Make It Happen Mondays: Dream House
from daveramsey.com on 21 Jan 2013
We make many worthy sacrifices in the name of getting out of debt. Often, one of those sacrifices is renting instead of owning a home. Or sometimes we stay in a smaller home instead of upsizing our living space—and monthly payment.
But one day, you begin to see a light on the horizon. The realization dawns on you that not only are you about to be out of debt, you’re also inching closer and closer to finally buying a home … or if you already own one, moving into your dream house.
As exciting as it is to take this step, it’s important to keep your focus. Attack your goal of buying a home with the same intensity and intentionality as you attacked your debt and you’ll find yourself in a new home you can enjoy without the money problems most homeowners face.
Pay Off the Debt—All of It!
Your last debt in your debt snowball is the one with the largest balance. Fortunately, when it comes up in your snowball, you have a chunk of cash to throw at it every month. It can be awfully tempting to stash that cash for a down payment on a home instead—especially when you keep hearing about terrific deals and great home loan rates.
But you should never buy a home just because the market is great—whether it’s your first or third house. Buy when you’re ready financially. That means being out of debt and having an emergency fund of three to six months of expenses. With this solid foundation, you’re financially prepared to face a leaky roof or a busted water heater.
Saving Money Is a Good Habit to Keep
Once you’ve saved up your emergency fund, you’ll feel like a money-saving pro. So keep your momentum going while you save up your down payment. To get the best home loan rates, you’ll need a down payment of 100%. (Yes, you read that right.) If you’re not that hardcore, commit to saving at least a 10–20% down payment. That sounds like a lot, but don’t be discouraged. You can take some steps to speed up your savings:
- Get an extra job and save what you make for your down payment only.
- Don’t lend your money to Uncle Sam! If you received an income tax refund this year, adjust your withholding so you bring more money home in your paycheck.
- Selling stuff is good for getting out of debt—but you can save that money too!
- Have a conservative price range and keep your mortgage payment 25% or less of your take-home pay on a 15-year, fixed rate mortgage.
You might become so good at saving that you decide to keep saving until you can pay cash for a home. After all, 100% down is Dave’s preferred method of home buying!
Preapproval Makes House Hunting More Fun
When you’re ready to begin the house hunt, it’s important to be preapproved with your mortgage lender. Getting preapproved means you meet all the lender’s requirements to get a home loan, and it lets sellers know you mean business when you make an offer on their home. Dave also recommends working with an experienced real estate agent who will save you time and money by finding a great deal on your new home.
Looking Toward the Future
If you’re like most people, your first home won’t be your dream home. But it can be a stepping stone if you buy reasonably and build up equity by paying down the mortgage with all the spare cash you can muster.
Then, once you’re in a position to move up, you just might realize that your dream home may not be that huge house on a hill with a chef’s kitchen and four-car garage. Your dream home may actually be a less glamorous home that you own mortgage free!
Whether you’re looking to purchase a home right now or in the future, the all-new Dave Ramsey’s Homebuyer Guide will help you make the process as simple as possible. Download it for free now.
What steps will you take this year to get one step closer to owning your dream house?