4 3 2 1 Rule: A Simple Cheat Sheet for Buying a Home

If you’re scrolling through endless real‑estate blogs, you’ve probably seen the phrase “4‑3‑2‑1 rule” pop up. It sounds like a math puzzle, but it’s actually a quick way to check if a house fits your budget without drowning in spreadsheets.

What is the 4‑3‑2‑1 Rule?

Think of it as four quick questions you ask yourself before you fall in love with a listing:

• 4% – Can you put down at least 4% of the purchase price?
• 3% – Will your monthly mortgage payment (including taxes and insurance) stay below 3% of the home’s price?
• 2% – Do you have an extra 2% saved for closing costs, moving, and a small emergency fund?
• 1% – Is the property’s price at least 1% less than comparable homes in the same area?

When you can answer “yes” to all four, the deal is usually safe enough to move forward. If any answer is “no,” you might need to rethink the numbers.

How to Use It When House Hunting

Start with the listing price. Say the house is £250,000. Multiply that by 0.04 – you need a £10,000 down payment at minimum. If you’ve saved £12,000, you’re good on that front.

Next, calculate 3% of the price: £250,000 × 0.03 = £7,500. That’s the rough ceiling for your monthly housing cost (mortgage, tax, insurance). Use an online calculator to see if a mortgage that size fits your income.

For the 2% rule, set aside another £5,000. This covers solicitor fees, stamp duty, and a tiny cushion for unexpected repairs.

Finally, compare the asking price to recent sales. If similar homes sold for £260,000, the £250,000 price meets the 1% rule – you’re getting a small discount.

Plug these numbers into a quick spreadsheet or even a scrap‑of‑paper note. If everything checks out, you’ve validated the house with a single glance.

The real power of the 4‑3‑2‑1 rule is that it forces you to look at three hidden costs – down payment, ongoing monthly expense, and closing fees – before you get swept up by the property’s looks.

Keep in mind that the percentages are guidelines, not hard laws. If you have a strong credit score, you might qualify for a lower down payment, or if you’re comfortable with a higher monthly outlay, you can stretch the 3% a bit. The rule is flexible enough to adapt, but strict enough to keep you from over‑reaching.

When you talk to an estate agent, drop the phrase “4‑3‑2‑1 rule” into the conversation. It shows you’ve done your homework and can help the agent filter listings that meet your criteria, saving both of you time.

In short, the 4‑3‑2‑1 rule is a fast‑track sanity check for any property you’re eyeing. Use it early, adjust the numbers to fit your situation, and you’ll avoid the common pitfall of falling for a house that looks great but breaks the bank.

Ready to test your next listing? Grab a calculator, run the four quick checks, and you’ll know right away if the house is a go or a no‑go. Happy house hunting!