so you can put at least 20 percent down for the house. Look at the question from Robbie in Jackson, Miss., above. He has saved up a large sum of money and he will be in a position to pay off his house in 15 years, maybe sooner. I want you to save up and put yourself in that position, too.

Dave


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