Dear Dave,
My husband and I have been married for three months, and we’re debt-free. Right now, we’re trying to save up a 20 percent down payment for a house. I work for a real estate company, and they’re really pushing us to take advantage of a first-time homebuyer deal. The program offers 100 percent financing, no money down and no PMI. They say it’s a great deal. What do you think?
Stacy
Dear Stacy,
You guys are off to a great start! Don’t blow it now. Those people are wrong. I grew up in the real estate world, and this is a bad idea.
Slow down. It’s great that you guys are young and debt-free, but you need to do things that are smart for you. And for you, smart includes a couple of things. First, make sure you have an emergency fund of three to six months of expenses in place. Then, keep saving up for a big down payment.
You know, when I hear the advice you were given I just want to smack somebody. Haven’t the mortgage lenders learned ANYTHING from the last several months? Nothing down, interest-only and sub-prime loans are a big part of the reason for the financial debacle in this country. A house is not a blessing when you’re broke, and a bargain is only a bargain when you’re ready to buy!
I always recommend waiting at least a year after you’re married to buy a house. It takes that long to decide how close you want to live to your in-laws! Plus, you want to spend some time getting used to each other and knowing each other even better before making what will be your largest asset purchase.
Dave
The low down on 0 % car loans
Dear Dave,
I’m in the market for a better car. I know you tell people to buy used cars, but I saw an ad the other day for zero-interest auto loans. What do you think about these?
Cindy
Dear Cindy,
I feel the same way about 0 percent interest car loans as I do about every other kind of car loan. They stink!
A car is the largest item we buy that goes down in value. If you crunch the numbers, you’ll see that a new car loses 60 percent of its value in the first four years. That means a $28,000 vehicle will become an $11,000 vehicle while you’re still making payments on the thing! You might as well throw $100 out the window every week. You may not be charged interest on your loan, but you’re still losing money. Do you really think they care about you winning? They’ll get theirs one way or the other!
Zero percent loans tempt lots of folks to buy cars they shouldn’t buy. Pay cash for your cars, Cindy. Stick with good, used cars that are about three or four years old, after someone else has taken the butt-kicking in depreciation.
And NEVER buy a brand new car unless you have a net worth of $1 million or more!
Dave
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Wayne Allyn Root