Wednesday, September 3, 2008

“Playing House”

There was a guest post today over at Get Rich Slowly.  I love that blog, because there’s always good content there.  Anyway…

The post had to do with the process of preparing to buy a home.  Eventually, I would really like to own a home, and my wife would like to see us move into a home sooner rather than later, but the preparation has to be there as well.

One of the things that stuck out from what Jim had to say was to “play house”.  Set aside what you think you can afford every month and live off the rest, sticking that amount in a savings account to help with the down payment.  That way, you can tell whether or not you can actually live with the payment before taking the plunge.

I’m doing that, in a way, right now.  Except that rather than socking it away in a savings account, I’m using the money to hit the debt.  Plus everything else that we get, everywhere we can scrimp, all of it is going against the debt.  I think, however, once the credit cards are paid off, I will be adjusting my strategy just a bit.  I think I want to increase my emergency fund, and begin the process of saving for a down payment on the house.  Of course, I still want to attack debt with intensity, but I think that ridding ourselves of credit card debt is the main goal, and the other debt, while not “good” debt, isn’t as harmful/detrimental.

What do you think of the plan?  Am I looking at the debt (other than credit cards) with too kind an eye?  If you currently rent, at what point (if any) do you plan on buying?  If you own, did you “take the plunge” at the right time?

1 comment:

  1. I am a homeowner that got in at the worst time. When real estate prices were at their peak, my fiancé at the time (now wife) thought we should buy something before it got out of our reach. We both went to the bank to get pre-qualified (way different than pre-approval) and the bank said no problem. We started looking, and it took over a month and 30 some houses later before settling on the right one. The original bank I worked with couldn't get the loan done, so we went to another one. We couldn't qualify together, but I was able to take on the entire mortgage myself. The mortgage payment was higher than I had anticipated plus we had to consider taxes, insurance, and an association fee. What seemed like a great thing had near doubled what I paid in rent. I was able to pull it off and later that year got a raise which eased the pressure. After owning my house two years and seeing its value drop below what I paid for it is depressing. I don't want to sell right now because it would only clear what I owe and not pay off the realtors or taxes left over.

    Stay renting right now and paying off your debt. It is so much more difficult to get out of debt when you own rather than rent. When you have no debt it makes it easier to own a house. Things in houses break all the time too and you get to deal with your wife wanting them fixed right away. Regarding your other debt, the student loans are not a huge issue but those car payments could pose a problem. I had to use some savings to pay my car off to reduce my DTI just enough to be in a safe position. Having an EF in place before buying is also a good thing because banks like knowing you have money on the side to insure they'll be paid. It takes lots of money to buy a house, who knew?