Dave Ramsey Said You Absolutely Must Do This Before Buying a Home

Don't buy a house without checking out this advice from Ramsey first.

Buying a house is one of the biggest financial decisions you will make during your lifetime. You absolutely should not move forward with making this purchase before you take some crucial steps to ensure you are ready.

Finance expert Dave Ramsey has identified one of those steps that you need to take. Here's what it is, along with some advice on how to check it off your to-do list.

Don't buy a house without following this Ramsey advice

According to Ramsey, figuring out exactly how much house you can afford is a crucial step you need to take before moving forward with any home purchase.

"You absolutely have to know how much house you can really afford," Ramsey said. "Commit to staying within that budget no matter what—don't cave to the pressure to buy because you're tired of watching competitors pluck good homes off the market."

While Ramsey acknowledged that it can be frustrating to wait for a home that's actually within your budget, he said it's crucial to stick to your spending limits so "your home is a blessing instead of a big, honking headache of a mortgage payment you can't afford!"

How to follow Ramsey's advice

It may seem like the easiest way to follow Ramsey's suggestion is to go to a mortgage lender and let them tell you what amount you can borrow. You can provide your financial documents and get pre-approved for a loan up to a certain amount based on your income and the current level of debt you have.

You shouldn't do that, though. That's because the bank may be willing to lend you more than you really should spend, especially if you have good credit and not a lot of debt. Banks want to make the largest loan that they think you're likely to pay back, and they aren't necessarily concerned about whether your big loan will affect anything else you want to do with your money.

Make your housing payment work within your budget

You should do your own calculations for how large of a mortgage payment you can comfortably fit into your budget. And don't assume your mortgage payment can be the same size as your rent check and that you'll have plenty of money left over since there are additional costs you'll owe as a homeowner that you didn't face as a renter (such as home maintenance costs).

Ramsey recommends aiming to keep your housing payment below 25% of your take-home pay, and that's a good guideline to start with when trying to figure out how much house is within your budget. But even this approach may not work for you if you have lots of other goals to achieve, such as retiring early.

Ultimately, you should consider the big picture of your situation and the amount you're willing to devote each month to housing while still doing the other things you want. Then, work backward from there and decide how big of a house you can buy that will give you the desired mortgage payment -- or an even smaller one.