Dave Ramsey Explains Why Now Is a Great Time To Buy a House

Radio host and author Dave Ramsey believes buying a house now is a great idea.

He recently spoke on the topic, in an exclusive interview, with TheStreet's Editor-in-Chief Sara Silverstein (video above).

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Silverstein asked Ramsey what advice he would give to new homeowners.

"Well, buying a new home right now -- this is a great time to buy," Ramsey said. "Interest rates are up and the real estate market has slowed down. It's still increasing. There's still a shortage of housing. And so it's tough to find a really good house and a really good deal."

"But if you can find one, 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 continued.

Ramsey explained why he doesn't believe high interest rates should stop potential new homeowners from buying.

"If later the interest rates come back down, you're not stuck," he said. "Just refinance and dump the old mortgage that you had at 6% or 7% or wherever it lands right now."

The personal finance personality also had a warning about selecting a house to purchase.

"The second thing is, don't buy too much house," Ramsey said. "Don't get so excited and go buy something you can't afford and become house poor, using up all your disposable income with your house payment."

Specifically, Ramsey clarified how much a homebuyer should budget for when making a decision.

"You don't want your payment to be more than a fourth of your take home pay on a 15-year mortgage," he said.

Ramsey then discussed an aspirational component of why buying a house can be a big step toward long-term wealth.

"If you're a new home buyer, listen to me carefully," he urged. "We've studied millionaires for decades. The typical millionaire, the first $1 million to $5 million of net worth they get, is their paid-off home. And you've got the opportunity to set yourself up to do that fairly quickly."

A Warning About Down Payment Assistance Loans

Ramsey recently published an article detailing some options for first-time homebuyers who need some help making a down payment.

His website, Ramsey Solutions, has the following to say about down payment assistance loans (DPAs):

As you get more serious about buying a home, you might hear about down payment assistance (DPA) programs offered by some cities and states. These programs offer low- or no-interest loans to help people with lower incomes afford a down payment.

A few larger cities across the country offer grant money as part of a no down payment program for first-time home buyers with low incomes in minority neighborhoods. A first-time home-buyer grant does not have to be repaid.

Be careful though: These types of DPA loans and grants could get you stuck living in a home you can’t afford with little or no equity -- which could be a big problem when you go to sell your house.

Since all of these first-time home-buyer programs have additional costs that don’t help you pay off your home, we recommend avoiding these types of programs and choosing a 15-year fixed-rate conventional loan. This will get you a better interest rate, allow you to build equity, and get your home paid off faster.

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