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

moneywise ^ | Bethan Moorcraft

[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.

[Elsie]

What did your pump replacement cost you.

[mountainfolk]

I do not get why the put down is necessary for Ramsey. Anybody that can get the future house buyers to pay attention to the various aspects of ownership is worth listening to. Take or leave advice and live and learn.

[TexasGator]

“I do not get why the put down is necessary for Ramsey. “

His one page “helpers” are just a few common knowledge items leading you into paying for his services.

[woodbutcher1963]

Around $1450. This was about five years ago. My well is only about 145 feet deep. The pump hangs around 125’. There is a stream across the street from my house about 40’ in elevation lower than my house. I sit on the side of that river/brook valley. So, the water table is not that deep.

I replaced the pump, but the black plastic piping and electrical wires were still good. In fact they said the wires were a better quality/gauge than what they would replace them with.

Just the pump was $750. Then there were a few other things/widgets/do dads they needed to add on. Plus two guys labor.

One of the guys from the well company said he had installed pump.

[Elsie]

Thanks for info!

[subterfuge]

Ramsey is a jerk. Have you ever listened to his show? His callers who aren’t already doing what he thinks they should be doing get yelled at and called stupid or idiots. Then he claims on air he walks with the Prince of Peace. Some Christian he is.

[mountainfolk]

Maybe disapproval of Ramsey in print will gain him more listeners . I would be satisfied with whatever approach makes an impact on several youngish couples who do not equate hard work for a down payment on the house they want with the acquisition of that house. No way around it unless gifted from Santa or such. I tend to bypass the milder put-downs and go for the Ramsey thinking only a bit more ugly. Thing is, most of these would be buyers already know what it will take to get what they want, house or otherwise. They prefer that others do the heavy lifting for them. Tut Tut Ramsey. Be nice.