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 ...
My general advice for a mortgage is never to prepay but unless you’re paying off the entire balance. Instead, take the extra money you would have used for the prepayments and put it aside. Build up a parallel investment fund with that money until you get to the point where your investment fund exceeds the balance on the mortgage. It will take years, but if you’re disciplined enough you will be able to pay off your mortgage while maintaining a LOT of flexibility in your finances.
Dave Ramsey’s accent is probably Southern/Tennesseeish.
His company has done great work rescuing people who have dug debt holes.
His Mortgage advice is sound, and his programs, to get out of those debt holes, work.
Did you really have to mention his voice?
Yes. He can keep his accent and glad he’s successful, but I cannot listen to that voice nor do I need to.
That's what I did. I'm darn close to paying off my house because of it. It also gives you payment flexibility. When You are flush, you pay more. If things get a little tight, lower your payment for a month or two.
“......We can look further out but then you’re looking at an hour commute each way......”
_____________________________
We have been homeowners since 1986. For the math challenged that’s 38 years. Our first home had an 80 mile round trip to work. Our present home is 95 mile round trip. If you want to own a home bad enough, you will find a way. Complaining alone will not do it.
I agree — extended family has a lot going for it.
“...But the expense of maintaining a car now is complex technical parts. You almost HAVE to have a warranty - which you get with a new car and can usually negotiate a price on a long term full warranty in a new purchase....”
____________________________
This is not true. We drive 600 miles/week to work. That’s 30,000 miles/year. Every morning we get into our 2012 Ford Escape little 4 cyl and make the trip. I do oil changes and routine stuff. The car has been paid for now 7 years and sometime during the week after next it will hit 200,000 miles on the clock. No major problem unless you count the fact that it doesn’t impress strangers in the WalMart parking lot. Have a nice day.
“You almost HAVE to have a warranty -”
They sell you the warranty because they expect that they will pay out less than you pay in. Skip the warranty and pay yourself the premiums for that rainy day.
Dave:
——————How to get out of a car loan-——————
So, how do you get rid of a giant car payment? One option is to pay off your loan faster. Start by getting on a budget, cutting back your spending, and picking up a side hustle.
Throw as much money as you can toward your car loan. It’ll take some discipline and determination, but you can do it.
I suspect he lied to you. Cars can easily gets 250,000 miles with limited maintenance.
Only an idiot would buy a time share in the first place!
Yes. Guilty as charged. It was a great vacation place. Double unit, fully furnished. Laundry room, full kitchen, sleeps 8. Was $600 maintenance fee blew up to $1600, plus SUV rental, plane tickets, etc. in hindsight I could have rented it out and visited every two or three years.
Lack of flexibility was also an issue. Trading it for another location was a possibility but to get really nice comparable accomodations like Hawaii you had to book 2 years out. I learned a lot.
“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.”
You don’t seen to understand your problem was buying the time share.
Occasionally, the interest rate on the longer mortgage is
Lower than the short. In that (rare) instance, the longer mortgage is
Better, if you just pay extra.
Which will cost you more in utilities, upkeep and taxes.
And with space you really don't need but will fill it with things that you really don't use.
I suggest that they do not know HOW to do it!
Until just before your neighborhood goes down the toilet.
Make no mistake, the new homes of today are the slums of 70 years from now.
My house, too.
But, as one of the fixer shoes liked to say: “It had good bones.”
And, it was out in the country where the nearest neighbor was not likely to influence the value of my place much.
So true.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.