E192: Google Sucks: Financial Basics You Should Know

Even if you are an experienced researcher, Google is not a reliable source of information, especially when it comes to real estate and deciding if you’re ready to buy a home. You need to talk to a real person. AI is super cool and the Internet is great for a lot of things, but it is NOT going to help you when you are gauging mortgage rates and how much you can afford. Instead, listen to David (a real person) who tells you what you need to know to make sure you’re really prepared to buy your first home.

Here are some topics from today’s conversation:

• How much you need to make to buy a $400,000 home
• The lifetime cost of a home
• Amortization
• Why Googling can mess this all up

Episode Highlights:

[04:39] What Is the Lifetime Cost of Your Home?

If you’re Googling your real estate info, then this concept may not come up. But, there is your mortgage payment and then there is the whole lifetime cost of your home. One of these will shock you. Here’s a story - one How to Buy a Homie bought an $800,000 home with a monthly payment that was within his budget, but then he did the math. If he stayed in his home for 30 years, only paid the minimum payments, and never refinanced, he would have spent a total $1.8 million dollars on the house. That’s crazy! That’s because that’s not how loans work. When you pay on a mortgage for, say, a $400,000 home, you aren’t paying $400,000 over 30 years. The lenders want to get their cut, too. 

[9:29] The Cost of Middle Class Living

When it comes to living your life, you have two options: pay for everything in cash all the time. Or, your second option is to pay incrementally where you’ll pay a bigger price overall, but will be able to experience the middle class joys a little sooner. This usually happens with larger investments such as cars and homes. So, you’re living above your means, but you’re enjoying life. Sounds a little irresponsible, but many many people live this way. It’s not the worst thing, but when people have little to no financial education, it can all go terribly wrong. It takes some wisdom and understanding of your financial situation to prioritize in a way that benefits you best.

[17:30] Is Google Right? IT DEPENDS

Every decision in life has to analyze your own personal data. When you Google “How much money do I need to make to afford a $400,000 home?” take the search results with a grain of salt. Google doesn’t know your credit score, your income-to-debt ratio, or any financial factors that could influence a lender’s perception of your situation. Also, there are so many other factors that need to be considered such as interest rates. These numbers are always changing based on the economy, so what the Internet tells you might already be out of style. Instead, it’s better to skip the middleman (Google) and jump right to the experts (a unicorn team).