Dave Ramsey Says You Shouldn't Buy a Home Until You're Sure of Where You Want to Live. Here's Why

It's important to be confident in where you want to settle down.

There are certain drawbacks you might encounter when you rent a home rather than own one. For one thing, you'll be the mercy of your landlord when things break and you need them fixed. And also, you never know when your landlord might decide to sell the home you live in, thereby forcing you to move.

Plus, when you rent, you're not paying your own mortgage -- you're paying your landlord's. And while you get the benefit of a roof over your head, you don't get the benefit of building equity in a place of your own.

But while you may be eager to buy a home, you should really only do so if you're ready to stay put in the same place for a while, says Dave Ramsey. Otherwise, you might end up losing out financially.

You need to make that commitment

If you're ready to settle down and plant roots in a specific neighborhood, then it pays to buy a home there if you can manage the costs involved. But if your plans are in flux, then Ramsey says it's a better idea to continue renting.

Buying a home means making a huge financial commitment. It also means sinking money into closing costs on a mortgage (assuming you're financing a home purchase, which most buyers do).

Closing costs on a mortgage can easily amount to 2% to 5% of your loan amount. So for a $400,000 mortgage, you could be looking at $8,000 or more in closing costs.

Meanwhile, it generally takes a few years for homes to appreciate in value. So you'll want to make sure you intend to stay in your home long enough to be able to recoup your closing costs and at least break even, if not come out ahead.

Let's imagine you purchase a $400,000 home and spend $15,000 on closing costs. If you then decide to move and sell your home in a year, you might only get that same $400,000 for it. If you wait a few years, it might be worth $430,000, at which point you'd get the opportunity to recoup your closing costs.

Keep in mind, too, that home values could also decline periodically. If a recession hits a year after you purchase your home, you may find that it's worth less than what you paid for it. But if you have longer-term plans to stay, you can ride out a recession.

That's why you should generally plan on being in a home for a number of years before buying it, per Ramsey. If your plans aren't certain, it's not worth spending the money on a home purchase, especially if you can find an affordable rental instead.

Get your timing right

Maybe you're not sure where you want to settle down because you just started a new relationship and want to see where it goes. Or maybe you recently finished up grad school and think you've found a great career path, but haven't yet put in much time in the workforce.

Both of these, among others, are good reasons to continue to rent. But most importantly, keep renting if the area you live in now is an area you could see yourself leaving within a few years. It's a great idea to buy a home once you're set on a specific area, but until you reach that point, renting could really pay off financially.