Pick Your Community: | Hopkins | Muhlenberg | Daviess | Christian | Henderson | Lakes | McCracken | Webster

Dave Says – August 4, 2013

davesays300 greenKENTUCKY (8/4/13) – This week Dave discusses 'Not enough down payment?' and 'Loving your friend enough for the truth'

Dear Dave,
When is it okay to purchase a house without making a 20 percent down payment? - Hannah

Dear Hannah,
When you’re willing to pay private mortgage insurance (PMI). And that’s not something you want to do.

PMI costs about $75 a month per $100,000 borrowed. So, if you borrow $200,000 on a home, and you don’t put down at least 20 percent on the transaction, you’ll have to pay out an extra $150 a month as part of your mortgage payment.

Private mortgage insurance does nothing for you except pay your mortgage company in the event they have to foreclose on you and they lose money. PMI is foreclosure insurance that protects the lender, and you get to pay for it if you don’t make a 20 percent down payment. In the scenario I mentioned before, that would be an additional $1,800 a year on a $200,000 loan. In a sense, that’s an extra 0.9 percent on your interest rate. That’s what it feels like.

So you can see that PMI is not a positive thing. Often, a first-time homebuyer will purchase a house with 10 percent down then pay the other 10 percent as quickly as possible in order to get rid of the PMI. Stay away from it, Hannah. It’s nasty stuff! - Dave

Dear Dave,
I have a close friend whose 17-year-old daughter is going to college to become a high-school band director. Her daughter wants to take out student loans to attend an expensive private school, and tuition alone over four years will cost $100,000. I feel this is a really bad idea, but I don’t know how to talk to her about this. - Natalie

Dear Natalie,
I’m sure your friend and her family are nice people. But what we’ve got here is a little teenage girl who has her heart set on something, and no one has told her no in a while. You’re getting ready to help introduce a new word into her vocabulary, because what you’ve described to me is stupid.

Listen, I love high school band directors. It just doesn’t make sense to spend over $100,000 on a degree to become one. Most of them make about $30,000 a year, so the return on investment for this kind of thing is terrible. It doesn’t matter if you’re a band director, English teacher or a doughnut shop owner, you need to figure out what you’re going to make versus what you spend to get there.

Make sure you talk to your friend directly, not her daughter. If you do that, you’ll end up branded as mom’s mean friend. Use your relationship and history together to help her see this is a train wreck waiting to happen. My suggestion would be for her daughter to live at home, work, and attend a community college for a couple of years. Then, when she transfers to a four-year school, make sure it’s a state institution and she keeps working.

The trick is to kindly and gently maintain enough influence to guide these two weak people away from a horrible decision. At the same time, you’ve got to be strong enough to call mom out for not stepping up and providing proper guidance. Mommies who don’t try to stop their babies from doing things this dumb are known as bad mommies. People who spend $100,000 to $150,000 to make the kind of money that’s waiting on her daughter are either young and inexperienced, or they’re what are known as fools.

I’m sure you’ll find a nice way to say it, but basically your friend needs to grow a backbone and tell her daughter no. - Dave

* Dave Ramsey is America’s trusted voice on money and business. He’s authored four New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover and EntreLeadership. The Dave Ramsey Show is heard by more than 6 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.

 

Disclaimer: The content supplied by columnists and letters to the Editor on this site does not in any way, shape or form, implied or otherwise, necessarily express or suggest endorsement or support of any of such content, statement, or opinions therein. SurfKY News does not necessarily adhere to or endorse content provided by outside non-staff sources.

© Copyright 2014 SurfKY News Group, Inc. All rights reserved. This material may not be published, broadcast, or rewritten without permission. SurfKY News encourages you to share this story by using one of the social media links below.

In Other News...

Come and Explore at Sister Trek 2014

OWENSBORO, Ky. (9/14/14) — Would you like to visit several communities of women religious in one weekend, along with… Read More

Dogwood Azalea Neighborhood Alliance to Host Fall Kickoff Party

OWENSBORO, Ky. (9/13/14) — The Dogwood Azalea Neighborhood Alliance will host a fall kickoff party from 4 to 8 p.m.… Read More

Most Read This Week (Site-Wide)

September 12, 2014 16292

Woman's Body Found in Theater Day After…

in Top Stories by Rita Dukes Smith, SurfKY News Director
September 10, 2014 8019

BREAKING NEWS UPDATE: Police Capture…

in Top Stories by Amber Averitt, SurfKY News
September 10, 2014 4174

Hopkins, Webster Men Arrested for Meth by…

in Top Stories by Sheriff Curtis McGehee
September 10, 2014 3929

Woman Accused of Trying to Give Child…

in Top Stories by Det. Otis Chamberlain
September 13, 2014 3022

MPD Responds to a Disturbance at Baptist…

in Top Stories by Madisonville Police Department

Most Read Stories from Hopkins County

September 10, 2014 8019

BREAKING NEWS UPDATE: Police Capture…

in Top Stories by Amber Averitt, SurfKY News
September 10, 2014 3929

Woman Accused of Trying to Give Child…

in Top Stories by Det. Otis Chamberlain
September 13, 2014 3022

MPD Responds to a Disturbance at Baptist…

in Top Stories by Madisonville Police Department
September 11, 2014 2444

Suspect Arrested for Possession of…

in Top Stories by Madisonville Police Department
September 11, 2014 1942

Three Injured in Early Morning Two-Car…

in Top Stories by Officer Falon Graham

Most Read Stories from Owensboro

September 10, 2014 2136

Owensboro Police Department Activity…

in News by Dennis Beard, SurfKY News
September 10, 2014 1926

Randy Lanham, Marty Brown, Team Up for…

in Top Stories by Paul McRee, SurfKY News
September 10, 2014 1599

Owensboro Police Conduct Investigations

in News by Dennis Beard, SurfKY News
September 11, 2014 1285

Owensboro Police Department Activity…

in News by Dennis Beard, SurfKY News
September 11, 2014 1255

Owensboro Parks Plans Fall Day Camp

in News by Brittni Bunn

Most Read Stories from Muhlenberg County

September 11, 2014 2991

Subject of Officer-Involved Shooting…

in Top Stories by Rita Dukes Smith, SurfKY News Director
September 10, 2014 2862

School System's New Finance Officer Aims…

in Top Stories by Charles W. Riley II, SurfKY News
September 10, 2014 2600

School System's Request for $5.5M Falls…

in Top Stories by Charles W. Riley II, SurfKY News
September 11, 2014 2225

Two Accidents Occur on U.S. 62 Within…

in Top Stories by Trooper Stu Recke
September 11, 2014 1741

Job Corps Students Volunteer with…

in Top Stories by Karen Robinson

SurfKY News Group, Inc. Central Office & Printing Division
1125 Nebo Rd.  •  Madisonville, KY 42431  •  270.452.2249 (fax)
Main Number: 270.452.2727 (phone)  •  Printing Division Direct Line: 270.821.8600 (phone)

SurfKY Owensboro News Bureau
920 Frederica St. / Suite 210  •  Owensboro, KY 42301  •  270.683-8060 (phone)


Contact a member of our staff: www.surfky.com/contact
Copyright © 2014 SurfKY News Group, Inc.  •  Terms of Use  •  Site Map

social 03social 04social 22social 21social 06