Dave Says: Pay Off Debt First

Dear Dave,

We've made an offer on a house we really like through a first-time buyers program. Now, after looking over our budget and debts again, my wife and I are having second thoughts. We haven't signed or turned in any paperwork yet. What do you think we should do?

Craig

Dear Craig,

I wouldn't go through with the deal. I advise people to be debt-free before buying a home because you want a home to be a blessing, not a curse.

Looking at it from a long-term perspective, if you're selling a bunch of houses a year or two from now, you're in the clear. You could easily stay in the house. But if you don't find extra income while you build your business, if you're not willing to work extra hard and sacrifice in the meantime — even if it means just delivering pizzas — then you probably need to sell the house.

Homeownership, when you're broke, is never a good idea. And basically, that's the situation you're describing. You have debt, and you're trying to squeak into something with a first-time buyers plan. The translation? You have no money. Everything that can go wrong will go wrong. That's Murphy's Law, and he'll move into your spare bedroom along with his three cousins — Broke, Desperate and Stupid.

Get your debts paid off, build up an emergency fund, and save up a good down payment before buying a home. I know that's not the popular answer, but it's the smart one!

—Dave