4‑3‑2‑1 Rule: A Simple Checklist for Buying a Home

If you’ve ever felt overwhelmed by mortgage numbers, the 4‑3‑2‑1 rule can cut the noise. It breaks home buying into four easy checkpoints you can run on a single sheet of paper. No jargon, just clear cuts that tell you whether you’re ready to look at listings or need to pause and save.

How the 4‑3‑2‑1 Rule Works

4% – Down‑payment ratio. Aim to have at least four percent of the purchase price saved. For a £250,000 home that’s £10,000. If you can’t hit this, look at lower‑price properties or government schemes that boost your deposit.

3% – Income allocated to housing. Your total monthly housing cost (mortgage, taxes, insurance) should stay under three percent of your gross monthly income. Earn £3,000 a month? Keep the house cost below £90. This keeps your budget realistic and leaves room for other bills.

2% – Emergency fund. Keep cash equal to two percent of the home price in an easy‑access account. That money covers unexpected repairs, a job gap, or a rate rise. For the same £250,000 house, set aside £5,000.

1% – Ongoing investment. Reserve about one percent of the home’s value each year for upgrades, landscaping, or energy‑saving improvements. It’s a small habit that prevents big, expensive fixes later.

Applying the Rule to Your Situation

Start by writing the price of the house you’re eyeing. Multiply it by .04, .02 and .01 to get your deposit, emergency fund, and upgrade budget. Then check your pay slip – three percent of your monthly earnings is the maximum you should be paying for the mortgage and related costs.If any of the numbers don’t line up, you have three options: shrink the price range, boost your savings, or improve your income. Many first‑time buyers find a government‑backed scheme that lets them put down a smaller deposit, but the rule still applies to the emergency fund and upgrade budget.

One quick test: plug the numbers into a spreadsheet and see the gap. If the gap is small, you’re probably ready to start house hunting. If it’s big, focus on the biggest gap first – usually the deposit – and revisit the rule in a few months.

Remember, the rule isn’t a law, it’s a safety net. It helps you avoid the pitfall of over‑stretching and keeps you in control when the market shifts. Use it each time you think about a new property, and you’ll stay ahead of surprise costs.

Bottom line: keep the four checkpoints front‑and‑center, revisit them whenever your income or savings change, and you’ll move forward with confidence instead of doubt.