Dave Ramsey warns homebuyers to avoid major money mistake | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

Purchasing a home is a major financial decision, often one of the most significant investments a person will make. While mortgage rates and housing prices play a crucial role in affordability, buyers must also consider upfront expenses.

The costs of homeownership add up quickly. Property taxes, home insurance, and maintenance repairs can be easily overlooked, but make a huge dent in savings.

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Not budgeting for additional housing costs outside of the mortgage payment could create financial strain for buyers. Building a sufficient savings nest egg before closing on a home can provide peace of mind for when additional costs inevitably arise.

Best-selling personal finance author Dave Ramsey outlines how homeownership costs can quickly snowball, and how buyers can protect themselves against unforeseen expenses.

Homeownership can be expensive, and buyers must factor in maintenance and insurance costs on top of mortgage payments. Dave Ramsey explains how homeowners cans prepare themselves for unforeseen costs.

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Dave Ramsey explains how homeownership costs add up quickly

The first year of homeownership can be expensive, with unforeseen costs catching some homeowners off guard. On average, homeowners should plan to spend an additional $2,044 per month on top of their mortgage.

Though property taxes, home insurance, and HOA fees vary based on the size and location of the home, homeowners should anticipate spending up to several thousand dollars per month amount in addition to mortgage payments.

The cost of homeownership has skyrocketed recently, jumping 26% between 2020 and 2024, partially due to inflationary costs. Still, housing experts estimate that annual maintenance and repairs cost about 2% of home’s value, and monthly home insurance premiums average $200.

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Ramsey outlines that new homeowners should anticipate their monthly maintenance and utility costs to be substantially more than when they were renting.

“Owning a home is expensive! After buying a house, you’ll have to pay certain bills as long as you live there — like property taxes and HOA fees,” he wrote. “Plus, your utility bill will likely go up if you’re upsizing from an apartment. That’s even more reason to get out of debt before you buy.”

Dave Ramsey highlights how homebuyers can financially prepare for unforeseen costs

Many financial experts advise that homeowners should factor in an emergency fund into their home nest egg, aiming to save between 2-3% of the home’s value to cover unforeseen costs.

Paying monthly HOA fees, home insurance premiums repairs, and furnishing a new home can add up quickly. nearly a quarter of homeowners reported having to pay between $10,000-$20,000 in unanticipated repair costs.

Ramsey reiterates the importance of having considerable savings before buying a home to avoid going into debt to cover repairs and maintenance.

“It’s only a matter of time before your home needs repairs. So don’t make the mistake of spending all your savings when you buy a home. You’ll need some money left to fix stuff when it breaks,” he continued.

“That’s why you should save up an emergency fund of 3–6 months of your typical expenses before buying a house in addition to your down payment and closing costs. That way, you’ll be able to cover emergencies without breaking a sweat (or using a credit card).”

Though buying a home is an expensive endeavor, having considerable savings can safeguard homebuyers from going into debt, or even making late mortgage payments.