How Much House You Can ACTUALLY Afford (Based On Income)
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- Опубліковано 7 вер 2023
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Buying a house can come with a lot of emotion and sometimes bad decisions. Today, you’re going to learn how to figure out how much you should spend on a house based on your income so you can confidently reach your homeownership goals.
Links:
Ramsey Mortgage Calculator:
rb.gy/nea8q
George Kamel is a personal finance expert and co-host of The Ramsey Show. Following Ramsey’s proven money plan, George went from negative net worth to a millionaire in under 10 years. His goal is to help people spend less, save more, and avoid money traps so they can live a life with more margin, options and freedom.
This channel will simplify complex money topics, bust money myths with actual facts, and debunk the stupid financial advice you're seeing in your social media feed. All with a healthy dose of pop culture, humor, and snark.
The Ramsay method highlights the fact that hardly anyone can afford at house at all regardless of income. Meaning…houses are overpriced and inflated.
Great. Now good luck finding a $162,000 house right now that isn’t condemned/unlivable or in a high crime area.
Exactly! No houses are going for that little these days. In order to afford those prices you have to live in the middle of no where which isn’t sustainable from a job perspective.
Honestly trailer parks seem to be the only feasible option if you don't want to rent 😢
@@josephwright8752 Unfortunately not in my area. Trailer parks are owned by landlords who rent out the individual mobile homes. The parks are run-down, crime-ridden, and unsafe in a tornado.
@@josephwright8752a used trailer in a park in my area is 250-350k lol it sucks
@@gloriaalex11in my area there are trailer homes going for 215k with HOAs of $700 a month. What does HOA do? Oh they trim shrubs that get too big and remove snow, they don't even mow the lawn. It's downright criminal.
I stopped watching at $160,000 house price lol
$162k....Why not do this with the average house price of $400k? Is it because it would show how impossible this is for most folks?
Cauze folks would get depressed lol
Sure would 😂
Why would your first house be an average house though? Your first house should probably be below average, and you’d trade-up to an average house later.
@@rickenbacker472 Not everyone wants their first home to be below average.
@@scevans8756 Hi. Yes you’re absolutely right, and in my personal experience these people will be much worse off in the long-term. The secret to building housing wealth imho is not to postpone a purchase until you can afford your dream home. It’s getting into the market early, living somewhere you might not love, and moving up over time. The sooner you are paying off a mortgage and benefitting from price rises, the better off you will be long-term. I’m in my 40s and have seen this scenario play out over & over. The people I know who bought the small, affordable (but not very nice) houses are now living in MUCH nicer houses than the people that held-off waiting to buy their dream home. Just my experience of course.
Unfortunately this is why so many are willing to go into debt. $162k won’t buy you much anywhere. Neither will $225 and that’s with a salary that 65% of the country doesn’t even make. It’s really sad.
Before this video I was looking at Fischer homes, after this video I’m looking at fisher price homes 😂
I love me some Dave Ramsey, George Kamel and the Baby Steps. Although I know y'all are trying to keep people out of debt and its misery, these home scenarios are Completely ridiculous.
I live in Memphis and just wanted to confirm that you can’t get a house here for less than $165k. It would be a fixer upper in a bad neighborhood if you did.
I’m not complaining, this just shows that we’re in a situation where most people need to rent until they can get their income and savings up. And also expect to get a smaller house.
If you want a nice house in Memphis in a decent neighborhood you're paying 300k
Let's be honest: following the Ramsey method for a house payment means you will end up with far less house than most people are willing to live in-at least early on in adulthood. It also means that there are areas of the country that you simply cannot live in without a huge salary increase. Maybe you can't live anywhere near San Francisco, New York, or even within an hour of Nashville. You have to be realistic and decide how much you want to save for retirement vs. how much house.
100%.
Yep. Ive been learning from the money guys. "Financial mutant" guys. 30 year isnt a bad idea as long as you dont pay it off in 30. You can treat it as a 15 when your income grows over time. Also it gives you a bigger margin
@@crashtestdummy1972 another solid Chanel!
Very few people own a house in New York City.
@@crashtestdummy1972exactly why I did it. 30 year mortgage at 3%, I’ll pay it off like 5-10 years early
According to these guidelines, living in Florida, on a 100k a year salary I can afford a comfortable home depot tool shed😢
Have you taken into account the rising insurance in our state? That could easily run you $500 a month.
lol
“Rent no more than 25% take home pay” is not doable for 75% of all Americans. The Ramsey show needs a serious reality check.
