The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Information on this website may not be current. This website may contain links to other third-party websites. Such links are only for the convenience of the reader, user or browser; we do not recommend or endorse the contents of any third-party sites. Readers of this website should contact their attorney, accountant or credit counselor to obtain advice with respect to their particular situation. No reader, user, or browser of this site should act or not act on the basis of information on this site. Always seek personal legal, financial or credit advice for your relevant jurisdiction. Only your individual attorney or advisor can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, contributors, contributing firms, or their respective employers.
Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them. Compensation is not a factor in the substantive evaluation of any product.
Nearly half of women would trade a big engagement ring for a down payment on a house, according to a recent survey by ERA Real Estate of about 1,000 women in committed relationships. Buying a house is a huge financial goal, so it makes sense so many women would say that.
But here’s the thing: You’re not looking at the same amount of money when you’re comparing engagement rings and down payments. Let’s look at the numbers, shall we?
The National Association of Realtors puts the average home price at about $195,700 in 2013. The average engagement ring cost $5,431 in 2012, according to the 2013 Real Weddings Survey from XO Group. The general down-payment rule of thumb is to put down 20% of the home’s value, but homebuyers can get an FHA mortgage for as low as a 3.5% down payment.
Even at that 3.5% level, the down payment on the average U.S. home is $6,850, and at that level, you’re looking at a higher mortgage rate, which means paying more in interest than someone who puts down 10% ($19,570) or 20% ($39,140).
If a groom-to-be uses the three-months-salary “rule” for how much he can pay for an engagement ring (at the average ring cost of $5,431), that would put his income just more than $21,000 a year. That’s less than a third of the estimated average household income of $71,317, according to the 2012 Census estimates, the most recent available. Again, that’s household income, but even dividing that by two workers puts our average ring-buyer in a below-average earning bracket. It’s likely that person is looking at below-average homes, too, making the down payment/engagement ring swap more plausible.
So here’s the thing: If owning a home is a huge goal for the couple, it makes a lot of sense to put several thousand dollars toward saving for a home instead of a big engagement ring, assuming your significant other is on board with that idea. However, a big ring and a down payment are not necessarily exchangeable goods, so a conversation about this idea may go like this: “I could buy you a really nice engagement ring now, or we could have enough for a down payment on a house a lot sooner.” How soon depends on your credit standing (you can see where your credit scores currently stand with the free Credit Report Card) and the price of homes you’re thinking about, but it could be a really good strategy for reaching financial goals ahead of schedule.
Mostly, it comes down to personal preference. It’s probably a good idea to talk about the idea before surprising your significant other with a beefed-up savings account instead of the engagement ring she may be hoping for.
Image: Wavebreak Media
September 13, 2021
Uncategorized
August 4, 2021
Uncategorized
January 28, 2021
Uncategorized