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

Ramsey's preferred mortgage loan

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.

As the Redditor’s “like, what?!” reaction suggests, that’s a huge amount of cash, especially when you consider the median household income in the U.S. in 2022 (the latest Census Bureau data set) was $74,580, which would leave you with a monthly income of $6,215.

This mismatch was not lost among the Redditors, many of whom acknowledged a high income was needed to follow these guidelines, or that one would need to find a home where prices are well below the national median. Some commenters labeled the advice “unrealistic” or “nearly impossible.”

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Understanding Ramsey's rule

You could be doing everything Ramsey suggests — be debt-free, have three to six months of expenses saved in an emergency fund and have enough saved for a 20% down payment on a home — but still struggle to afford a domicile following his 15-year fixed rate mortgage advice.

When a seemingly money-stable man named Robert called into the Ramsey Show to question the host about how to stick to his mortgage advice in pricey metropolitan markets like southern California, Ramsey said: “You don’t get a pass on math because you live in an expensive market.”

Ramsey settled into his argument.

“If you end up with a house payment that is a large percentage of your take home pay, you’re going to struggle financially,” he said. “We call that house poor. If you want to be house poor and blame it on southern California real estate prices, it’s a reasonable blame, prices are high.”

Before looking to buy a house somewhere like San Francisco or Manhattan, Ramsey suggests you ask yourself: “Can you afford to live there?”

He added: “You cannot tie up 40-50% of your income just because you live in an expensive area. That means you don’t make enough to live in that area,” he said. “I can tell you that it is very difficult to prosper financially when you get a house payment that is north of 30% of your take home pay.”