What are the odds, I live in Ankeny! Represent!! BRIMMING
300 is still below median in Ankeny. Close but still below. My wife is from Des Moines, and I was blown away at how high Des Moines area in general has gotten.
This
My parents are in a small town near Ankeny called Maxwell!
Iowa house prices are not that bad. ( Iowa resident here)
@@joeyrichards8041 majority of Iowa is incredibly cheap with tiny pockets of expensive. Was just saying for his example 300k is below the median price in Ankeny.
I’m 30. After working 5 years in my professional field, living frugally and saving every penny, along with my girlfriend, I bought a house that is over my 25% take home pay, and that was the cheapest we could find. I live in Miami. Not everyone can just go live in the middle of a farm in Kansas.
no hope for the single people buying on their own 🥲
There's definitely lots of farmland in Kansas. But there are also great urban places to live in Kansas! And with good cost of living to boot!
You have no idea what your missing by not living on a farm in the middle of Kansas; you city people stay put we like our peace and quit out here :)
Yep agree, also ppl should do the 25% to a T. Everyone is in different situations
Ah, Florida... the wonderful state, where the northern you go, the southern you get. :)
I was given a loan for 300k and got my house for 125k. Can barely keep up with the maintenance. Yea never go as high as they offer you
I went as high as I could ... but know need to be scared.. that was 4 years ago and I've doubled my pay😂
The median home price in the U.S. was $329k at the end of Q2/2023 and the average was $416k. Their data on housing prices seems like it's outdated pre-pandemic numbers.
Even where I live in central GA, you can't get a home for under 150k unless its a junker requiring significant repairs. You'd either have to spend years or decades saving a massive down payment, or throw in the towel and go for a 30 year mortgage.
@@Phantom121904 This is why their methodology no longer makes sense in this housing market. They need to revise their approach to allow for a higher percentage of a budget to go toward housing, such as 33% on a 30 year fixed mortgage, and cut back on other things in the budget, then use the debt snowball method to pay the mortgage down faster. Lately, I think Caleb Hammer has a better approach to personal finances.
@@Phantom121904150k is a down payment not a price
National median household income was 71k in 2021. Let's call it 80k today. So basically the majority of the nation can't afford the majority of homes in the nation, following this formula
@@gtmaster3031 yup. Nor can they afford a lot of rent in a decent apartment
Love these videos! Keep bringing them on George!
This is useful information even now tht i am retiring
That is true.But I am looking for where I can start contributing some funds to help me after retiring, savings alone will not sustain me and my family
If you are serious about it you can look into some of these portfolio managers.They will guide you on what to do
Do you know any?if so I will like to know,I love to get another source of income
I've shuffled through a few experts in the past, but settled with LUCY ROSE CARTER. The strategy they use is recession-proof, more specifically profit-oriented, and most likely, you'd find her basic info on the net, she's a renowned advisor.
I was actually looking for an advisor
A $300k house is over 100k below median US cost. A 150k household income is about 2x the US median. Ramsey requires 20% down. That's 60k on a 300k house. You disallow financing any closing costs, that's another few grand up front. Yes, being long term renters hurts family stability. This purchase standard is irresponsibly ideal.
Do you understand what median means? It means half the houses are cheaper.
Sure. Half above, half below. Without checking, I think the US median was last at 418k. 150k household income is loosely defined as the lowest end of upper class. This standard declares that anyone that earns a middle-class income cannot afford a home even greater than 100k below the "normal" (median, not average) price. A 300k family ready home is a unicorn. I like your show's principals, but this standard is truly out of touch.
@@GeorgeKamelYeah, the commenter is the tone deaf one here 😂 smh
@@GeorgeKamelby your standards, the information provided is statisticaly dubious.
@@user-ft3oc7ks9zstatistics dont lie. people do.
Someone needs to explain to me how I make 100k and me and my spouse’s choices to live are houses that sit between a crack house and a retiree.
George just buying a house like that is going to get us robbed if not killed. It would be one thing if everyone in that area made roughly the same, but that’s not the case.
It's all about ratios. You can make six figures and that's great, but the area you choose to live in can still overwhelm your income. Six figures is a mental checkpoint, not a financial one.
If i followed ramsey in every step...i would be broke..i make like 65k a year and my payment is $1,300 a month...have common sense...and follow Jesus.
