In an episode of the ‘Women and Money’ podcast, a 47-year-old caller asked Suze Orman if it is too late for her to buy a house. Orman gave sound advice, but ultimately told the caller, “It’s not enough right now.”
Nicole, a single 47-year-old, is ready to stop renting and wants to own a home. She lives on Staten Island, where the median home price is $700,000. Nicole makes $195,000 annually and has about $200,000 in liquid savings, $1 million in retirement savings, and $30,000 in a non-retirement investment that she doesn’t plan to touch anytime soon.
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“I’m starting to wonder if I should rent for the next few years, keep my expenses low and then buy a house in a cheaper condition,” Nicole told Orman. “The big problem for me is that I have to move away from my mother, who is 75, and my entire family. I don’t really want to do that, nor do I want to take out an overly expensive mortgage at the age of 30.” 47 while I do not intend to continue in the same job for another thirty years.”
Orman said to Nicole, “I think you answered your own question. Believe it or not.’ She then articulated a core philosophy of her show, which is “people first, money second.” Orman told Nicole that if she wants to be close to her mother and family and can’t afford to buy on Staten Island, she can always buy something later.
“If I were you,” Orman said, “in your particular situation, I wouldn’t buy a house right now. I would wait and see what happens to your job.”
Another point Orman emphasized is that you never know what will happen. You could buy a house and get stuck with a large mortgage payment. Then you might get sick, have a car accident, or lose your job, and be stuck with a huge mortgage, property taxes, home insurance, the whole gamut, without the money to pay for it.
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“Now I make sure you have a good amount of liquid savings,” says Orman. “But if you’re going to buy a $700,000 house, you’re going to need to put down at least $70,000 to $140,000 as a down payment… which leaves you with just $60,000 in savings, which isn’t really an emergency fund.”
Orman continued adding up Nicole’s remaining savings, which would be about $90,000 with her non-retirement investment, and finally said, “It’s not enough.” She advised to continue renting in the coming years and keep costs as low as possible.
“Then, if you decide you have enough money to buy a house, or you want to move to another, cheaper state for your own retirement, you can buy one right away.”
Deciding when and where to buy a home isn’t easy, especially given the current state of the housing market. Maybe you’re in a situation like Nicole’s, torn between buying an affordable home or staying near family. Or perhaps you are considering rental real estate as an investment option for your retirement.
Whatever your situation, and however good Suze Orman’s advice may be, consider consulting a financial advisor who can help you take stock of your assets and make the best decision for your future.
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This article Suze Orman Tells 47-Year-Old Caller: $200,000 Savings ‘Not Enough’ to Buy a Home originally appeared on Benzinga.com
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