Ramit Sethi is not one to keep his thoughts to himself, especially when it comes to consumer manipulation. And to be clear, Sethi believes the “American Dream” of homeownership is brainwashing. According to the bestselling author of I Will Teach You To Be Rich, home-buying is not for everyone. What especially irks Sethi is when renters are considered less-than, as though they’re not reaching for the brass ring.
Despite his gruff manner, Sethi has a heart for his million-plus followers. He considers the notion that everyone should own property propaganda offered by those who profit when homes are sold. He worries about those who buy into the propaganda, then find themselves in a precarious financial position.
For anyone thinking of buying a home, Sethi offers these six pieces of advice.
1. Look 10 years down the road
No one knows precisely what will happen in the next 10 years, but if you suspect you won’t stay in a house for 10 or more years, Sethi recommends not buying. Otherwise, the fees associated with buying and selling the home will likely eat up any equity you gain.
According to Attom Data, the average amount of time homeowners stay in their homes before reselling is a little over eight years. Considering how much money you’ll pour into a house in that time — including insurance, furnishings, maintenance, and repairs — it’s easy to see that it can take some time to recoup those costs. Add to that the fact that it costs approximately 10% to sell your home and, Sethi points out, you could lose money.
2. Focus on the bottom line
Sethi says you won’t often hear from people who’ve gotten in too deep or lost money on their homes. Still, he claims to receive hundreds of letters each month from homeowners in that predicament. That’s one of the reasons he recommends finding a home with total housing costs of less than 28% of your gross income (before taxes).
And when he says “total housing costs,” he means everything, including taxes, interest on the loan, maintenance, utilities, furnishings, and projected upgrades and repairs.
He realizes that 28% is less than a bank will say you can afford, but 28% means you’re likely to have money left in your bank account when an emergency arises.
The exceptions, according to Sethi, are:
- If you live in a high cost-of-living area. In that case, he thinks it’s okay to stretch …….
Source: https://www.fool.com/the-ascent/mortgages/articles/ramit-sethis-6-best-home-buying-tips/