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'You don't get a pass on math': Homebuyers call out Dave Ramsey's 'unrealistic' mortgage advice. Are they right?
moneywise ^ | Bethan Moorcraft

Posted on 03/07/2024 9:26:22 AM PST by where's_the_Outrage?

Radio personality Dave Ramsey has been called out online for delivering out-of-touch real estate advice to homebuyers.

“Is it even possible to follow Dave Ramsey’s advice on a mortgage?” one person asked on Reddit — and their skepticism makes sense when you do the math.

The ideal way to buy a home, according to Ramsey Solutions, the finance guru’s website, is to buy it outright in cash.

But if you’re not sitting on a mountain of money, Ramsey Solutions says the only home loan you should consider is a conventional, fixed-rate mortgage with a 15-year (or less) term. Your monthly mortgage payment also shouldn’t exceed 25% of your take home pay.

“I just don't see that happening,” the Redditor wrote, “unless your take home [pay] is more than 20% of the home's value, or maybe if you buy a one-bedroom in the bad parts of the country.”

Are they right that Ramsey’s mortgage advice is unrealistic for most Americans — or are these risk-averse recommendations reasonable? Here’s the math.

U.S. homes sold in Dec. 2023 went for a median price of $402,045, according to Redfin. For simplicity’s sake, let’s say you buy a $400,000 home with a 20% down payment of $80,000, leaving you with a mortgage principal amount of $320,000.

With a 15-year fixed rate mortgage at 6.66% — the rate as of Feb. 14 — you would have to make a monthly mortgage payment of around $2,815.

For those payments to be no more than 25% of your monthly take home pay, you’d need to earn at least $11,260 per month before taxes — and that doesn’t factor in additional housing costs such as property tax, home insurance and utilities.

(Excerpt) Read more at moneywise.com ...


TOPICS: Business/Economy; Culture/Society; Front Page News
KEYWORDS: chat; daveramsey; economy; homebuying; housing; mortgage; mortgagepayments; notnews; ramsey; realty
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To: woodbutcher1963

“AUTOMOBILES”

Yes, I for got that.


41 posted on 03/07/2024 9:53:29 AM PST by caver ( )
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To: caver

Jinx

You must have been typing the same thought at the same exact time a me.

waist s/b waste


42 posted on 03/07/2024 9:53:32 AM PST by woodbutcher1963
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To: where's_the_Outrage?

Ramsey's advice is over the target. The most likely reason a person can't follow that advice is ... having made poor decisions that resulted in home ownership being out of reach. The complainers should fix their positions and then buy the home instead of pretending they made right decisions and that Dave's advice is where things are wrong.


43 posted on 03/07/2024 9:54:18 AM PST by so_real ( "The Congress of the United States recommends and approves the Holy Bible for use in all schools.")
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To: PeterPrinciple

This equates to an hourly pay of almost $65.
So let’s hear it “Fight for $65”
Fast food cooks will start out at min waste of almost $70 an hour.


44 posted on 03/07/2024 9:54:27 AM PST by midwest_hiker
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To: where's_the_Outrage?

Dave is right. If the math doesn’t work our for you, look for a smaller/cheaper house.


45 posted on 03/07/2024 9:55:52 AM PST by Psalm 73 ("You'll never hear surf music again" - J. Hendrix)
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To: Yo-Yo
Saving 30% down on a $400,000 home ($120,000) is not realistic for an under 30 couple...

I didn't in anyway mean for a starter home to be one of the $400K ones. I took from this line in the article:

median price of $402,045

These 2 things: Median is not average. It's middle in the list as far as # of house listed in order by price. And that it's for all homes, not just homes bought by young couples as a started home. The starter homes need to be much cheaper than $400K.

I just did a zillow search in my area and see many small old homes on small lots from 100K to 150K. Saving up 30% for one of those seems quite do-able.

46 posted on 03/07/2024 9:56:22 AM PST by Tell It Right (1st Thessalonians 5:21 -- Put everything to the test, hold fast to that which is true.)
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To: PeterPrinciple

The assumption that there is one right way to buy a house is the problem. What he proposes may work well for people with minimal savings and minimal self-control when it comes to spending but it’s not for everybody.

Some of us have been savers and investors. Paying off a mortgage in 15 years doesn’t work for us. Sometimes paying in cash really works, especially between December and February, and sometimes taking a no-interest loan can work work. Paying back a 30 year loan with inflation-damaged dollars can work well for a lot of people.


47 posted on 03/07/2024 9:56:37 AM PST by ladyjane
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To: where's_the_Outrage?

The problem is that while you’re being frugal and saving, the house price keeps going up. The longer you save the more you have to save and the less affordable it becomes. If you buy sooner you get that appreciation.


48 posted on 03/07/2024 9:56:47 AM PST by CraigEsq (,)
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To: faucetman
Dave Ramsey is a fraud. Who would listen to this guy? He just has simpleton ideas about money.

He is like the doctor who tells you to exercise, eat your vegetables, take two aspirin, and call me in the morning.

WOW! I didn’t know that!!!!! /S

Oh yeah, diversify your portfolio. BRILLIANT! Dave.

