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Dave Ramsey’s Best Home Buying Tips

Author of seven national best sellers, Dave Ramsey is a personal money-management expert that knows a thing or two about making smart decisions with your money, including when it comes to buying a home!

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Dave-Ramseyvia Dave Ramsey/Twitter

Make 10 Percent Your Down Payment Minimum

One of Dave Ramsey's top tips for buying a new home is to put down at least 10 percent on your new home. He says 20 percent is even better, as it will help you to avoid private mortgage insurance (PMI). "That's an extra cost added to your monthly mortgage payment, and it doesn't go toward paying off your mortgage balance."

Check out these 8 steps to successfully purchase your first home.

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Save 3 Percent of a Home's Purchase Price for Closing Costs and Prepaids

Another top tip from Dave Ramsey is to listen to Alex Clark's advice! A real estate Endorsed Local Provider whose team closes an average of 100 homes a year in Portland, Oregon, Clark recommends saving around 3 percent of a home's purchase price for closing costs and prepaids.

"But that percentage can vary depending on how expensive fees and taxes are in your area," notes Ramsey. "Closing costs are the fees charged by title companies and lenders involved in your real estate transaction. Prepaids cover any prorated property taxes and insurance items."

Here are 10 secrets first-time home buyers should know. .

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Get a 15-Year, Fixed-Rate Mortgage

Dave Ramsey advises getting a 15-year, fixed-rate mortgage to save you big money in interest down the road. He suggests steering clear of a 30-year or variable rate mortgage. "When you have a 15-year mortgage from the beginning, you won't be tempted to use that money for something else. You've got built-in accountability to get your house paid off fast!" Ramsey says.

Check out these 10 things you should know about down payments.

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A Monthly Mortgage Payment Should Be 25 Percent of Total Take-Home Pay

Ramsey urges the importance of knowing how much you can afford so you don't wind up in financial trouble. To figure this out, first add up any income you bring in each month. "Let's say you bring home $2,400 a month and your spouse makes $2,600 a month. Your total monthly take-home pay would be $5,000," he says.

Next, multiply your monthly take-home pay by 25 percent. This will give you your maximum mortgage payment.

"If you earn $5,000 a month, that means your monthly house payment should be no more than $1,250."

"You could afford these options on a 15-year fixed-rate mortgage:

  • $187,767 home with a 10% down payment ($18,777)
  • $211,238 home with a 20% down payment ($42,248)
  • $241,415 home with a 30% down payment ($72,424)
  • $281,650 home with a 40% down payment ($112,660)."

Here are 10 important things to consider when buying a house.

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Not All Real Estate Agents Are Created Equal

"You may know a lot of real estate agents in your area. But keep in mind that not all agents bring the same knowledge and experience to the table. Don't work with an amateur just because they know your cousin's sister-in-law's best friend from 10 years ago," advises Ramsey.

He suggests interviewing a real estate agent. Look for the following criteria:

  • Specific experience assisting home buyers like you
  • Full-time real estate experience for at least two years
  • Great communication skills
  • A super-serving attitude that makes you feel like you're their only client
  • An impressively long list of sold homes every year
  • Exceptional experience in your local market

Find out why hiring a home inspector is worth it.

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SaleDarren Baker/Shutterstock

Don't Compromise on Location or Layout

"These are two things you can't change about the home you buy," Ramsey says. "No amount of curb appeal can make up for a truly terrible floorplan. And buying a great house in a not-so-great neighborhood is a bad idea. If you don't love the location or layout, chances are potential buyers years from now won't either."

See how one family updated a classic 1950s ranch-style home to make the layout work for them.

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Look Past the Surface

Many people have a budget that restricts them fro looking at newly constructed homes. That means there might be avocado-colored walls throughout and funky-colored bathrooms. Dave Ramsey urges not to sweat the aesthetics! These are quick fixes that won't cost you big bucks. "Other buyers may not be able to look past those easy-to-fix details like décor and paint color, which could score you a deal," advises Ramsey. "That lime green bathroom may mean more green in your pocket!"

Here are 20 reasons why it might be the right time for you to move.

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Buy the Least Expensive Home in the Best Neighborhood

"That gives your home's value room to grow in the future. Keep in mind that future buyers who are shopping in a $200,000 neighborhood won't be looking for a $300,000 home," says Ramsey.

Check out these 10 important things to know abut property taxes.

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SellersSean Locke Photography/Shutterstock

Keep Your Cool in a Bidding War

Once you submit an offer, there may be some tense moments to come, like a bidding war with other buyers. Dave Ramsey suggests keeping your cool and focusing on what you have in your favor. If you're preapproved with your lender and have a flexible closing date, then you have a strong offer!

Find out what buying a house "as is" really means.

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Compromise on Little Details

If things do get intense, then it's time to entice the seller that you're the better buyer. "Sometimes it pays to compromise on little details if that will move the process forward. A good real estate agent can give you advice about when to give in and when to hold firm," says Ramsey.

Here are 13 things you can expect to pay for before buying a house.