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Dave Says
Dave Ramsey is America's trusted voice on money and business, and CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 12 million listeners each week on 575 radio stations and multiple digital platforms. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com. |
Make buying a home a blessing and not a financial curse by following Dave’s suggestion for determining when to buy a home. Mortgages and Baby Steps Dear Dave, We’d like to own a home someday, but we know we’re not ready for that kind of financial commitment yet. Where does buying a house fit in your Baby Steps plan? Heather Dear Heather, Buying a home when you’re broke is the easiest way I know to become a foreclosure statistic. I’m glad you two are being thoughtful and sensible about taking such a big step. If you remember, in Baby Step 1 I advise people to save up a beginner emergency fund of $1,000. Baby Step 2 is paying off all consumer debt from smallest to largest using the debt snowball method. Then, Baby Step 3 is where you go back and grow your emergency fund to a full three to six months of living expenses. With all this in mind, let’s call getting ready to buy a home Baby Step 3b. Save up for a down payment of at least 20 percent to avoid PMI (private mortgage insurance). Also, make sure any mortgage loan is a 15-year, fixed rate loan, where the payments are no more than 25 percent of your monthly take-home pay. Doing it this way may delay your dream of being a homeowner for a while, but it will help ensure your new home is a blessing and not a financial curse! - Dave |
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