Should I buy a house with 100% financing or not? Interview with Dax Swanson pastor of Grace Church Bellingham, Washington

By
Real Estate Agent with Keller Williams

 “Should I buy a house with 100% financing or not?”

Don Hammons:

Dave Ramsey is a very popular author and recommends that the ideal way to buy a home paying 100% down using cash. If you can’t do that he recommends to buy a home with a down payment of at least 10% using a 15-year (or less) term mortgage. What do you think a wise decision for first time home buyers?
Dax Swanson:

The first thing I want to say is that I think Dave Ramsey is a wise man. He has helped literally thousands of people and I think his heart is that people not be in debt. He is basing that out of Proverbs mostly – that the borrower is slave to the lender. The Bible simply does not present borrowing in a positive light. It is a measure of last resort. As the same time, borrowing is a wisdom issue. There are factors for each person to consider in the decision-making process, especially around home ownership. In our society, perhaps more than in the Old Testament context, borrowing for home ownership is a tool. We have the ability to use lending as one tool in our arsenal to make wise financial decisions with what God has given us. Right now with interest rates really low it may become wiser for some people to lock in that low rate and have a home; for some people this may be wiser than to wait until one can put 30% down. But others should not. It’s a wisdom issue every time. And we consider the Biblical cautions to lending throughout. You need to think through this decision for yourself.
What Dave Ramsey points out is that if you do a 30 year loan you are going to be paying quite a bit in interest. I’m not an expert on Dave Ramsey; my understanding is that he is ok with borrowing for home ownership. But what Dave may not be focusing on is the opportunity cost of money. As an example, if you can get better than a 4% rate of return (annually) on money that you are saving then it would behoove you to go invest that money and get, say 10% back and then use the extra and go pay down your home loan. You’ll pay it down faster. That assumes that you have the discipline to save money. What Dave Ramsey has found, I believe, is that people don’t have discipline. And without self-control to say “I’m not going to live the American lifestyle to the extent of what I want to,” people don’t save. So he is using the house as an instrument for saving. With interest rates at 4% I’m not sure that’s always the best way to go. And don’t forget that we also need to consider that our money shouldn’t just go to our home – but to other causes and necessities as well.

Comments (3)

Brenda Mullen
RE/MAX Access - Schertz, TX
Your San Antonio TX Real Estate Agent!!

Congrats on your first blog Don!!  Just wait and I will be sending folks over to say hi!  Blog and learn here Don and welcome to the Rain :)!

Sep 01, 2011 01:24 PM
Sussie Sutton
David Tracy Real Estate - Houston, TX
David Tracy Real Estate for Buyers & Sellers

Welcome aboard Don and good first post.... I was wondering when someone was going to post bout Dave.

Sep 06, 2011 09:07 AM
Dale Baker
Baker Energy Audits and Commercial Properties Inspections - Claremont, NH
New Hampshire Relocation Real Estate Information

Howdy and evening Don

Don,
Welcome to the ActiveRain blogging community!

I learn about you joining from Steve Smith. Seeing that Steve is a mighty fine and upstanding guy, I sure wanted to be sure to stop by your blog. Look forward to seeing even more posts by you.

Have a good one
Dale in New Hampshire

Sep 16, 2011 04:39 PM