I think a housing crash will happen because all those people who bought homes over asking price, although it was at a low interest rate, they are over their heads. They have no equity if the housing prices continue to go down, and if for whatever reason they cannot afford the house anymore and it goes into foreclosure because even if they try to sell, they will not make any money. I think this will happen to a lot of people especially with the massive layoff predicted for the future and the cost of living rising at a high speed.
For 2023, it’s hard to nail down specific predictions for the housing market is because it’s not yet clear how quickly or how much the Federal Reserve can bring down inflation and borrowing costs without tanking buyer demand for everything from homes to cars.
I suggest you offset your real estate and get into stocks, A recession as bad it can be, provides good buying opportunities in the markets if you’re careful and it can also create volatility giving great short time buy and sell opportunities too. This is not financial advise but get buying, cash isn’t king at all in this time!
You are right! I diversified my 450K portfolio across various market with the aid of an investment coach, I have been able to generate a little bit above $830k in net profit across high dividend yield stocks, ETF and bonds.
Impressive can you share more info?
When ‘Carol Vivian Constable’ is trading, there's no nonsense and no excuses. She wins the trade and you win. Take the loss, I promise she'll take one with you.
The interest rate in the video is low. Current rates are over 7%. Also goodluck finding a house for 160k. I live in the midwest and that price will give you a hole with a ton of problems to fix. News flash people, you are all too poor to buy in today's environment. It's never been this expensive in history to buy a house.
Rates are in the 6% range for 15 year mortgages like he presents, but that almost doesn’t seem like a large enough rate decrease to justify the 15 year. If I could get something in the low 5% range at 15 then it makes more sense
With rates climbing like never before in ’23 coupled with uncontrollable inflation, and our own mortgage at now 7.42% what are the best alternatives/strategies for avoiding a crunch and maximize my savings other than moving in to an RV with my two kids or take more loans.
You are not alone we can no longer afford our mortgage, husband wants us to travel or relocate/I am proposing cashing in, walking away and renting while putting the rest in the stock market.
If you have the funds to travel you should be able to afford the mortgage.
We own a few rented apartments but don’t wish to sell them or make the tenants uncomfortable by inflating rents however I am being more cautious than ever with rising costs.
dont venture these crazy markets yourself seek a fin-professional with fiduciary responsibilities who knows about fixed income, bond and other mortgage securities for proper guidance
We know the value of a fiduciary as we have a family lawyer and he has hinted on it occasionally, so we’ve began to consider the idea. how can one vet a fidciary?
I think some people are going to have to come to terms with the idea that they are not going to be able to own more than one home in their lifetime. I honestly think the idea of people having a “starter home” (or “first time home”) is one of the worst concepts that has come about in the past 20, or so years. With housing prices being so high it’s just going to take people longer to save for a home. Which is what people use to do anyway. 30, or 40 years ago people would decide where they wanted to live, they would buy a home, and they would stay there unless some unforeseen circumstance caused them to have to move. My parents saved for 8 YEARS after they got married (or had any children) before they bought their house, and they still live there. They did some small renovations over the years, but that’s it. People need to stop putting their wants, and fantasies above what is truly important in a home. Not everyone is going to get to have their “dream home”, that’s why they call it that.
Bruh we’re just asking for houses, not a dream home 😂
I think having a starter home can be a good investment to level up. Buy a home which is truly a starter - 800-1200 sq. ft. In a mediocre location and without all the extra features. Then pay it off in 15 years or less and sell it for a profit with a new career salary and level up to something more comfortable and lovely.
We built a 900 square foot home debt free then added onto it 4 years later debt free for a total square footage of 1500. We are a family of 6, making under 40k a year and are completely debt free and have never owed for a home. You can do it but it takes sacrifice and hard work.
Starter homes have been a thing since the 1950s.
As someone living in Nebraska, the cheapest homes are now pushing 200k without moving to the middle of nowhere. I feel like hope is lost for any single people to own a home on their own without a massive income
Living in the middle of nowhere...even those homes are 200k. Mine went from 78k to about 165k.
The average home in my area is $680k, below the regional average of $900k. $200k is the dream. Canada is mad....
A single person owning a home on an average salary is so far from possible it's not even funny. Pretty sad situation actually
I am a 29 year old dude and yeah things look so damn bleak for me... I have about $45k in savings, I make $23 right now... I have screwed my life, I just want a home so bad.... I live with my mom and it's mentally destroying me, I have wasted my life.
