Dave Ramsey's 7 Tips For First-Time Home Buyers

Summary

A 20-year-old seeks advice on purchasing a home, with 20% down payment ready. Key tips include keeping mortgage payments under 25% of take-home pay and opting for a 15-year fixed-rate loan. Important steps include getting title insurance, a home inspection, and a survey (if buying non-traditional lots). Buyers are advised to avoid homes that are unattractive from the street or have impractical layouts, as these issues are hard to fix and can impact resale value. Caution is recommended, especially with corner lots and overly ambitious renovation plans.

Takeaways

• 😀 Aim for a house payment that is no more than 25% of your take-home pay, including taxes and insurance.
• 🏠 Putting 20% down is great because it helps avoid private mortgage insurance (PMI), reducing extra costs.
• 🔒 Always get title insurance, especially when buying non-subdivision property, to protect against ownership disputes.
• 📏 Get a survey if buying non-traditional property, ensuring you're paying for the correct land size.
• 🔧 Always get a home inspection, even if you think you know a lot about homes, to avoid missing critical issues.
• 👁 Avoid buying a house that is ugly from the street, as it will likely be hard to resell at a good price.
• 🚪 Be cautious with awkward floor plans, such as bedrooms that require walking through another bedroom, as they can decrease property value.
• 🛠 Don't take on major rehab projects on your first home—go for something more manageable and less risky.
• 🌿 Look for a house that presents well and has a balanced, simple design; avoid overly complex properties that could become problematic.
• ⚠️ Corner lots can be a mixed blessing: they often look great from the street, but may lack backyard space, which can affect resale value.

Q & A

What percentage of your income should your home payment be according to the advice given?

Your home payment, including taxes and insurance, should not exceed 25% of your take-home pay.

Why is it beneficial to put 20% down on a house purchase?

Putting 20% down allows you to avoid paying Private Mortgage Insurance (PMI), which is an additional cost.

What type of mortgage term is recommended in the script?

A 15-year fixed-rate mortgage is recommended.

What are some essential steps to take when buying a house?

It’s important to get Title Insurance, a survey (if it's not a standard subdivision lot), and a home inspection.

Why should you avoid buying an 'ugly' house?

An 'ugly' house may be cheap to buy, but it will also be hard to sell for a good price since its unattractiveness remains a concern for future buyers.

What is the risk of buying a house with a poor floor plan, such as one where you must walk through one bedroom to access another?

A poor floor plan can make the house less desirable to live in and harder to sell in the future, as it suggests the house may have been added onto without a clear plan.

Why should you avoid buying a house that needs major structural changes or additions?

Making major changes to a house can be risky, expensive, and time-consuming. It's better to choose a house with minor cosmetic issues like outdated carpets, which are easier to fix.

What are some potential downsides of buying a house on a corner lot?

While corner lots may look nice from the street, they often have smaller, less functional backyards, which can be a concern for future buyers.

What should you do before buying non-standard subdivision lots?

You should always get a survey to ensure the property size is accurate, especially for larger or more irregularly shaped lots.

Why is it advised to get a home inspection even if you're experienced in real estate or construction?

Even if you have experience, a home inspection by a professional is worth the cost to ensure there are no hidden issues that could become costly later.