“I’m begging you not to do that,” the radio host says.
Personal Finance personality Dave Ramsey doesn’t mince his words when it comes to giving advice.
Some of the biggest decisions people make financially involve those around buying a home.
For example, a caller identifying herself as Tina in Fort Lauderdale recently talked with Ramsey about her ideas about purchasing a new house.
“My question is around using a HELOC (home equity line of credit) to put 20% down on a new home,” Tina said. The conversation was captured on YouTube.
“Nope,” Ramsey immediately replied.
“And then selling the current home right after closing on the new home,” Tina continued.
“Oh, that home. I got confused,” Ramsey said. “So you’re going to close on another property before yours closes. That’s pretty dangerous.”
“What happens if it doesn’t close?” he asked. “You got two house payments. You know what you’re gonna become after that? We call them a motivated seller who sells their house cheap because they get stuck.”
Arriving at what he seemed to think was the logical conclusion to this line of reasoning, Ramsey had a straightforward piece of advice.
“We’re gonna close on the second one after that the first one closes,” he said. “Then we use cash.”
Tina offered a bit more personal history on her past experience buying and selling houses.
“I just did that on my second real estate property now,” she said. “When I sold the first home to get into this new home that I live in now. It was very stressful for me to not have anywhere to live in the interim.
Ramsey had a blunt response.
“You know what’s more stressful?” he asked. “Two house payments.”
“I guess my idea of doing it that way is because, the sale that I did just now, it was really stressful for me, the move.” Tina explained. “I was, ‘I need to find a home, where am I going to live?’ I would have preferred to be able to secure a home for me first.”
The radio host suggested a solution to that challenge.
“So write a contract on the property you’re purchasing, contingent on the sale of yours and set the closings up on the same day,” Ramsey said. “But if your current house doesn’t close, you don’t close on the new one.
“Because you’re going to end up with two house payments in a market that has slowed down with higher interest rates,” he added. “And you’re going to be calling me two years from now going, ‘I’ve done the dumbest thing. I’ve got two house payments and it’s killing me. Can you help me Dave?'”
Tina had another issue on her mind as well.
“Aside from that,” she said, “I could take out a HELOC enough to pay for the home in cash, because I have enough equity in my current home.
Ramsey voiced some immediate dissatisfaction with the idea of taking out a home equity loan.
“Sell your stinking house and move, and quit talking to me about stress,” he said. “You’re trading one kind of stress for another, because you don’t perceive the risk.”
“After 30 years of doing what I do, I’ve seen people step into it up to their knees and I’m begging you not to do that.”
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