Dave Says: Growing Family Needs More Space

Dear Dave,

My wife and I are completely debt-free, and we live in a 1,400-square foot home. Our family is growing, so we need a bigger house. She saw a small, seven-acre farm with a larger house she’d like us to buy, but I don’t ever want to go back into debt or experience the hassle of another mortgage. I make about $100,000 a year, and we have $50,000 in a 401(k), in addition to $15,000 in savings. What do you suggest?

- Jack in Louisville, KY

Dear Jack,

With the kind of income you’re talking about and no debt, you should be able to save money like a crazy man and pay cash for this farm in no time.
I’d suggest budgeting at least $2,000 a month for a house payment from your monthly income. That’s what Dave and Sharon Ramsey would do. If we decided to buy a new home today, we’d save up the money and pay cash for it.

Here’s the drill on home-buying. If you go into debt for it, you don’t really own it – at least not for a while. Lots of people don’t have the luxury of being able to pay cash up front for something as expensive as a home. I tell them to save up and make a down payment of at least 20 percent, then go with a mortgage of 15 years or less.

But you DO have the money, Jack, or you will in a very short time if you just SAVE, SAVE, SAVE. When it comes to buying a home, you want the security and peace of mind that goes with owning that sucker outright. And with your income and being debt-free, you can get this deal done fast!

- Dave