There are also times when you may need to use credit out of necessity. For anyone hospitalized, payment is usually in the form of credit. Hospitals will treat patients immediately, with the understanding that insurance payments and billing will be worked out later. If your car breaks down or your computer goes on the fritz and you don’t have money saved for emergencies, you might find yourself using credit out of necessity.
Who has the better idea, Daven or his wife, Jess?
Daven and Jess have been married a few years and both work full time. Daven makes $42,000 per year as a teacher, and Jess makes $50,000 as a computer technician. They like their jobs and their town. Both are smart with their money and have no debt. They’ve saved for a house since they got out of college and now have enough for a 20% down payment on a $200,000 house they love; they would have to borrow about $160,000. Interest rates are very low right now. Jess believes they can handle the loan and that buying now is the best option for their future. Daven just doesn’t think that they can afford $160,000 in debt and would like to save more until they have a 30% down payment. What do you think? Who’s right?
|A. Jess is right. They should buy the house because they can afford it.|
|B. Daven is right. They shouldn’t buy the house because they can’t afford it.|
That’s correct! 20% is a very reasonable amount for a down payment on a home. Generally speaking, a home should cost no more than three times the household income. Daven and Jess have a combined annual income of $92,000, making a $200,000 house well within their limit. Owning a home can be very rewarding. If Daven and Jess both want to be homeowners, this is a sound move for them.