Dave Ramsey Home Buying Guidelines

I want you to feel confident about how much house you can afford before you hit the ground running and start shopping. And our How Much House Can I Afford calculator can do just that. All you have to do is enter your monthly income into our home-buying calculator to instantly get a home price that fits your budget.

To calculate how much house you can afford, use the 25% rule: Never spend more than 25% of your monthly take-home pay (after tax) on monthly mortgage payments. Following this rule keeps you safe from buying too much house and ending up house poor. I want your home to be a blessing, not a curse.

As you get more serious about buying a home, you might hear about down payment assistance (DPA) programs offered by some cities and states. These programs offer low- or no-interest loans to help people with lower incomes afford a down payment.

Buying a home is a huge decision, and picking the right mortgage is a huge part of that process! Here's why the 15-year fixed-rate mortgage might be one of your best options when it comes to buying a house.

If it turns out that your hypothetical budget has 65% of your income going towards needs, that leaves only 35% total for wants and savings. In other words, your opportunity cost for buying a larger home means sacrificing wants (e.g., travel and entertainment) or savings (e.g., you may have to delay retirement).

Owning a home and paying it off is one of the data points of an every day millionaire. At Churchill, our goal is to give you more power, clarity, and peace throughout the home buying process and ultimately help you get back to a debt-free lifestyle as soon as possible.

Even if you just follow one part of the rule, you will also be able to enjoy your property more because you will be less stressed about your finances. But ideally, you follow two or more parts of the three-part home buying rule.

When mortgage rates are lower, you can already buy more home if you keep your spending as a percentage of gross income fixed. The danger emerges when you break this home-buying rule percentage to buy an even more expensive home.

Before buying a home, you should have at least 30% of the value of the home saved in cash. 20% is for the downpayment to avoid PMI insurance and get the lowest mortgage rate. The other 10% is for a healthy cash buffer just in case you run into financial trouble.

If you are planning on buying a home within the next six months, keep at least the 20% down payment in cash. It is unwise to invest your downpayment in stocks and other risk assets if your home-buying time horizon is so short.

Home affordability based on cash flow is a function of the price you pay for the home. If you are able to meet the first two home-buying rules, then you can tie it all together with the final home-buying rule.

Instead of buying this home now, first save up another $155,000 to get to $255,000 in cash and semi-liquid investments. With 30% of the home price saved, you can put down 20% and have a nice $85,000 cash cushion.

For those of you who are looking to achieve financial independence sooner, follow the FI home-buying rule. This rule recommends you keep your home expense to no more than 10% of your monthly gross income.

With the majority of the generation now in their 30s, most are now reaching the age where huge life-changing decisions (such as buying a home or starting a family), are becoming the norm which is having a huge impact on home demand. As more and more new homebuyers hit the market each year, demand is outpacing supply by a staggering amount which is pushing home prices higher.

In many markets across the country, the number of buyers searching for their dream homes greatly outnumbers the number of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.

The biggest mistake new home buyers make is falling in love with a home they cannot afford. The second biggest mistake is buying a home a lender says they can afford, but they really can't. Don't make these mistakes.

The Dave Ramsey Show is heard by more than 14 million listeners each week on 585 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.

If you are buying or selling a home, Dave Ramsey can help you find a locally based real estate agent in his ELP network. The real estate agents he recommends are all top-notch professionals who perform in the top 10% of their fields. They will guide you through the home buying or selling process.

Working with an ELP can also reduce your agent search. Instead of trying to find an agent through a Google search or looking up countless brokerages in your area, you can receive recommended Realtors who want to work with you. You can focus less time on vetting Realtors and more time selling your home or buying your next one.

The only unlikely but theoretically possible exception to that is finding a lender that allows you to be a first time home buyer with a cosigner, such as a parent for their child buying their first home, and that accepts the down payment from the cosigner instead of the home buyer (although this is an unlikely scenario since a cosigner is different from a co-borrower). 59ce067264

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