A distressed first-time buyer has discovered he is too broke to buy a home he had already contracted for.
Fortunately, financial guru Dave Ramsey has offered a way out of the mortgage confusion.
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Stephanie, from Arlington, Virginia, called The Ramsey Show for help with your financial situation.
The 28-year-old was a first-time home buyer who “hit rock bottom” with her first purchase.
Stephanie had contracted to buy a $760,000 home with a 10% down payment on the mortgage.
The problem was that she only had half of the initial payment.
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Stephanie got the first half of the money by selling her employees’ shares.
She had no savings other than cryptocurrency and what was in her retirement accounts, and was now considering taking out a loan against her 401(k) balance to pay the rest of the down payment.
Dave was outraged by Stephanie’s decision to buy a $760,000 house as her first home, especially since she had no real money in the bank.
“We don’t cash out 401(k)s, we don’t cash out Roth IRAs, we don’t take out loans on 401(k)s,” he said.
“You will be penalized. You’re too broke to buy this house!
“You shouldn’t have bought it, but you’ve already been hired to buy it.”
However, Dave discovered that Stephanie had around $30,000 worth of cryptocurrency.
He advised her to sell the crypto “today” to increase the remainder of the down payment without jeopardizing her retirement plans.
Dave also said that a 5% initial loan would have been better and that Stephanie should keep $20,000 as an emergency fund.
“Don’t close this house down and put every penny you have into it, because as soon as you move out, the crap will go down.”
Where to save retirement money
There are several different places you can put the money you have saved for retirement. Each has different tax advantages, but not all are available to everyone.
401(k) – an employer-sponsored retirement account. Contributions are made pre-tax and many employers will match a certain percentage of your contributions. Taxes are paid when funds are withdrawn in retirement.
Roth IRA – an individual retirement account. Contributions are made after taxes, but withdrawals in retirement are not taxed.
TSP (Thrift Savings Plan) – a retirement savings and investment plan for federal employees and members of the uniformed services. They work similarly to 401(k)s, but may have more limited investment options.
Pension – an employee benefit that obliges the employer to make payments to the employee upon retirement. Pensions are becoming increasingly rare.
“You’re asking for trouble to run out of money and buy a house,” Dave continued.
“It’s not a blessing to buy a house when you’re broke.”
Dave recommends his followers have at least a three to six month emergency fund for living expenses saved up before buying a home, as part of his 7 Baby Steps method.
He also advises paying off your mortgage early whenever possible so you can focus on financial goals like saving for retirement and your kids’ college funds.
See how one of Dave’s fans paid off $234,000 in debt in just 31 months.
Or find out what he advised a 70-year-old man who didn’t have money for retirement.
This story originally appeared on The-sun.com read the full story
