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Dave Ramsey is known for his no-nonsense approach to personal finance, including bold guidelines about how — and when — to buy a home. His long-standing advice is clear: never take out more than a 15-year mortgage, and never let your mortgage payment exceed 25% of your take-home pay.
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But as housing prices and interest rates climb, can the average person still afford a home if they follow Ramsey’s rules?
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TikTok user @simemedia recently laid out what Ramsey’s home-buying rule looks like in today’s market. Using national housing averages and ideal borrowing scenarios, he walked viewers through the numbers — and the outcome raised eyebrows.
As @simemedia explains, the average U.S. home now costs around $350,000. A 15-year mortgage on that amount, assuming excellent credit – a 780+ score – would come out to just under $3,000 per month — before factoring in insurance, utilities, or maintenance.
Now factor in Ramsey’s second rule: the mortgage payment should be no more than 25% of take-home pay. Take-home pay is what’s left after taxes, so to comfortably afford a $3,000 mortgage by Ramsey’s standard, a buyer would need to take home $12,000 per month. That equates to an annual gross income of about $190,000 — putting the buyer in the top 6% of earners nationwide.
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To test the advice further, @simemedia ran the same scenario using Mississippi, the state with the lowest average home prices — around $180,000. That would bring the 15-year monthly mortgage payment down to roughly $1,600.
Following the 25% rule, a buyer would need to take home $6,400 a month, or earn about $95,000 per year before taxes. That’s still well above the national median household income of $80,610, according to the Census Bureau.
In other words, even in the cheapest state in the U.S., the average household would fall short of affording a home under Ramsey’s guidelines.
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Ramsey’s advice is rooted in avoiding financial risk. A 15-year loan saves thousands in interest compared to a 30-year one, and the 25% rule ensures homeowners don’t stretch their budgets too thin.
