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Ramsey’s advice can help you decide whether to buy or rent.

Key points

  • When it comes to housing, you need to decide whether to rent it or buy it.
  • Both options have their pros and cons, and this is an important decision.
  • Finance expert Dave Ramsey gave some advice on how to make a decision.

The decision to rent or buy a home is one of the most important financial decisions you will ever make. If you choose to buy, you are committing to decades of mortgage payments and will most likely end up with your home as your biggest asset. You also agree to pay for decades of home maintenance and repairs that the homeowner would otherwise pay for. But you will build capital with every payment.

The choice between renting or buying is a personal matter that you must make with all the pros and cons of each option. To help you make that decision, here are some expert tips from financial guru Dave Ramsey.

Here’s what Dave Ramsey says about renting and buying a house

According to him Ramsey Solution blog, Ramsey believes that you should buy a house if and only if you are financially ready to do so. And in order to be financially ready, you should:

  • Do not have any other consumer debt such as credit cards or personal loans. Ramsey believes that being out of debt is more important than buying a home because “homes are expensive and come with a lot of unexpected expenses.” Having other debts means that you will have less free money to cover these expenses.
  • HOURavenue emergency fund with the accumulation of living expenses from three to six months. This will allow you to make monthly payments even if something happens to your income.
  • Have money for a down payment. Ramsey advises making an absolute minimum down payment of 10%, but ideally putting down 20% so you don’t get stuck with private mortgage insurance.
  • Make sure your housing costs don’t exceed 25% of your salary: This includes all expenses for your home, including HOA fees, if any, as well as property and insurance taxes. As Ramsey explains, making sure you don’t tie more than a quarter of your income into your home “leaves enough room in your budget for other things.”
  • There are no plans to move within the next three years. Ramsey believes that you need to plan on staying in your home for several years before incurring the cost of owning a home and making a commitment to buy.

If you don’t meet these criteria, he suggests putting off your dreams of homeownership and renting a house until you improve your financial situation.

Should I listen to Ramsey about home ownership?

Ramsey is accurate in most of his advice. You need to be sure that you can pay off your mortgage and pay for unexpected expenses at home, even if something goes wrong with your job or if you get sick. Otherwise, you may face foreclosure. You also don’t want to spend too much on your home and become poor or buy with plans to move soon as you probably won’t make enough from the sale to cover closing costs.

However, it does not always make sense to put off buying a house until all other debt paid off. Sure, you probably shouldn’t buy a house with a ton of credit card debt, but if you have low-interest loans available that take up a reasonable percentage of your budget, there’s no reason to put off buying a house – perhaps for years – – at the time. how do you pay those down.

Ultimately, you should look at your overall financial situation and make sure housing costs are readily available before you start buying your own home.

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