Dave Ramsey Shares Three Rules For Buying A House

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In today's turbulent housing market, navigating the path to homeownership requires a more strategic approach than ever.

With soaring prices and high interest rates, prospective buyers face myriad challenges. But despite the complexities, financial experts like Dave Ramsey offer valuable insights to guide homebuyers through the process.

Ramsey shared three rules for buying a house in a May 6 post on X:

1.    Be debt-free.

2.    Keep enough money in an emergency fund to cover three to six months of household expenses.

3.    Never take out more than a 15-year fixed-rate mortgage.

In addition to following his top three rules, Ramsey said homebuyers should never have a mortgage payment that is more than one-quarter of their take-home pay.

"You can qualify for twice that amount, but don't do that, don't be that stupid," he said. "Keep it conservative so you can get the house paid off in less than 15 years. That's the goal."

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Ramsey also suggested making at least a 20% down payment on a conventional Fannie Mae loan to avoid paying private mortgage insurance (PMI), which costs $75 per month for each $100,000 borrowed. That works out to $225 per month on a $300,000 loan.

"That's pretty substantial," he said.

Paying that kind of money for something that benefits the mortgage company rather than the borrower is a waste, he said. But putting down 20% on a house gives a buyer an 80% loan-to-value ratio and allows them to "avoid having to buy the ridiculous PMI," Ramsey said.

"Foreclosure insurance is something you buy for the mortgage company," he said. "If they have to foreclose on you it covers them. It does nothing for you."

Ramsey's website provides more advice when it comes to buying a house. In addition to the counsel provided on X, he suggests getting preapproved for a mortgage and finding the right real estate agent. When you find the house you want, be sure to get a home inspection and appraisal — you're getting a loan, and your lender will require an appraisal.

Be sure to review your closing documents ahead of time so there aren't surprises on closing day. The documents will outline closing costs, property taxes, homeowners association fees, and home insurance.

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