Baby Step 3b is an optional step in the Ramsey Baby Steps plan, specifically for people who want to buy a home after completing their fully funded emergency fund (Baby Step 3).
Here’s what Baby Step 3b means:
- Save for a down payment on a house, ideally 10–20% down, at least 5–10% if you’re a first-time homebuyer.
- The goal is to pay cash for closing costs and put yourself in the best position to avoid Private Mortgage Insurance (PMI).
- You should do this after you’re debt-free (except for a mortgage) and have 3–6 months of expenses saved in your emergency fund.
Baby Step 3b is NOT for everyone. Only do this if you’re ready to buy a house, and don’t move on to investing for retirement (Baby Step 4) until you’ve bought your home or decided to wait.
Quick recap:
- Baby Step 3: Save 3–6 months of expenses for emergencies.
- Baby Step 3b: (Optional) Save for a house down payment.
- Baby Step 4: Invest 15% of your income for retirement.