Dave Ramsey is financial guru whose advice has saved millions of people vast amounts of money. For a first time home buyer the house hunting process is often romanticized. It is a rite of passage of sorts. It is important though to think of a few key things before starting the process of buying a home. Fortunately Dave Ramsey has some first time home buyer tips to ensure that mistakes that could be costly are avoided.
It is important to make sure that you are thinking about home ownership realistically. When thinking about owning a home and especially a first home it’s important to ask these questions:
- Who will handle repairs when they are needed?
- Who will be responsible for the maintenance of the yard and the pool?
- How will we pay to replace the boiler when it breaks?
- Which school district should we live in?
These are important questions that as a first time home buyer you should consider.
Dave Ramsey’s first time home buyer tips are organized into the steps below and they are a great starting point for any first time home buyer.
Table of Contents
Save for a down payment
Save for a down payment. This should be between 10% – 20% of the value of the house that you want to purchase. This means that if a home is $300,000 the downpayment should be $30,000 – $60,000. This is a lot of money but the more money is put down the better the terms. This is a financial goal for most couples and if the money isn’t there perhaps a good idea would be to skip the wedding and elope to save money for a home.
To track how much you have been saving I recommend using a spreadsheet, setting a separate bank account or using a bullet journal to track your savings.
Save for closing costs
The next issue to tackle is whether there are savings for closing costs. I didn’t know about closing costs until I really started looking into buying a home and as a first time buyer the amount can be huge in comparison to the expectation. Having saved for the down payment is there enough left over for closing costs and moving expenses. First time home buyers think they are over the huddle after saving for the down payment but then the issue of paying closing costs. Have you saved for this?
Get pre-approved for a loan
The next step is to talk to a mortgage loan officer. Find someone who has a great reputation. Also I have found that working with smaller banks is always in your advantage. Small banks will listen more. This is also the part is where your credit score, income, interest rates factor in. Have pay stubs and your credit history ready. It’s important to ensure that you get the right mortgage for your needs and Dave recommends a fixed-rate conventional loan.
Keep your budget in mind and avoid being house poor. The recommendation is that your mortgage should be 25% of your net pay.
Find a real estate agent
Finding a real estate agent to work with may take a few tries. A real estate agent may make or break the house hunting journey. I would suggest using someone your friends or relatives have used. They are your best references. Ensure that you check their professional reputations, experience and background
Narrow Down Where to live
Narrow down on what you want and where you’d like to live. This will help in determining what type of house you want, check the comps in the area and whether it’s an area that young families would live in. Are there parks, restaurants, good schools, commute distance are questions you should ask.
A rule of thumb is not to buy the most expensive house on the block because opportunity to gain value decreases. Check out this video by an experienced realtor.
Submit an offer
Once the home checks off most of the boxes it is time to prepare and submit an offer. A first home may need some cosmetic work but for the most part it should be good as is. First time home buyer makes the mistake of buying a fixer upper when they aren’t ready to live in a home that is being renovated and the house becomes an expensive project.
The first or second offer may not be accepted so we should always be prepared to negotiate. A good realtor will help with this.
Home inspection and appraisal
We are now nearing the end. I’m glad you’ve stuck with me. Now it’s time to get the home inspected and appraised. This is critical and should be a condition to the purchase. Should the house fail the inspection you should be able to get back your deposit without problems.
Close
Close on the house as this means that the mortgage was approved and you can finally sign the dotted line. Congratulations you are now a home owner. You will need to pay closing costs, taxes and homeowners insurance.
Enjoy your new home.