I can't afford an apartment in Denver they go for like $1500 for a studio.... I don't even qualify for an apartment even though I have 800 credit score.
The only way for me to get a house would be to get married but women nowdays are insane and they would just leave me broke and destroyed.
There is no hope for me as a single man. I shouldn't have to get MARRIED just to survive.
Ridiculous. Get a fixed 30 yr loan that costs no more than 32% of your pay minus debt. A $240,000 loan at 8% will cost you $1760/month or the average rent in Nashville. Why rent at the same cost as buying. Add more to the principle monthly if you wish. Homes in Nashville appreciated 151% over the past decade. The average cost of a home in Nashville is $460,000. If these homes inflate @ 5% per year you would have to save $23,000 per year just to tread water.
I was blessed to grow up in a family of blue collar professionals, 1 uncle and my grandfather were pipe fitters, my dad was an electrician and my other uncle was a general contractor.
I grew up helping build houses.
When comparing the current cost of materials to build vs buy in the market I'm moving to it is a no Brainer.
House prices are dramatically inflated from the short term rental Market. While raw land and materials are comparatively VERY cheap.
I'm buying property and setting up to build using saved cash.
Anyone taking out loans to buy in the market I'm moving too are risking getting caught upside-down with high interest rates they can't refinance.
I just looked up what upside down means. Can you explain why they wouldn't be able to refinance?
Building and renovating saved me gobs of money and got me the acreage I wanted to be buffered from neighbors. Many other tradies have multiple skills and make them pay off in personal independence. I wouldn't want to live any other way and if I struck it rich I'd just build a bigger shop.
@@sebchan21, if people buy a house for say $300k in what is currently an inflated housing market due to lack of supply, if the prices drop because, 1. Supply increases due to more houses being built, or foreclosures hitting the market.
Or 2. Demand drops because the economy slips into a deep recession.
Then it limits people's options for getting a loan.
If you own $300k for the house, and the appraised value drops to $250k then you will have e a VERY hard time getting a loan for $300k to refinance that house. The banks don't want to borrow you $50k more than the house is worth for risk of you going bankrupt or just walking away from the loan.
In the market I'm moving to there are old run down houses that probably cost $30k in materials, on a small $30k lot that are listed for $250-300k. Think a 1000 Sq ft, 30 year old menards garage kit with insulation, a kitchen added in and windows.
I can buy a nicer piece of property 15x larger have a well and septic installed for 100k total, then build a $150k house (materials) on it and in this market, it would be listed for $500k-$600k. When really it should be closer to $350k.
It is insane. You definitely need to be careful what you are buying.
We signed a lease on a townhouse and are looking for property right now. Hopefully building over the summer and moving in by Christmas.
@@Comm0ut, I'm doing the exact same thing. Looking for a nice 5-10 acre lot or better. I'm planning to put $250k into land, well, septic, and materials for the house. Probably do an ICF house. I really like them and it's super easy to layout the forms and rebar yourself.
Running underground electrical in this area isn't obscenely expensive so I'm looking to get back away from the road. Put up a remote control gate to keep the riff raf out.
I'm considering building this place then building an upgrade in a few years and selling this one. 🤔 Make use of that Section 121 federal exclusion for selling your primary residence.
Might buy a separate piece of property, make sure it's zoned mixed use residential/farm/commercial and put a big garage/shop on it. Keep that forever. Same thing. Gate with Security Cameras.
Yeah bro, I live in Louisiana. You're not finding a 162k house where I live. My house was 160K over 3 years ago. Now a starter home is 200k+. I also have a friend who lives in Mississippi. Even 162k is hard to find there. I guess if you get a shack on the bayou or move to the midwest. Also getting a 30 year mortgage on your first house really isn't as bad as people make it out to be.
Ikr
Average house cost in Washington state= $578,000. Low cost ( in the middle of nowhere) = $290,000
Eh in my opinion you might as well do a 30 year mortgage and do bi-weekly payments. Brings it down to 24 years just by doing that. Then slowly pay off just principal along side it. Like for me if I average an extra $500 a month just towards principal I can pay my house off in 15 years. Doing that youre able to get into a house more realistically and you can always contribute more to get it paid off faster.
They recommend 15 because the vast majority of people don't have the discipline to put extra payments on their mortgage. So their 30 year is actually 30.