I think you misunderstand what the problem is and what Ramsey is trying to accomplish. The doctor's advice, like Ramsey's is sound. The problem is that millions fail with the discipline necessary to follow the advice. One need only go to a Walmart to see the the doctors are being ignored.

In your world alcoholism, the fentanyl crises, drug abuse are easy to solve . . . just stop drinking or doing drugs - end of crisis.

Like AA, Ramesy gives concrete steps that can be accomplished an followed easily enough my most people with a little bit of effort. He's not trying to turn everyone into the next Warren Buffet, he's trying to help the undisciplined who failed high school algebra.

49 posted on 03/07/2024 9:56:57 AM PST by ALPAPilot
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To: dfwgator

Yes. It’s a big burden. This year mine went up $85 a month.


50 posted on 03/07/2024 9:56:57 AM PST by Alas Babylon! (Repeal the Patriot Act; Abolish the DHS; reform FBI top to bottom!)
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To: where's_the_Outrage?; Red Badger; SunkenCiv

But where is that “average (NEW) house” price of 400,000.00 coming from?

The “math” looks very different when you use a 150,000.00 or 100,000.00 starter used house rather than of the average price of over-hyped new suburbs offering over-sized and over-built McMansions.

20 year mortgage. Condos or mixed-plan apartment style places that you purchase.


51 posted on 03/07/2024 9:57:01 AM PST by Robert A Cook PE (Method, motive, and opportunity: No morals, shear madness and hatred by those who cheat.)
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To: Tell It Right

I financed at about 5.5% 30y fixed letting the financed part stay in stocks. I refinanced at about 3%.

Leverage your money. Homes appreciate. Stocks appreciate.


52 posted on 03/07/2024 9:57:26 AM PST by TexasGator
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To: where's_the_Outrage?

I know ALMOST NO ONE who could do a $2800/month mortgage payment.
I guess find a a small box???


53 posted on 03/07/2024 9:58:51 AM PST by bantam
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To: where's_the_Outrage?

Great advice, but as usual people only want to hear what makes them feel good.

Those who have a problem with what Ramsey had to say, and instead refuse to listen to his sound financial advice, will one day find themselves in the poor house wondering what happened.

Yet, in the end times people will hire teachers who will scratch their itchy ears. This is a reference to the endgames in the Scriptures, but it is good advice in all matters relating to one’s life.

Do not listen to anyone who refuses to tell you the truth. Fact is, the truth may not be what you want to hear, but in time it will make you satisfied if you head the advice.


54 posted on 03/07/2024 9:59:49 AM PST by OneVike ( Just another Christian waiting to go home)
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To: where's_the_Outrage?

You don’t get a $400,000 house as a starter. You live a little farther from the city and get the $200k house or a mobile. Dave’s advice is excellent and will work for most reasonably employed people. The author of this article is a dope.


55 posted on 03/07/2024 10:00:09 AM PST by Poser (Cogito ergo Spam - I think, therefore I ham)
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To: ClearCase_guy; caver
Caver said it best above when he said "First time buyers shouldn’t be buying a house for $402,000."

My wife and I bought a 30 year old Cape Cod as our first home, did a bit of sweat equity to increase its value, then sold it and used that as a down payment on a larger new construction home 6 years later to raise our two boys.

Maybe people these days expect to have what their parents had while they were growing up, but didn't realize what their parents had before they were born or were toddlers.

Oh, and the interest rate on that first Cape Cod was north of 12%.

56 posted on 03/07/2024 10:01:04 AM PST by Yo-Yo (Is the /Sarc tag really necessary? Pray for President Biden: Psalm 109:8)
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To: where's_the_Outrage?

Ramsey is a jerk who berates his callers. Calls himself a Christan.

He shilled for that Time Share Exit team who are facing a class action suit. Time Share Exit team basically stole $4,500 from me. They told me to stop paying the maintenance fee for my time share in Vail. I did that for years until ultimately I owed the time share $17,000! Oh but TSET was “we get you out of your time share or your money back.” That’s a lie. After 7 years I tried to get my money back and they claimed that since I didn’t fill out some form in 2019 they would not be giving me the refund.

I ended up negotiating with the time share myself and they let me out of the contract for a mere $2,000. The time share person said the TSET never even tried to contact them! The TSET is just some crooked attorneys. I think the name is Reed/Hein.

And Dave Ramsey is an asshole for recommending them.


57 posted on 03/07/2024 10:01:14 AM PST by subterfuge (I'm a pure-blood!)
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To: ClearCase_guy
In fact, I believe that average US purchasing power really peaked in 1971.

The US Dollar was taken off the gold standard in the early 1970s, too. I'm sure it's just a co-incidence.

58 posted on 03/07/2024 10:01:23 AM PST by Disambiguator
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To: where's_the_Outrage?

Reddit is a leftist site. They HATE Dave Ramsey. If you did a poll about buying a house, most of the respondents would say that the government should give you a house.

No one on Reddit would admit that Dave Ramsey’s home buying advice is made difficult/impossible due to Brandenomics.


59 posted on 03/07/2024 10:01:43 AM PST by Reddy (BO stinks)
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To: TiGuy22

I was going to say what you did, but I would have added combined as in a committed stable relationship. In other words a two parent household.


60 posted on 03/07/2024 10:01:58 AM PST by Woodman
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