Dear Dave: We've got $1,000 in our starter emergency fund, and we've paid off the last of our debt. We're renting, but now my wife really wants to buy a house. On top of this, she wants to go the route of 100 percent financing and argues that a mortgage payment wouldn't cost any more than we're paying in rent. She's extremely upset because I'm against the idea. How can I explain to her that this is a bad plan?
It sounds to me like this girl has a bad case of house fever. I think she probably knows deep down this isn't a good plan, but she's found something she really likes and is mad because you're not going along with the idea.
When you buy a home with nothing down and no money in the bank, you're inviting Murphy and his three cousins - Broke, Desperate and Stupid - to move in with you. The roof will start to leak, and your central unit will die before you've lived there six months. In other words, you'll find yourselves right back in another mess just because you didn't have the maturity and wisdom to wait until you had your fully funded emergency fund in place, plus a 20 percent down payment on that house!
Here's another thing. The idea that you save money because your house payment is the same, or even less than your rent, is one of the biggest myths out there. It costs more to own a home, period; especially on a short-term, monthly basis. As a homeowner, you're exposed to all kinds of things you never have to worry about as a renter.
We all have times when we get excited by something we want and do things we shouldn't do. I've done it, and I'll bet you have, too. But in situations like this, you've got to sit down and talk things out. I'm not sure how to get your wife to realize this or act more mature, but I do know that people who charge into things of this magnitude without thinking are the very ones who end up in my office for financial counseling or filing bankruptcy!