Financial guru Dave Ramsey is known for offering candid advice, especially when it comes to significant financial decisions like buying a home.
A recent conversation with a caller named Tina from Fort Lauderdale shed light on a critical home-buying mistake that must be avoided. Tina inquired about using a HELOC (home equity line of credit) to put 20% down on a new home and sell her current house after closing on the new one.
Ramsey quickly warned against this approach, explaining that it’s dangerous to close on another property before selling the current one. He pointed out that if the first house doesn’t sell, Tina would be stuck with two mortgage payments and become a motivated seller forced to sell her home cheaply.
Instead, Ramsey suggested closing on the second house after the first one closes and using cash for the transaction. To avoid the stress of finding a new home after selling the current one, he advised writing a contract on the new property contingent on the sale of the existing house and setting up both closings on the same day.
Tina also considered taking out a HELOC to pay for the new home in cash, as she had enough equity in her current house. Ramsey strongly discouraged this idea, stressing the importance of selling the current house and moving without unnecessarily complicating the process.
In conclusion, Dave Ramsey’s advice highlights the importance of avoiding risky financial decisions, especially when it comes to home buying. Selling your current home before closing on a new one is essential to prevent getting stuck with two mortgage payments and potential financial ruin.