Is Renting Throwing Money Away, and How Much House Can I Actually Afford?

Everyone tells you renting is throwing money away, that you're just paying someone else's mortgage, that a real adult buys a home. Now some of that is true and some of that is myth that pushes people into homes they can't actually afford. So today I want to separate the two.I want to break down that belief that renting wastes money because it's only half the story. Because buying wrong can hurt worse than renting can. Well, let's figure this out and find out exactly what's right for you on today's show.Hello and welcome to Financially Confident Christian. I'm Ralph Estep Jr. And I just want to thank you for joining me again today. Today we're having that age old battle, do I rent or do I buy?But bigger than that, we're going to talk about how much house you can truly afford because we got a great listener. This listener is getting pressured to buy, feels like they're being told that renting is wasting money. But he really wants to know what's affordable.So here's the thing I'm going to say right from the beginning, running the numbers first is wise. That's not a sign of weakness. Now, if you've got a question you'd like me to answer on the show, I would love to hear it.You can go to financiallyconfidentchristian.com/question. We'll put a link in the show notes. But again, that's financiallyconfidentchristian.com/question Well, let's get right to his email question.He says this Hi Ralph, I'm 33 and I've been renting for years. Lately I feel this huge pressure to buy a house. My parents keep saying I'm throwing money away at rent.My friends are all buying and I feel like I'm falling behind by not owning something. But here's my hesitation when I actually look at homes in my area, the monthly payment would be a lot more than my rent.And now Ralph, once you add in taxes, insurance and repairs, I make decent money, but it will be tight. Now part of me thinks I should just do it because everyone says renting is waste. The other part is I'm scared I'd be buying more than I can handle.So Ralph, is renting actually throwing money away? And how do I figure out how much house I I can really afford without getting in over my head. Thanks for your honest take.Well, thank you for sending in your question. This is a question I get all the time.It's a very common concern, especially when people are getting into those early 30s and they're hearing talk from everybody around them. The truth is this. Owning builds wealth. But it only builds wealth if it doesn't strangle your life.So I'm going to say something from the beginning here. Renting isn't automatically wasteful and buying isn't automatically wise all the time. It's the numbers. So let's talk about how we make that decision.Well, I want to start by saying this. We got a number one thing. We got to bust the myth. I am so sick and tired of hearing people say if you rent money, you're wasting money.That's not necessarily true. Renting buys you flexibility. You don't have any repairs, you have no property taxes.If you want to change jobs and go to another city or another town, you have that option. Now, owning has its own throwaway money beliefs as well.You're going to be spending a lot on interest, you're going to pay property taxes, you're going to have to pay for insurance. And let's not even get started on the maintenance costs. So the truth is, in some seasons of your life, renting is smarter.Don't consider that a failure. The goal isn't owning at any cost. It's is this the wise move for you?So don't let that slogan of, well, if you're renting, you're just throwing away money drive you to your biggest purchase. Renting isn't throwing money away. It's paying for flexibility and freedom from repairs. So that's where I'm going to start that.But the second piece you asked about is, Ralph, how do I know how much I can afford? Well, we got to start by talking about knowing the true cost. The mortgage payment is a big part of that, but it's only part of the real costs.You've got to add all these things together. And you alluded to it in your, in your letter.You said, Ralph, what about property taxes, homeowners insurance, maintenance and repairs, hoa which is another fee a lot of people don't think about in general. Here's a rule of thumb that you can apply. 1 To 2% of your home value is going to be what you're going to cost you per year.So if you've got a hundred thousand dollar home, you can expect to spend about $1,000 a year. Now the truth is that that online payment is, is not the real number.Yeah, they're going to tell you your mortgage payment is this, but you've got to really compare all of the costs, which is what you said in your message you said ralph, but wait a minute. If I rent, it's one cost. So you got to be careful of that. That mortgage is kind of like that car on the car lot.It's the sticker price, but the real cost is a lot more. So now that we've determined what the real cost is, I'm going to give you what I call a sane affordability rule.Now, banks will approve you for more than you should spend. Ignore that number. They use numbers that are just sky high. Here's the thing that I think is the safest guideline to use.I think your total housing cost should be no more than about 25% of your take home pay. Now notice. I said take home pay. I didn't say your gross pay. I said what you actually take home from your paycheck. That leaves you room for savings.That leaves you room for giving. Hey, it leaves you room for having a life. And yes, it leaves you room for those unexpected expenses.If you're past that line, it's really too expensive. No matter what the bank will approve you for. I've seen it happen time and time again.The bank will approve you up to maybe 40, even 45% of your gross income. And that puts you in a spot that you don't want to be in. You don't want to be stretched become and becomes this trap.Affordable home can build wealth, yes, but don't buy what the bank approves. Buy what your life can actually carry. Now before you do any of those things though, I want to get back to a foundation.Because you've got to set the foundation first. You've got to build your financial