How many of them have you checked off your to-do list?
- Buying a home is a huge financial decision, and you need to be prepared for the long-term implications.
- Dave Ramsey believes there are certain tasks, like paying off debt and saving up for a down payment and closing costs, that you should complete first.
If you’re thinking of buying a home, you need to make sure you’re financially ready to make such a large commitment. The purchase of a home means that you’ll be promising to pay a lender for decades to come. You’ll also be committing to other ongoing expenses, including property taxes, maintenance, and insurance costs.
Before you take this huge leap and change your financial life forever, personal finance expert Dave Ramsey believes there are seven key steps you need to complete first. Here’s what they are.
1. Pay off your debt and build up a healthy emergency fund
Ramsey urges would-be home buyers to focus on knocking out your debt “as fast as possible” before you commit to buying a property.
By getting rid of other debt payments prior to becoming a homeowner, you’ll be better able to save for a down payment and will have more flexibility in your budget.
While this advice is solid, it’s important to consider the type of debt you have. If you have low interest loans with a long payoff time, it may not make sense to pay those off and postpone homeownership in the meantime. This could mean you miss out on the chance to get on the property ladder before prices rise.
An emergency fund, however, is always important even, if saving one means putting off homeownership. You don’t want to jeopardize your ability to pay for or maintain your home after purchasing it.
2. Make sure you can afford your monthly mortgage costs and maintenance expenses
Ramsey warns that your mortgage payment isn’t the only expense you’ll need to cover when you become a homeowner. You’ll also need to pay for home insurance, private mortgage insurance if you didn’t make a 20% down payment, HOA fees (potentially), and ongoing maintenance for the home.
Having an emergency fund can help you cover some of these maintenance costs if things break. But you don’t want to constantly raid your emergency fund every time there’s an appliance issue.</…….