@@davebond2381 yea I get that. But in my eyes renting is truly almost a waste of money. I would rather just get the 30 year mortgage so that I can start gaining some equity and then eventually pay more towards principal. People just need to be smart with there money and not blow it. Just take it slow at first.
Mine is 33% of our income. Our home price in 2021 started at 300k and then ended up at 370k with the cost of materials getting jacked up. Home now is 525k, but id be paying the same in rent as i do as a homeowner, so I'm somewhat relieved to have it over with.
Is the 33% just your mortgage or is it combined with your insurance and property tax?
@IrisP989 yes. Also, net income 33% with a 2.87% interest rate.
@@Chet_24 How did you calculate that? Total mortgage divided by your gross income or by your net income?
Samsies! MIne is 31.5% of my net at 3.25%. I built in 2020 and ended up at $400K, but for two homes. (I built a home for myself and a little detached MIL for my elderly parents on some acreage in WA state) I had bought the land back in 2018 for $140K cash and then paid around $75K out of pocket during the build, in order to keep the mortgage at $400K. While my payment is hefty, I knew that going in my property taxes would be around 10K a year, just from looking at other comps. I feel like I got a lot of bang for my buck and feel extremely blessed looking at home prices now. My mortgage is not stressful (even though it's over the 25% recommended) and my home is valued at north of $850K. I think the key is just not having a lot of other debt and then everything is manageable.
@@IrisP989 net income
I can't believe you chose Ankeny. My favorite music artist Trevor Blendour is from there! George throwing down FACTS!
We live in a small city in Wisconsin, the population of the metro area is ~100,000. You can find move-in ready 4br houses for under $300,000. But there's always a host of factors to deciding where to live, not just affordability. Here, you have to be ok with 4-5 months of snow. Summer and fall are awesome though!
I live in Florida, and I can't even afford rent for a "cheap" apartment. I'm not saying this is bad advice, but it's unfortunately unrealistic for people in areas such as as mine in which houses that are not even built yet are already going for the mid 300s. My strategy at the moment is just save what I can and hope for foreclosures a year or two down the road when those who took a HELOC or are in deep student loan debt are no longer able to keep the home. It's horrible I have to rely on the failure of others, but I'm not making $150k any time soon...
Speak for CA. Homes are going for 650,000 the cheapest. And average are $850,000. That's unattainable. I've been trying to do math with my husband and myself getting 2 jobs. It's getting ridiculous and depressing.
It's extremely hard to consider but maybe a move to a more affordable area could be the answer - even for just 5 years.
I live in Jax, Fl and there’s $200k homes all over town. They’re just starter homes. Everyone is expecting a fancy home starting out and that’s not realistic.
@@philo_veequit voting for Democrats!!
@mikezerker6925 lol. Far from it. It gets exasperating when anyone outside of CA thinks we all vote left. My family is conservative. BUT!!!! our extended family is conservative as well but b/c being conservative is not a trend or woke they'll vote left or not vote at all. Majority of CA are ignorant voters. They vote based on feelings. It's sad. :(
Thank you!
Ya this home advice is outdated.. no one's buying a 160k home lol delusional scenario
$75k income after tax is probably around 4k monthly not 5k. 25% of that would be around 1k..... it's hard to find even one bedroom apartment with that. It's crazy out there!
In Florida a 75k gross income is $4,580 net per month with only your basic federal deductions. I used to make that recently.
According to financial advisors you simply aren't ready to live anywhere.. go back to Mom and Dad's 😂
But seriously everyone has to do what they can for survival right now
So glad we refinanced back in 2020 at 2.875%! We didn’t fall into the pandemic home buying spree like so many others. We purchased our first home in 2013 for a very modest $185k. Now, our home is worth over $350k. Our plan is to pay it off in 10 years or less.
I knew this video would be pretty funny because of all the Ramsey advice I really can't quite take seriously, this one really takes the cake because it's just not possible to make it realistic to get a 15 year mortgage these days unless you have a massive income, down payment, or both.
This would be a lot more reasonable with the 2.1% interest rate on the 15 year mortgage we had 2 years ago.
We sure had it good back then. Low home price and low mortgage rates. We bought before the pandemic. I thought home prices were high then, and the good homes were selling fast. I thought we'd find a home we want within a month or two and instead it took 6 months. That's after we increased our budget and moved further away.
