Warning for Newlyweds: Think Before You Buy a $700K House!

The dream of building a new home is an exciting process, especially for young couples. However, a call on The Ramsey Show program showed that there are some warnings behind this dream.

Joseph, a 21-year-old from Pittsburgh, asked whether it was realistic to build a home worth $700,000 with his fiancée. The hosts' response was clear: don't rush it.

Joseph explained that they planned to get married and wanted to build a home in the area where they would start a family. They thought this plan was feasible because they would receive a down payment assistance of $100,000 to $130,000 from his parents.

However, the hosts raised some concerns. George Kamel pointed out that the couple would be taking on a significant debt and planned to enter into a high obligation before even getting married.

When Joseph elaborated on his financial situation, the picture became clearer. The couple was projected to earn a total of $10,000 per month, including additional income. With a down payment of $260,000 for a $700,000 house, their monthly mortgage payments could be around $4,500 to $5,000.

This situation meant that they would be spending half of their income on housing expenses, which is a classic sign of being “house poor,” as host Jade Warshaw explained.

Even if everything went well, the hosts emphasized that the couple's margin for error was narrow. Their strategy relied on income increases, stable employment, a smooth construction process, and long-term family assistance.

Warshaw said, “Everything has to go according to plan for this to work,” and pointed out the challenges of being “house poor” for several years, even in the best-case scenario.

The couple was advised to consider a slower and more traditional approach: getting married, renting for a while, saving, and then buying a house that fit their budget.

The hosts also highlighted the risks of over-planning for the future. Joseph said that owning a big house would not necessarily mean they would need to move throughout their lives, but Kamel reminded him that life can change rapidly. The upcoming children, career changes, or a partner leaving the workforce can significantly affect the couple's purchasing power.

The hosts' suggestion was not to give up on homeownership; rather, it was to scale this according to the couple's current financial situation. With their careers still in the early stages and plenty of time ahead of them, they suggested buying a more modest property or postponing construction until they strengthened their financial foundations.

A key takeaway from their conversation was the importance of flexibility. Instead of limiting themselves with a high mortgage at 21, it might be more beneficial for the couple to increase their savings, strengthen their income, and create some breathing room for themselves.

Kamel said, “You need to do everything in order. I love how excited you are. You’re planners and thinking ahead; I have that too, but when I over-plan, I can fail in a domino effect.”