May 8, 2018
Guest Blogger: Rachel Cruze
Buying a home is probably the most expensive decision you’ll ever make. But it’s also one of the most exciting decisions you’ll ever make.
Whether you’re a newlywed in the housing market or just tired of renting, you probably have many reasons why you want to buy a house soon. I get that. I remember when Winston and I closed on our first home. It was an amazing feeling to hold those keys and realize we had our own house!
This is a decision you can’t jump into quickly, though. So how do you know if you’re ready to buy a house? Here are three guidelines:
Before you take on a mortgage, you need to have all your debt out of the way first. I know it’s tempting to just add on more debt. But you’ll be much more equipped to manage that mortgage when you’re free from student loans, credit card debt and car payments. That’s the type of freedom that will allow you to buy your dream home without it eventually becoming a nightmare.
You have an emergency fund of 3–6 months of expenses.
Here’s the deal with owning a home: Stuff breaks. Your HVAC will decide to quit on you in the middle of the summer. A pipe you never knew existed will explode under the house in the dead of winter. I want you to plan for emergencies like that. So when something crazy happens, you can just dip into your emergency fund and not have to worry about using a credit card. The emergency fund is also your safety valve when you get a flat tire or when your son breaks his arm and you have to rush to the emergency room. Make sure you have one in place before you start looking for a home!
You’ve saved cash for a 20% down payment.
Why 20%? There’s this thing called Private Mortgage Insurance (PMI) that’s required when you buy a home. It’s designed to protect lenders in case you aren’t able to make payments. All it does for you, though, is add to your monthly payment. You can avoid PMI if you’re able to put down 20% when you buy. So that’s what I want you to do. If you’re in the market for a $150,000 house, then make sure you’ve got $30,000 to put down when you buy. You’ll make a huge dent in your monthly payment right away!
If you’re still in debt, trying to accomplish all these tasks might seem impossible. But, I promise, if you put some goals in place and get super intense about knocking them out, you can do this in a much shorter time than you realize.
Owning a home is a huge blessing that can turn into a huge curse if you don’t go about buying one the right way. Make sure you’re out of debt, have your emergency fund in place, and can put down 20%—then you’re ready to go.
You can do this!
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About Rachel Cruze
As a #1 New York Times best-selling author and seasoned communicator, Rachel Cruze helps people learn the proper ways to handle money and stay out of debt. She’s authored three best-selling books, including Love Your Life, Not Theirs and Smart Money Smart Kids, which she co-wrote with her father, Dave Ramsey. You can follow Cruze on Twitter and Instagram at @RachelCruze and online at rachelcruze.com, youtube.com/rachelcruze or facebook.com/rachelramseycruze.