Quote:
Originally Posted by Run Silent
You should immediately pay off the car. Having a loan on a 7 year old car is ridiculous.
The number one way to building wealth is to not have any debt (with exception of a home).
You should absolutely buy a home, but only if you can meet the following criteria. If you cannot meet ALL of the items below, continue to rent until you do so:
1) A down payment of a minimum of 20% of the cost of the home. No PMI.
2) A payment that is no more than 25% of your total take home pay.
3) A fixed rate mortgage for a maximum term of 15 years.
4) You plan on living there for at least 5 years.
So long as you can meet all four of those items...and.... you don't have any other debt of any kind - buy the home.
Otherwise, wait.
EDIT: I see you live in a relatively high cost of living area. This doesn't change anything I just said. Simply living in an area that is expensive does not give you a pass on basic math.
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This is really great advice, and I wish I could have been in the financial position to follow it every time I bought a home. That said, even though I did not buy while using that criteria, if I had waited to get what I considered a liveable home for my family, I would have been priced out of what I was aiming for. Market timing also needs to be considered, and if done properly you could enjoy the tax benefit of a 30 year mortgage vs nothing on renting, and accrue some decent capital appreciation. Especially in Seattle. Yes, being house poor sucks, but at this point in my life I am pretty sure that if I had a chance to do it again, I would do what I did. Renting sucks (to me anyway) more than being house poor. For me, home ownership created other opportunities to leverage money as well, which also contributed to what has accumulated in my little nestegg. Rule number 1- capital appreciation, rule number 1A- capital preservation. Any way you slice it, to be thinking about it in this fashion for the OP is a great thing, and I wish him nothing but the best!
PS.. FWIW, I am on a 15 year now, and it really is the way to go if you can swing it.