Watch Video: Buy A Home The Dave Ramsey Way
My Dave Ramsey Story
Back in 2006, ‘7, and ‘8 during the last real estate bubble that we had, we got caught in the middle of it. We were over-leveraged. It created a ton of stress. We ended up having to sell our home and start from ground zero.
As a result, we stumbled upon Dave. I started listening to his podcasts. I ended up reading his book, Total Money Makeover, which I would highly encourage you to do.
We started in on Dave’s plan. We went through Financial Peace University, and it took us 10 years to go from baby step 1 to baby step 7.
Dave Ramsey Baby Steps 1 through 3 When Buying A Home
Below are Dave Ramsey’s 7 Baby Steps. Step 3B is saving up 20% for a downpayment on a home.
Baby Step number one is an emergency fund for $1,000. Step two is his debt snowball. That’s paying off all consumer debt: cars, credit cards, student loans. He teaches you how to do that. Then baby step three is, if you haven’t already bought a home, it’s buying a home the right way. That’s saving at least 20% down for a home. The reason 20% down is a big number is because you avoid mortgage insurance, which goes to nothing. It’s a total waste of money, and it increases your payment. So saving up enough money, do it the right way, 20% down.
Then the other thing he teaches, and this was huge for us, that is buying a home within your budget, that you can afford buying a home with the down payment that you have to do it on a 15-year fixed mortgage. The beauty behind a 15-year fixed is number one, you’re going to get a slightly lower interest rate. But every month when you make your mortgage payment, the principal portion is a little bit more than a 30 year, and you can have your mortgage paid off in 15 years, which is huge in the amount of interest that you save from a 30 to a 15 year. It’s mind boggling. Just go to Google, look at an amortization schedule, and put in a 30 year versus a 15 year, and you’re going to end up saving a substantial amount of money. You’re going to have your mortgage paid off, which is baby step six.
Baby step seven then is just living like no one else because you’ve done the hard work to be able to have no debt and now be able to invest and really set yourself up for financial success.
First Time Home Buyers Avoid This
One thing I’d like to talk about is, first time home buyers or people that are buying that don’t have that 20% down. In 2006, ‘7, and ‘8, I’ve been in this business for 30 years, and a ton of people got hurt because they were over leveraged. Just my opinion, I think at some point, this market will cool off. Whether it pulls back or not, I don’t have a crystal ball. But if it does and you can’t weather the storm, you’re going to be in a tough spot.
I would encourage people if they’re looking to buy with less than 20% down, specifically an FHA or a VA loan, I would encourage you to sit on the sidelines and save more money because a lot of people that did do that in the last meltdown ended up being a statistic because they couldn’t afford the payment and they were upside down. They either were foreclosed on or they had to do a short sale when they needed to go sell their house.
A short sale basically is, if you owe more than your home’s worth, the bank has to agree to allow you to sell the home for less than you owe the bank. Then you work it out with the bank in terms of that difference.
So again, if you’re looking to buy and you don’t have that 20% down, I would encourage you to sit on the sidelines and save up at least 20%. Again, doing that for us, it’s made a huge impact on our lives, and I would encourage you.
Again, go get his book and go through the baby steps one through seven and put yourself in a position for success. Because at the end of the day, a house is a liability unless it’s paid off. On a balance sheet, a lot of people think a home’s an asset. If it’s going up in value, yeah, you’re building equity; but it’s still a liability on a balance sheet until it’s paid off. Home ownership done the wrong way can be a burden and create a huge financial stress within a household, which creates more problems than it’s worth and tons of restless, sleepless nights. Again, I would encourage you to do it the Dave Ramsey way and set yourself up for success.
FREE MOVING TRUCK
In order to give back and help and save money, we have a FREE moving truck. It’s a 16-foot box moving truck. If you use us to buy or sell a home, you can use our truck for free. We’ve only got one, so it’s based on a first-come, first-serve basis.
Then the other cool thing is if you use us to buy or sell a home, and after the fact if you ever need to move furniture, pick up appliances, doing a remodel, and you need to move some bigger stuff, you’re more than welcome to use our free moving truck. Just reach out to us, and we can set you up with our truck if you use us to buy or sell a home.
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