Benzinga and Yahoo Finance LLC may earn fees or revenue for certain items through the links below.
Dave Ramsey He is known for his nonsense approach to personal finance. This includes bold guidelines on how to buy a home. His long-standing advice is clear: Don’t take away your mortgage for more than 15 years. mortgage payment Please exceed 25% of your takeaway salary.
Advertisement: I bought the top mortgage fee
But as home prices and interest rates rise, can the average person still afford to buy a home if they follow Ramsey’s rules?
Don’t miss it:
Tiktok users @simemedia Recently, I explained what Ramsey’s home buying rules look like in today’s market. Using the national housing average and ideal borrowing scenario, he walked the audience through numbers. The result raised eyebrows.
As @simemedia explains, the average US home currently costs around $350,000. A 15-year mortgage for that amount, assuming that good credits (scores above 780) come up at just under $3,000 per month before considering insurance, utility or maintenance.
Ramsey’s second rule factor: Mortgage payments must be less than 25% of take-out salary. Take-out wages are left after tax. So, to comfortably offer a $3,000 mortgage on Ramsey’s standards, buyers must bring home $12,000 per month. This amounts to gross income of approximately $190,000 a year. This places buyers in the top 6% of earners across the country.
Trends: This Jeff Bezos-backed startup makes you possible You become a landlord in just 10 minutes, and the minimum investment is as low as $100..
To further test the advice, @Simemedia ran the same scenario using Mississippi, the state with the lowest average home price. It costs about $180,000. This will bring you to approximately $1,600 monthly mortgage payments for 15 years.
Following the 25% rule, buyers will need to either bring back $6,400 a month or make around $95,000 a year before taxes. That’s far outweigh the $80,610 national household income. Census Bureau.
In other words, even the cheapest states in the US would not end up offering homes under Ramsey guidelines.
See: It invests in places that hurt and helps to heal millions: It will invest in Cytonics and help disrupt the $390 billion pharmaceutical base.
Ramsey’s advice is rooted in avoiding financial risk. A 15-year loan saves thousands of people on interest compared to a 30-year loan, and the 25% rule ensures homeowners don’t have to be too thin on their budget.
