Personal finance radio host Dave Ramsey talks frequently about approaching big investment decisions with a tested and well thought out plan.
Those who successfully follow his advice say he provides a framework and financial blueprint with which one can feel comfortable implementing.
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One big financial question many people are grappling with during the second half of 2023 is whether or not to buy a house.
High mortgage rates due to the Federal Reserve's efforts to combat inflation continue to be a concern.
The rapid increase of home values in 2021 has slowed a bit in 2023, but they are still at record high levels.
And the housing supply is expected to remain tight, which will cause competition for homebuyers to remain intense.
All this being said, Ramsey has some words of encouragement.
"If you can find a house, regardless of the interest rate, I want you to go ahead and buy now, if you're out of debt and you have your emergency fund in place," he has said.
"If later the interest rates come back down, you're not stuck," Ramsey continued. "Just refinance and dump the old mortgage that you had at 6% or 7% or wherever it lands right now."
And Ramsey's radio co-host Rachel Cruze seems to agree.
"Buying a home is a huge deal, you guys. And when you throw a crazy real estate market on top of it, shopping for a home can feel like buckling up for an emotional roller coaster," Cruze wrote on Ramsey Solutions Aug. 15. "But I’m here to share a step-by-step process for how to buy a house in 2023."
Being sure you are ready to buy
The first thing Ramsey Solutions advises is to be sure you are ready to take the big step.
"Before you jump into the home-buying process, I want you to be debt-free with 3-6 months of expenses saved up in an emergency fund," Cruze wrote. "Think of this money like an insurance policy against life — it's important to have this safety net when you get ready to make a big purchase like a house."
Cruze emphasizes the importance of having a substantial emergency fund saved up when buying a house.
"Picture this: When you buy a home, your landlord is you! That means paying for repairs is your responsibility," she wrote. "So, if the hot water heater springs a leak two weeks after moving in, it'll be no big deal because you have an emergency fund to cover the repairs."
"But when your budget is eaten up by debt payments and you don't have any savings to fall back on, you might be eating ramen for the rest of the month just to get that water heater fixed. That's not fun," she continued. "With a full emergency fund and no debt draining your monthly budget, an unexpected repair will just be an inconvenience — not the end of the world."
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Another important consideration when buying a home
One crucial situation to take a good look at when deciding to purchase a house is where you are in your life path.
"It doesn't make sense to buy a house if you plan to move sometime in the next year," Cruze wrote. "Buying and selling a house is an expensive process, so you'll want to live in that area for the next 5-7 years. (This is one of the reasons I recommend waiting at least a year after getting married before you buy a house.)"
If these considerations all seem to be pointing toward going ahead with buying a home, Ramsey Solutions suggests some further items to be sure you can check off your list before pulling the trigger.
You can afford monthly mortgage payments and home maintenance.
You have a good down payment.
You can pay your own closing costs.
You can cash flow moving expenses.
You plan on staying put for a while.
You have a real estate agent you trust.
If you can say yes to these items, Ramsey Solutions says you are ready to move on to the next checklist — and some of these items will already have been taken care of.
Make sure you're actually ready to buy.
Figure out how much house you can afford.
Save for a down payment.
Get preapproved for a mortgage.
Find the right real estate agent.
Go house hunting.
Make an offer on a house.
Get a home inspection and appraisal.
Be patient getting your mortgage finalized.
Close on your house.
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