Few personal financial experts have built up a following like that of Dave Ramsey. His Financial Peace curriculum is taught in churches and secular organizations across the country. His radio show is listened to by millions. When he talks, people pay attention.
One of Ramsey’s latest pieces of advice is that if you’ve been on the fence, waiting for things to settle down in the housing market, now is the time to get into the game.
Ramsey made his statement after mortgage rates significantly shifted lower in November and December, but he warns that only those folks who’ve been planning for this point should move forward.
“Ever heard someone say everyone should buy a house? Or that renting is a lot like flushing a whole bunch of money down the toilet every month?” he asked on Ramsey Solutions. “Yeah, we’ve heard that stuff too. And it’s nonsense! The truth is, not everyone should buy a house.”
Ramsey offered a list of critical things to consider when making the determination that the major financial opportunity is in order.
His advice for future buyers includes:
- Lower your current debt as much as possible.
- Build up an emergency fund because homeowners often face emergency repairs.
- If possible, come up with a 20% down payment since it means you’ll avoid paying for private mortgage insurance (PMI).
- Your monthly house payment should never be more than 25% of your take-home pay.
- Set aside 3–4% of the total purchase price for closing costs.
- Work with a real estate agent you can trust.
Ramsey also wrote that only people who are planning on staying in their new home for five years should make the purchase now. “Most of the time, buying a house is a bad idea if you’re not planning to live in it for at least five years,” Ramsey wrote. “Why? Because it usually takes at least five years for a home’s value to grow enough to keep you from losing money when you resell it. For example, if you stay in a home for three years and its value only increases by 3% in that time, you wouldn’t even make back the money you spent on closing costs if you sold the house.”