Dave Ramsey’s Real Estate Advice: What Would Dave Ramsey Do When Buying A Home in 2023?
Dave Ramsey is clear on his real estate advice. As a former Dave Ramsey Endorsed Local Provider (ELP) I had a first hand behind the curtain look at Dave’s real estate advice and buying principles. I’ve read his books, been through classes, and worked with his real estate department to service dozens of clients. As a result, I’ve learned a few things I’d like to share with you.
Don’t Buy A House If You Are Broke
First of all, buying a home is usually the largest expenditure for most families and the process should not be taken lightly. It takes planning and preparation. He states, “If you are broke, don’t buy a house.”
Get Out Of Debt
You need to have a good understanding of how your money works. He lays out a plan that includes getting out of debt, having an emergency fund, and then saving for a down payment.
Have An Emergency Fund
He’s widely known for talking about Murphy’s Law, which states that if something can go bad, it most certainly will. When you don’t have an emergency fund, Murphy comes knocking on your door.
Homeownership has many unexpected expenses so you have to be able to handle those.
Downpayment
Your down payment should be at least 20% so that you don’t have to pay Private Mortgage Insurance (PMI), which is an insurance policy that you have to pay in order to provide insurance coverage for the lender in the event that you can’t make your payment.
Mortgage Term
He encourages everyone to get a 15 year mortgage. It’s widely known that people who take on a 30 year mortgage rarely pay off their mortgage. They end up refinancing their mortgage over and over and use their home as a piggy bank rather than a long term asset.
It’s also true that most people who take on 15 year loans pay them off in 12 years. Why? Because once you know the end of the loan is coming, they usually accelerate those payments to get it paid off.
Mortgage Payment
Dave recommends that your mortgage payment be 25% or less of your take home pay. That means you take your gross income per month, subtract your taxes and then divide by four. For example if you make $120,000 and pay 20% in taxes you should keep your monthly mortgage payment at $2,000. ($10,000 x 80% = $8,000/4 = $2,000).
Location Location Location
Finally, you should never buy the most expensive house in the neighborhood. That is ver important real estate advice! Buy in the bottom half of the neighborhood because you have upside potential. Buying in the top half limits your long term growth.
If you are ready to take steps and enter into homeownership let’s talk today. We can help you evaluate your current financial situation and find neighborhoods that work for your budget. We can also help you strategize to help you save money for a down payment.
Now, if you are actually Dave Ramsey, you’d pay cash for your home. Why? Because he’s followed his own advice after trying to amass a real estate empire using debt as leverage. After losing it all, he realized his beliefs about debt was all wrong. His story of transformation is dramatic and admirable.
Aaron Zapata is the founder and Broker of IMPACT Properties in California, Tennessee, and Alabama and has a team of expert agents who are trained to work with first time homebuyers and give excellent real estate advice.
