Chapter 17
Buying a House
A house is the largest purchase most households ever make, financed with the largest loan they will ever sign, and decided with less analysis than either deserves. This chapter supplies the analysis: whether to buy at all, how much house your balance sheet actually supports, how to finance it, and how to exit — with the arithmetic shown at every step, because this is the one market where the seller, the agent, and the lender all profit from your rounding up.
Rent vs Buy decision
Consumption or Investment? Get the Definition Right
Dual Role of Houses: Durable Goods and Financial Investments
The Unrecoverable-Cost Framework
The NPV Framework: A Rigorous Buy-vs-Rent Comparison
Transaction Friction and the Break-Even Horizon
The House as a Single Point of Failure
Underwriting Your Own Income
The Mortgage as a Negative Bond
Making the Call
True Affordability in the Housing Market
Debt-to-Income Ratio (DTI)
Housing Ratio (HR1)
Broad Housing Ratio (HR2)
The Gross-DTI Trap for High Earners in High-Tax States
The 30/30/3 Home-Buying Rule
What the Guide Lets You Leave Out of DTI
The Investment Showdown: Property Growth vs. Stock Market Gains
Leverage: Where the Levered Return Comes From
Prepay Fast or Invest the Difference: The Ramsey–Edelman Divide
The 15-Year Versus 30-Year Arithmetic
Surviving Job Loss: How Strategic Financial Planning Can Save Your Home
Private Mortgage Insurance
Jumbo Loan Microstructure
Do You Really Have to Buy a Home?
The Down Payment Versus the Retirement Account
The Marginal Dollar: A Priority Order
Prepay or Invest? Compare the Right Two Things
Do Not Raid Retirement for the Down Payment
Calculating Financial Impact Of Buying A House
Home Location
Home Buying Process, Offer, Contingencies, and Mortgage
The Home Buying Process Overview
Do You Need a Buyer’s Agent — and How to Pay One Less
Home Loans
Recourse, Non-Recourse, and What a Refinance Silently Costs You
Home Loan Structures
Impound Account vs. Non-Impound Account
Homeownership Taxes
Low-Down-Payment Conforming Programs (Conventional 97, FHA, VA)
Buying a Home for a Parent or an Adult Child
Local Homebuying Programs
Understanding Contingencies
“Cash Offer” — No Loan Contingency
Obtaining Mortgages
Signing a Contract to Buy a House
Price Versus Credits: Buy the Lower Number
Selling Primary House
Sell It or Rent It Out?
Hiring the Listing Agent
Consumption or Investment? Get the Definition Right
Dual Role of Houses: Durable Goods and Financial Investments
The Unrecoverable-Cost Framework
The NPV Framework: A Rigorous Buy-vs-Rent Comparison
Transaction Friction and the Break-Even Horizon
The House as a Single Point of Failure
Underwriting Your Own Income
The Mortgage as a Negative Bond
Making the Call
True Affordability in the Housing Market
Debt-to-Income Ratio (DTI)
Housing Ratio (HR1)
Broad Housing Ratio (HR2)
The Gross-DTI Trap for High Earners in High-Tax States
The 30/30/3 Home-Buying Rule
What the Guide Lets You Leave Out of DTI
The Investment Showdown: Property Growth vs. Stock Market Gains
Leverage: Where the Levered Return Comes From
Prepay Fast or Invest the Difference: The Ramsey–Edelman Divide
The 15-Year Versus 30-Year Arithmetic
Surviving Job Loss: How Strategic Financial Planning Can Save Your Home
Private Mortgage Insurance
Jumbo Loan Microstructure
Do You Really Have to Buy a Home?
The Down Payment Versus the Retirement Account
The Marginal Dollar: A Priority Order
Prepay or Invest? Compare the Right Two Things
Do Not Raid Retirement for the Down Payment
Calculating Financial Impact Of Buying A House
Home Location
Home Buying Process, Offer, Contingencies, and Mortgage
The Home Buying Process Overview
Do You Need a Buyer’s Agent — and How to Pay One Less
Home Loans
Recourse, Non-Recourse, and What a Refinance Silently Costs You
Home Loan Structures
Impound Account vs. Non-Impound Account
Homeownership Taxes
Low-Down-Payment Conforming Programs (Conventional 97, FHA, VA)
Buying a Home for a Parent or an Adult Child
Local Homebuying Programs
Understanding Contingencies
“Cash Offer” — No Loan Contingency
Obtaining Mortgages
Signing a Contract to Buy a House
Price Versus Credits: Buy the Lower Number
Selling Primary House
Sell It or Rent It Out?
Hiring the Listing Agent