Dave Ramsey says: Put all the pieces in place before buying a home

Dear Dave,

We’d like to own a home someday, but we know we’re not ready for that kind of financial commitment yet.

Where does buying a house fit in your Baby Steps plan?

—Heather

Dear Heather,

Buying a home when you’re broke is the easiest way I know to become a foreclosure statistic. I’m glad you two are being thoughtful and sensible about taking such a big step.

If you remember, in Baby Step 1 I advise people to save up a beginner emergency fund of $1,000. Baby Step 2 is paying off all consumer debt from smallest to largest using the debt snowball method. Then, Baby Step 3 is where you go back and grow your emergency fund to a full three to six months of living expenses.

With all this in mind, let’s call getting ready to buy a home Baby Step 3b.

Save up for a down payment of at least 20% to avoid private mortgage insurance. Also, make sure any mortgage loan is a 15-year, fixed rate loan, where the payments are no more than 25% of your monthly take-home pay.

Doing it this way may delay your dream of being a homeowner for a while, but it will help ensure your new home is a blessing and not a financial curse!

—Dave

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