Here on this blog I want to document our home-buying process for those of you out there trying to buy a home the “Dave Ramsey” way. By no means are we experts…just trying to do our best to follow Dave’s guidelines. If you are not familiar with his home buying guidelines, check them out here. There is always time to change your housing strategy if you desire!
This post would be loooong if I didn’t break it up, so for your sanity it’s being divided into three parts:
Part One: Prepare
As a foundation and starting point, here is a review of what Dave Ramsey recommends to anyone buying a home:
- Be 100% debt free
- Have 3-6 months of expenses saved in a Fully Funded Emergency Fund
- 10% down payment minimum
- 15-year fixed-rate mortgage (or less)
- Payment (including taxes, insurance, and any PMI) should be less than 25% of your take home pay
With that said, let’s dive into part one – the preparation aka getting the ducks in a row.
Our home buying process began this past August. Yup. Nine months before we were ready to pull the trigger. We wanted ample time to save funds and interview realtors. No way were we going to purchase our largest asset with just anybody steering the ship. We hopped onto the Dave Ramsey Endorsed Local Provider website and requested to be contacted by a few Dave recommended ELP’s in the local area.
Within a day or so we had a few ELP’s reach out to us. We set up interviews with each of them but something stood out with one in particular. It was obvious she was experienced, enthusiastic, driven, and hardworking. She didn’t ask us anything about the actual home buying straight away. She took us out for coffee and asked us about who we are, what we value, our Dave Ramsey story…she took interest in our lives. At the end of that initial meeting, she asked very basic things about the home buying process. We told her out timeline of starting to look in May and she gave us the advice to hold firm to that and to not go out looking beforehand. I knew we would be in good hands with her.
The other ELP’s? They were nice but within ONE MINUTE of being on the phone, let alone a face to face interview, they were trying to set up an auto-MLS service so we could get emails about houses in our price range and desired specs. They didn’t ask about our timeline. They didn’t ask about who we are. They didn’t ask about our Dave Ramsey story. We ended up cancelling both those other meetings because we were so unimpressed on the phone, we could only imagine the in person interaction. One even talked about getting in the car and checking properties that very week….
We called a few other Dave Ramsey like-minded couples in the area whom the agent we liked had previously helped buy homes. We wanted to choose her but needed to make sure we did due diligence to check references for the good, bad, and ugly. She was happy to provide us with references and they all checked out. There were only good things to say. They were definitely raving fans of her and the team’s service. This gave us tremendous confidence in moving forward with her.
We chose to work with her in January but remember….our timeline wasn’t until May. So what happened in the meantime? Education!!! Dave Ramsey always says the best ELP’s are those with the heart of a teacher and boy, did we strike gold. Our agent invited us to her office on evening for a 3-hour personalized class on the entire home buying process.
She truly educated us on the ins and outs of every step in the journey ahead. We were able to ask questions and she and her team were super patient and wouldn’t move on until we completely understood their answers. She wanted to educate us, not speed us into a house so she could have a payday. It was obvious by her actions, patience, and desire to help us understand home buying that she had our best interest in mind.
The next preparatory step was the mortgage pre-qualifictaion…and we ran into a hiccup.
Long story short – Jonathan got a speeding ticket 3.5 years ago driving through Indiana. He paid it but then threw out the receipt, whoops. A year later a collections letter showed up in the mail, stating he never paid the ticket (which he did and even had a bank statement proving it). They wouldn’t accept the bank statement as a receipt, so he paid the ticket, AGAIN! He paid it right away, so the collector should not have reported it to the credit bureau but….
Of course, they did. Fast-forward to the mortgage pre-qualification and to our surprise a big BLACK mark is found from this collections company. This would mean the mortgage interest rate we would qualify for would be much HIGHER. There was no way we were going to pay upwards of $75/month for 15 years in interest because some dumb $100 speeding ticket was sent to collections many moons ago (even though it got paid twice!!!) Grrr!
Just a note here that the Almighty FICO credit score isn’t a big deal in the Dave Ramsey world. However, in home buying, you either want to have NO credit score (because you’re doing the DR plan and have no debt) or a GREAT credit score (which you can still obtain perhaps if you have a credit card open that you always pay the balance off). In between is where you get into trouble. This collections account was throwing us into the middle, so I had to proactively fix it or be willing to pay up.
I dove in and made phone calls, faxed letters, begged, emailed, etc. It took two and a half months to finally clear – JUST IN TIME for our May buying timeline.
I want to end each post with a brief summary of bullet points, for those who would rather get the drive-by version rather than the whole story! In closing, while you prepare for home buying, make sure to do the following:
- Be debt-free and have your 3-6 month Fully Funded Emergency Fund set aside (this is NOT down payment funds)
- Save at least a 10%-20% down payment plus cash for closing costs
- Find a Real Estate Endorsed Local Provider (ELP) in your area and interview them and check references!
- Stay off websites like Trulia, Zillow, or Redfin on a regular basis until you are ready to buy. Don’t tempt yourself prematurely.
- Don’t go looking at houses in person until you are ready to buy. Again, why tempt yourself?
- Obtain a current copy of your credit report and make sure it’s accurate.
- Clean up any errors from the credit report – this will take a while so be insistent but patient.
- Pre-qualify for a 15-year fixed rate mortgage.
Stay tuned for part two…