Benzinga and Yahoo Finance LLC may earn commission or revenue on some items through the links below.
Dave Ramsey regularly answers callers’ questions on “The Ramsey Show.” He helps people manage debt, offers guidance leading up to big financial decisions, and shares how individuals can fortify their finances.
Ramsey recently heard from a caller who wants to know when is the best time to buy a house. The caller and his wife have a $200,000 annual household income before his commissions. They also have $150,000 in investments and $30,000 in a money market account.
Don’t Miss:
The couple initially wanted to wait until interest rates dropped before committing to a house. However, Ramsey had other ideas.
“House prices are not coming down,” Ramsey responded as he told the couple when to buy a house. Here’s what aspiring homeowners can learn from the conversation.
Ramsey believes that you should buy a house as soon as you can afford it. While that timeframe differs for each person, it offers a clear roadmap of when homeownership makes sense. If the couple can afford homes in their area on a $200,000 annual household income, then they may want to consider buying.
Although the couple was nervous about buying a house right before a potential rate drop, Ramsey cast those concerns aside.
“Marry the house and date the rate,” he explained.
Trending: Hasbro, MGM, and Skechers trust this AI marketing firm — invest pre-IPO from $0.60 per share.
The couple can always refinance their mortgage if interest rates go down. However, Ramsey prefers that people get rid of debt as soon as possible, so he suggested paying it off and having no interest rate if that became possible in the future.
Most people don’t have enough cash to buy a property outright. However, if you make more than the monthly mortgage payment, you can get out of debt a few years early.
Supply chain concerns and existing homeowners wanting to preserve their low interest rates are some of the factors that have contributed to elevated housing prices. Inflation didn’t do the housing market any favors for aspiring homeowners.
All three of these dynamics remain in play, and any interest rate reductions should result in higher housing prices. When interest rates fall, it becomes cheaper to borrow money. If it’s easier to borrow money, there will be more demand for financial products like mortgages.
Although long-term population declines can eventually result in lower housing prices, this trend likely won’t play out in a meaningful way for two the three decades. For now, houses look like they will continue to appreciate over time, but some local estate markets will be hotter than others.
See Also: It’s no wonder Jeff Bezos holds over $250 million in art — this alternative asset has outpaced the S&P 500 since 1995, delivering an average annual return of 11.4%. Here’s how everyday investors are getting started.
There are many factors that go into telling if you are ready to buy a house, but one common rule states that you shouldn’t allocate more than 28% of your gross income toward the monthly mortgage payments. That may require making a higher down payment or using a 30-year mortgage instead of a 15-year mortgage.
You can also assess how much money you save each month to determine if you can build an emergency fund as you make mortgage payments. Some people start off renting in smaller properties to score lower monthly payments and save money to buy a house in the future.
A house becomes more valuable when you are ready to start a family. Leading up to a purchase, you should make it a point to pay off your existing debt. Most mortgage lenders will want to see a debt-to-income ratio below 40%, but some lenders offer more wiggle room.
Lower interest rates mean some investments won’t yield what they did in months past, but you don’t have to lose those gains. Certain private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities.
Arrived Home’s Private Credit Fund’s has historically paid an annualized dividend yield of 8.1%*, which provides access to a pool of short-term loans backed by residential real estate. The best part? Unlike other private credit funds, this one has a minimum investment of only $100.
Looking for fractional real estate investment opportunities? The Benzinga Real Estate Screener features the latest offerings.
Image: Shutterstock
Send To MSN: 0
This article A Couple That Earns More Than $200,000 Per Year Asks Dave Ramsey For The Best Time To Buy A House: ‘House Prices Are Not Coming Down’ originally appeared on Benzinga.com