Money and Wealth (Part 23) - Debt (Part B) - House Buying

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Money and Wealth (Part 23) - Debt (Part B) - House Buying 5. It is foolish to be in debt. A. Sin is called debt (Mat 6:12 c/w Luk 11:4). B. We are to owe no man anything (Rom 13:8). C. The borrower is servant to the lender (Pro 22:7). i. If you're in debt, you're a slave (Neh 5:3-5). ii. If you’re in debt (a slave), you have less rights (Exo 21:2, 20-21). iii. We are not to be servants of men (1Co 7:23). iv. To be debt-free is to be free. D. It is foolish to be in debt because you pay more for whatever you buy because of interest. E. To be in debt and to be a conservative or a libertarian is to be a hypocrite. i. How can you criticize the government for its deficits and be in debt yourself? ii. Take the beam out of your own eye before you try to take the mote out of Washington DC's eye (Mat 7:1-5). F. A person who is in debt is contributing to our country's demise. i. Every time a loan is made, new money is created which inflates and dilutes the money supply. ii. Saving money creates reserves that businesses can borrow from to invest in producer goods which are used to create consumer goods which causes economic growth. iii. Borrowing money to spend on consumer goods wastes resources and increases our trade deficit. 6. The broke-person mindset versus the wealthy-person mindset A. When a wealthy person (or even just a financially responsible person) is considering a purchase, he asks “how much?” B. A broke person asks “how much down and how much per month?”  C. Until you stop thinking in terms of “how much per month,” you will be broke for the rest of your life. D. Our culture has a broke-person mindset. i. Just go to a car dealer and ask “how much will this car cost me out the door?”, and 100% of the time you will get an answer of “$xxx per month.” ii. Do the same thing with a realtor, and you will get the same result. iii. It never even crosses their minds that someone might actually be paying for the car or house. 7. The “build your credit” myth A. We are encouraged to “build our credit” today as if it’s some kind of status symbol. B. Your credit score has nothing to do with how much money you have or how trustworthy you are. C. To a person who follows the Bible’s precept to “owe no man anything” (Rom 13:8), a credit score is worthless because he will never need it, nor use it, for anything. D. Dave Ramsey blows away the “build your credit” myth, even as it pertains to getting a home mortgage. i. “The best myth is the ‘build your credit’ myth. Bankers, car dealers, and unknowledgeable mortgage lenders have told America for years to ‘build your credit.’ This myth means we have to get debt so we can get more debt because debt is how we get stuff. Those of us who have had a Total Money Makeover have found that cash buys stuff better than debt. But if I were selling debt, as the banker is, I also would tell you to get debt to get more debt. This is, however, a myth. “Yes, you will need to ‘build your credit’ by borrowing and repaying debt in a timely fashion if you want to live a life of credit cards, student loans, and car payments. Not me. The one question we must answer is, ‘How do I get a home mortgage?’ Later, I will introduce you to the 100-percent-down plan, or if you must, how to settle for a fifteen-year fixed rate mortgage. But if you want that fifteen-year fixed rate with a payment that is no more than 25 percent of your take-home pay so I won’t yell about it, don’t you need credit? No. “You will need to find a mortgage company that does actual underwriting. That means they are professional enough to process the details of your life instead of using only a Beacon score (lending for dummies). You can get a mortgage if you have lived right. Let me define ‘lived right.’ “You can qualify for a Conventional fifteen-year fixed-rate loan if:  You have paid your landlord early or on time for two years.  You have been in the same career field for two years.  You have a good down payment, which is more than ‘nothing down.’  You have no other credit, good or bad.   You are not trying to take too big a loan. A payment that totals 25 percent of take-home pay is conservative and will help you qualify. “Don’t let anyone tell you to go into debt to make way for a mortgage; that is a lie. A quality mortgage professional can get you into a home if he or she knows how to do underwriting. As for building credit for other stuff, leave that to the losers. With your Total Money Makeover, you won’t be taking on that kind of debt anyway.” (Dave Ramsey, The Total Money Makeover, pp. 38-39) 1. Don’t buy or build a house until you are financially prepared to do so (Pro 24:27; Pro 24:3). A. You are not financially prepared to buy or build a house until all of the following are true. i. You have no debt (credit cards, student loans, car loans, personal loans, etc.). ii. You have 3-6 months of living expenses saved in an emergency fund. iii. You are investing 15% of your gross income for retirement. iv. You have a 20% downpayment saved. v. You can take out a 15-year fixed rate mortgage with a payment that is not more than 25% of your take-home pay. vi. Only when all of these things are true can you afford to buy a house. A. With today’s interest rates (approx. 7.03%), financing a house with a small downpayment for 30 years will end up costing you almost three times as much as the house is worth. B. If you must get a mortgage, get a 15-year mortgage rather than a 30-year. i. The mortgage rate is lower on a 15-year loan than a 30-year. ii. Currently the rate on 30-year fixed rate mortgage is 7.03%, while the rate on a 15-fixed rate is 6.34%. iii. Consider the difference between financing a $250,000 house with a 20% downpayment ($50,000) with a 30-year mortgage versus a 15-year mortgage (includes property taxes ($2,302/year) and insurance (2,000/year). 