Dave Ramsey’s philosophy on homeownership emphasizes avoiding debt and building long-term wealth. Here are his key points to consider affording a house:
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Be Debt-Free (Except the Mortgage): Ramsey recommends paying off all debts before buying a house. This frees up income for a larger down payment and reduces your overall financial burden.
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Emergency Fund: Have a fully-funded emergency fund with 3-6 months of living expenses saved up. This acts as a safety net for unexpected costs.
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25% Rule: The core principle. Your total housing payment, including principal, interest, property taxes, homeowners insurance, and HOA fees, shouldn’t exceed 25% of your take-home pay.
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15-Year Fixed-Rate Mortgage: Ramsey favors 15-year fixed-rate mortgages. They have higher monthly payments but you’ll pay off the house much faster and save on interest.
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20% Down Payment: Ideally, you should have a 20% down payment to avoid private mortgage insurance (PMI). This reduces your monthly payment and saves money in the long run.
These are some of Dave Ramsey’s core tenets for affordable homeownership. Keep in mind that there may be situations where some adjustments might be considered depending on your specific circumstances.
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