house first. You got to have that emergency fund.You know, I talk about this all the time, but you've got to have that in place because that emergency fund is going to help you survive those repairs you weren't expecting. I mentioned it on the show when I bought my first townhouse when I was 22 or 23 years old.I was there a week and the air conditioner blew up and I wasn't wise. I didn't have that emergency fund. A lot of times you also have to save for a real down payment.Ideally, you want to save enough that you don't have to pay extra mortgage insurance.I don't have time to talk about that today, but there's a thing called PMI which is basically, if you're putting less than 20% down on a house, they're going to charge you. I'll call it an extra interest. And every month and that number can add up.And another thing you want to consider, if you've got credit card debt or personal loan debt, I want to encourage you to pay down those high interest debts first. You got to buy from a place of strength. When you buy from a place of strength, it's a blessing and it's not a burden.So get your foundation set solid before you put a house on top of it. But now I want to just lean into one more thing. You've got to buy on your timeline. The right time for you is about your numbers and your life.Now it makes the most sense when you'll stay put there for several years. If you're in the beginning of your career, you're not sure where your career is going, it's probably not a great time to buy.Because once you buy a house, you're kind of locked into that. If you've got tight math you might be moving soon, then renting for a longer period of time is wisdom. That's not failure to you.Your pace doesn't have to match everyone else's. Like I said earlier, live in the season. That works best for you. Buy on your timeline using your numbers, not because everyone else did.Now I want to dig a little deeper into your message. You said you were feeling like you're falling behind by not owning, and I want to gently lift that pressure off of you.Your worth and your wisdom are not measured by a deed with your name on it. But here's the thing that faith doesn't promise us. It doesn't promise us a house is going to make you feel more secure.It doesn't promise that timing is going to feel obvious. It doesn't promise that you'll never feel that pool of comparison. Those are things you're going to feel. But here's what faith does promise us.It promises that wisdom counts to cost before it builds. We're going to talk about in our scripture today. And it also tells us that God honors the one who plans before they leap.As scripture tells us, prepare your fields first, then build a house. This is ancient financial wisdom that goes all the way back to Bible days.The foundation before you build, you got to build in that patience and preparation. Those things aren't a lack of faith, they're stewardship. Because a house built on a solid foundation is the one that will stand for the long term.So listen, don't let the cloud rush you. Prepare well, count the cost and build when the foundation is ready again.You're not behind for renting, you're Wise for running the numbers and refusing to overbuy is actually a strength because the right home at the right time is worth the wait. So here's your win for today.If you're thinking about buying a home and you've listened to what I've said, number one thing I'm going to encourage you to do is go calculate that 25% of your monthly take home pay. That is your honest housing target. All you got to do is look at your direct deposits for a month. That's the money that you're actually getting.Multiply that by 0.25 and before you even go shopping for a home, know what you can afford. You're not deciding to buy to rent today. You just want to understand that real ceiling and see it on paper. And you got to reframe your mind.Don't make a housing call without your true number in front of you. Which leads us to our Bible verse today comes from the book of Proverbs, chapter 24, verse 27.It says do your outdoor work and get your fields ready and after that, build your house. That Bible verse is literally telling you about the right order foundation before you build the house.Now you're going to get pressure that says build first. You can figure the rest out later. But scripture tells us something completely different.It tells us that getting our finances ready before buying is diverse in its modern form. Wisdom prepares, it doesn't rush. Well, how about we pray together right now? Together.Heavenly Father, I briefing before you, someone feeling the weight of comparison and that pressure to buy before they're actually ready. Lord, they want to be wise. They don't want to be rushed. So give them clarity, Lord, and give them peace in this decision.Free them from that pace pressured around them and show them the true cost, Lord, and the wisdom for the real limit that they can actually afford.Help them build that solid foundation before they build, just like scripture tells us, Lord, and guard them from a decision driven by fear or comparison or falling behind. Lead them to the right home, Lord, at the right time in your provision. And we ask this in Jesus name, Amen.Now friend, you came into this today, you felt pressured, you felt like you're behind. But I've given you some tools today. A clear, honest way to decide what's best for you.And again, renting isn't waste and buying is an automatic wisdom. The numbers tell the truth. So here's my takeaways for today. Bust the myth. Renting does buy flexibility. It's not wasting. Know your true cost.The taxes, the insurance, the upkeep, not just the mortgage. Lean into that 25% sanity rule. Build that foundation and buy on your timeline. Not what the crowd is telling you. Now.Maybe you've got a financial decision you're trying to get through. I would love to hear your voice.You can send me a voicemail by going to financiallyconfidentchristian.com/voicemail we'll put a link in the show notes, but again, that's financiallyconfidentchristian.com/voicemail thank you for joining me today as I always encourage you stay financially savvy. May God bless you and you have a truly great day.