30-year mortgage 15-year mortgage Monthly $1,693.14 Monthly $2,083.17 payment payment Total interest $280,469.32 Total interest $110,440.85 paid paid Total paid for $609,529.32 Total paid for $374,970.85 house house iv. You will save $170,028.47 in interest by taking out a 15-year loan instead of a 30-year loan. v. Millionaires don’t waste their money on 30-year mortgages. (i) That’s why they’re millionaires. (ii) “In our National Study of Millionaires, we found that 67% of millionaires have a paid-off home, and it took them an average of 11.2 years to pay it off. Take that in for a moment: Millionaires don’t spend thirty years paying off their house. They pay it off in roughly ten years. They’re also not living in a 10,000-square-foot mansion. They live, on average, in a 2,600-square-foot home they’ve been in an average of seventeen years.” (Dave Ramsey, Baby Steps Millionaires, p. 26) vi. Millionaires live below their means when it comes to their homes. (i) That’s why they’re millionaires. (ii) Millionaires, on average, live in houses that are slightly smaller than the average new American home. (iii)“…the millionaires in this study [The National Study of Millionaires] live in relatively modest homes located in ordinary neighborhoods. The U.S. Census Bureau states that the average square footage of the new American home is around 2,660 square feet. The National Study of Millionaires found that the random sample’s average home size is actually slightly smaller at 2,600 square feet.” (Dave Ramsey, Baby Steps Millionaires, p. 146) C. Dave Ramsey recommends that your mortgage payment should be no more than 25% of your take-home pay on a 15-year mortgage.  i. If you spend more than 25% of your take-home pay on a house payment, you will be what is called “house poor” because you will not be able to cover your other living expenses and meet your saving and giving responsibilities. ii. Unfortunately, based on this wise guideline, buying an average home today in America is impossible for the average family. iii. An example of this in our local area. (i) At today’s housing prices and interest rates, that means that to buy a $250,000 house with a 20% downpayment with a 15-year mortgage, one would have to have an annual take-home pay of $99,992.16, which would be an annual gross income of about $125,000. (ii) To finance the same house with a 30-year mortgage, one would have to have an annual take-home pay of $81,270.72, which would be an annual gross income of about $101,588.40. (iii)According to census.gov, in 2023 dollars, the per capita income in MO is $38,497 and the median household income is $68,920. (iv) This means that the average family in Excelsior Springs, MO today cannot even come close to affording an average priced home using a 15- or 30-year mortgage. iv. A national example. (i) As of May 2025, the national median household income is $83,150. (source) 1. That means that the median household take-home pay is approximately $5,543/month (20% taken out for taxes). 2. According to the Home Affordability Calculator on RamseySolutions.com, following the no-more-than-25%-of- your-take-home-pay-with-a-15-year mortgage rule, that means that the average family can only afford a $140,255 house with a 20% downpayment ($28,051). 3. This would be a $1,386/month payment. (ii) According to RamseySolutions.com, the median home price today (July, 2025) in America is $440,000. (iii)That means that the average family in America would have to save up a downpayment of $327,796 to afford the average house with a 15-year mortgage. (iv) Even if the average American family used a 30-year mortgage, which Ramsey strongly advises against, they could only afford a $183,641 house with a 20% downpayment ($36,728) – a $1,386/month payment. (v) That means that the average family in America would have to save up a downpayment of $293,087 to afford the average house with a 30-year mortgage. v. These numbers show that housing is astronomically unaffordable today. vi. We need a huge crash in the housing market, and it can’t come soon enough. D. You also need to consider the cost of owning and maintaining a home before buying one.  i. “Financial experts recommend budgeting 1% to 4% of a home's value each year for maintenance and repairs.” (Average Home Maintenance Costs, Homeguide.com, 5-20-2024) ii. This means that for a $250,000 house, one should budget between $2,500 - $10,000 per year for house maintenance, depending on the age, condition, and features of the house. iii. This means setting aside between $208 - $833 per month for house maintenance. iv. This would cover routine maintenance tasks such as AC tune-ups, AC coil cleaning, dryer vent cleaning, furnace cleaning, air duct cleaning, landscaping maintenance, gutter cleaning, deck sealing or staining, painting, chimney sweeping, tile and grout cleaning, window cleaning, carpet cleaning, plumbing repair, electrical repair, and appliance repair. v. If you are handy, you can do some or all of these things yourself, but if you do, be prepared to spend a lot of time maintaining your house. vi. Setting aside money every month will build up a house maintenance fund that can be used for larger maintenance costs, such as:  Water heater replacement ($600 - $3,100) ― every 8-12 years  Appliance replacement ($350 – $1,700) ― every 10-15 years  Roof replacement ($5,700 – $16,000) ― every 15-20+ years  Gutter replacement cost ($750 – $2,300) ― every 15-30 years  Window replacement ($4,500 – $22,500) ― every 15-30+ years  HVAC system replacement ($5,000 – $16,000) ― every 15-25 years  Exterior house painting ($1,900 – $6,900) ― every 5-10 years  Exterior siding replacement ($10,000 – $32,500) ― every 20-40+ years  (Average Home Maintenance Costs, Homeguide.com, 5-20-2024) E. Home ownership is expensive, even if you have your mortgage paid off (more on this later).