Dave Ramsey, a best-selling author and financial influencer, can be a controversial public figure. Most of the backlash centers around his finance advice being too black-and-white or unrealistic.
I’ve followed Ramsey’s advice closely over the years. I was raised reading his books and watching his videos, and over my last decade as a personal finance reporter, I’ve read an occasional Ramsey take, then had to take five cleansing breaths.
In some ways, his recent advice on how much to spend on a home made me angry. In other ways, I understood his points.
“How much house can I afford?” It’s a question we all ask during the homebuying journey, and there isn’t necessarily a simple solution. But Ramsey hopped on social media this week to provide a straight answer.
“When you’re looking for a home, limit your search to ones where the payment would be 25% or less of your monthly take-home pay on a 15-year fixed-rate mortgage,” Ramsey recently posted on Facebook. “That’s how you give yourself margin to actually live your life, not just scrape by every month.”
Ramsey then included a list of costs you should save for before buying a home. The first item was a down payment.
“If you’re a first-time home buyer… 5-10% of the home price’s is okay (don’t go lower),” he wrote. Then he clarified that a 20% down payment is best.
He also said buyers should save for closing costs (3%-4% of the home price) and moving expenses (which vary but are usually under 1% of the home price).
Ramsey made some solid points about calculating how much house you can afford. And he made some that were… let’s say… out of touch.
The cons of Dave Ramsey’s mortgage advice
To adequately explain the pros and cons of Dave Ramsey’s home budget advice, it’s easier to start with the cons and work our way from there.
First, Ramsey said borrowers should get a 15-year fixed-rate mortgage. Even though the most popular home loan term is a 30-year FRM, Ramsey has long been an advocate for the 15-year FRM, especially in his popular book “The Total Money Makeover.”
His main praise for the 15-year FRM is that you’ll get out of debt 15 years earlier than with a 30-year mortgage. And being debt-free is one of Ramsey’s main schticks. But 15-year terms have much higher monthly payments than 30-year mortgages.
Let’s say you take out a $400,000 home loan with a 6% mortgage rate. With a 30-year loan, the monthly payment on principal and interest would be about $2,398. If you had those exact same terms with a 15-year mortgage, your monthly payment would jump to $3,375.
Related: Dave Ramsey sends strong message on housing market
America is experiencing a national housing affordability crisis. According to the Federal Reserve Bank of St. Louis, the average sales price of houses in the U.S. rose to $534,000 in Q4 2025. National mortgage rates are also holding above 6%.
So, how likely is it that the typical American can afford the higher monthly payments that come with 15-year mortgages? Not very.
Along those same lines, it seems unlikely that buyers — especially first-time homebuyers, whom Ramsey addressed in his Facebook post — could afford a 20% down payment along with closing and moving costs. Even 10% or 5% down is a stretch for many people.
In reality, most mortgage lenders accept a 3% down payment from first-time buyers. Some lenders, such as Rocket Mortgage and Guild Mortgage, offer 1%-down-payment programs.
And if you qualify for a VA loan or USDA loan, you may not need a down payment at all to qualify for a mortgage.
The pros of Dave Ramsey’s opinions
Not everything in Dave Ramsey’s Facebook post was wrong — it should just be taken with a grain of salt.
Let’s jump back to the 15-year fixed-rate mortgage. If you can afford the monthly payments that accompany a shorter term, it’s a worthwhile option. Those buying their “forever home” will be out of housing debt in half the time, and 15-year fixed mortgage rates are lower than 30-year fixed ones.
For example, as of April 16, Freddie Mac data showed that the average 30-year fixed mortgage rate was 6.3%, while the average 15-year fixed rate was 5.65%. Although 15-year mortgage payments are higher than 30-year ones, this lower rate will bring it down a little bit, and you’ll pay a lot less interest over the years.
More on home affordability and the housing market:
- Zillow predicts home values, housing market change
- Experts send strong message about decreasing mortgage rates
- Fannie Mae predicts shift in mortgage rates, home prices
Now for the down payment. Once again, if you can afford a higher down payment, it’s true that you’re setting yourself up for success. As Ramsey points out in his Facebook post, a 20% down payment means you don’t have to pay for private mortgage insurance (PMI). According to Freddie Mac, the typical monthly cost of PMI is $30 to $70 for every $100,000 you borrow.
The low-down-payment programs I mentioned above can be great tools for first-time homebuyers to get their foot in the door. But it’s true that the lower your down payment, the longer it takes to build equity, and the higher your monthly mortgage payments will be. So, a 5% or 10% down payment would be beneficial — but again, that’s only if you can truly afford it.
Finally, let’s look at the very beginning of Ramsey’s post. “When you’re looking for a home, limit your search to ones where the payment would be 25% or less of your monthly take-home pay…”
The “25% rule” isn’t something Ramsey pulled out of thin air. It’s a valid way of deciding what percentage of your income you should spend on a monthly mortgage payment without stretching yourself too thin financially. It states that your total monthly payment (principal, interest, PMI, property taxes, homeowners insurance, and homeowners association dues) should total no more than 25% of your net (after-tax) monthly salary.
The 25% method isn’t a hard-and-fast rule. There are alternatives, which I’ll cover below.
Alternatives to Ramsey’s home-budgeting advice
Dave Ramsey’s advice for determining how much house you can afford and budgeting accordingly is worth considering. However, everyone’s situation is different. So, here are some alternative home-budgeting ideas.
- The 25% rule isn’t the only way to figure out what percentage of your income you should spend on a mortgage. Many lenders such as Rocket Mortgage recommend the 28/36 rule, which states that your monthly mortgage payments should not exceed 28% of your pre-tax income, and your total monthly debt obligations should be 36% or less of your pre-tax income.
- Another alternative to the 25% rule is the 35/45 rule, Rocket Mortgage explained. Some mortgage lenders prefer all of your monthly debts, including your home loan payment, to be less than 35% of your pre-tax income and 45% of your post-tax income. When shopping for a mortgage lender, ask loan officers whether they prefer the 25%, 28/36, or 35/45 rule for borrowers, and talk through your options with them.
- Make a smaller down payment. As mentioned above, many mortgage programs allow you to put down as little as 3% or even 0%. A lower down payment results in higher monthly payments, though, so the most important thing to consider is whether you can comfortably afford the corresponding payments.
- If you can’t afford a 15-year fixed-rate mortgage, go for a 30-year FRM instead. Then, you can pay down the principal more quickly by making biweekly monthly payments, paying a little extra each month, or putting a financial windfall toward the balance.
Related: Redfin sees shift in home prices, housing market