Just for S&G, I looked at listings for my small southern city. About 30 single-fam & townhomes available under $200k. All of them are for people who must be willing to compromise heavily -- on square footage, location, age/condition of the home, or a combination of these. Which is what I did in my broke 20s. Bought a very small, old house with no AC, but it was cheaper than rent and allowed me to pay off debt and save. Still, things have gotten so crazy lately that if I didn't already own my current home, I couldn't afford to buy it. A lot of people in that situation, and we're not moving unless we absolutely have to.
We couldn't afford our home today. Our salary hasn't increased as quickly as housing costs.
I was approved for a mortgage amount that is WAY over what I can afford. I was told it because they base their calculations on your GROSS income not your NET income. No wonder so many people are getting foreclosed on. That's just wrong. I'm still looking for something I can actually afford that I want to live in.
Agreed. And broke people finance the maximum amount the bank is willing to finance.
$162k in DFW you'll be living in the hood and in a spot that needs a lot of maintenance.
Keep in mind that $60,000 doesn’t include investing 15% or giving of 10% that Ramsey also recommends so in reality if you follow Dave Ramsey your house is more like $100k 😂
Which is why they recommend keeping your housing at 25% or less of your total budget so you can invest and give and you've only used 50% of your take home pay
Giving 10% of your income is absolutely fucking crazy
Idk how accurate these home prices were in the video for general areas of the US (I live in Southern California, so absolutely not for me I know but still). Plus, trying to get a 15 year fixed and staying under 25% of your monthly take home seems ridiculous unless you have a huge salary or huge down payment with the current interest rates.
Wasn’t expecting my home town to get a mention while watching this video. Ankeny is a great place and you can generally find a reasonably priced home.
Love this one 👍
Can you share the breakdown for what the 25% should include if renting an apartment?
Should be all expenses tied to your renting the property. This would include the base rent, renters insurance, parking expenses, pet surcharges, and any other kind of monthly fees that might be associated with physically living in that space. Your utilities, if any, should be their own category.
At first I thought I could never afford a second decent home making 70k while living in NJ, but your tips helped a lot. I bought my first house in 2012 and would love to move. Good thing is my mortgage is 12% of my after tax income. I see your tips as prerequisites to new home ownership. Now I can make a realistic plan to get me there. Thanks❤
Good for you! I escaped Bergen County long ago like my father before me. The traditional method of buy property, cash out and bolt for much more comfortable and affordable climes goes back to early last century because it works.
You're right about Cleveland - you can still find a decent house in the suburbs for under 200k. However, you'll be paying at least 3k/year in property taxes unless you're in a lousy area, plus state and local income taxes. Still a great and affordable place to live! And there are plenty of well-paying jobs available, too.
Are there a lot of ski mask Americans?
I just paid off my car🎉🎉🎉
The thing that changes this is building equity over time. Once you buy your first house and pay the principal down over a few years you’ll have a lot of money for a down payment on your next house. Making a 30% or 35% down payment, which I did on the house that I’m living in, makes the monthly payment much lower!
My wife and I have lived in our house for 10 years and bought it around 70k. We nearly have it paid off and it's worth is tripled. We want to upgrade to a new house but we don't know how much to put into down payment? All of it? Percentage?
George these numbers are unrealistic. You have to make 150k to afford a 300k house? And rent until you can buy? You'll be renting for a long time before you accumulate enough down payment, not to mention home prices will continue to climb long term. Here in NJ 300k homes are practically shacks
Sounds like you can’t afford to be a homeowner right now in New Jersey. That is reality. My numbers are the *only* thing that’s realistic in today’s ocean of bad social media advice.
@@GeorgeKameltruth is. Very very few people will be able to this. 160k isn down payment not a house price
As hard as it might be to understand…there is a lot of truth to the numbers being presented. A big part of the reason for housing becoming so expensive in recent years is solely because demand was being driven up. Now if you look to what drove the demand….banks willing to extend mortgage amortizations to the moon, coupled with 10+ years of historically low interest rates meant that people with average incomes were able to purchase far more expensive homes than they previously could. As such, the demand for those more expensive homes increased, which then helps to bring the lower levels up that much higher as well.
The ultimate solution is to break the cycle. Stop overpaying for homes, and focus on building yourself a solid foundation first. A big part of the reason it was easier for previous generations to get into housing was that they started off much earlier building that foundation. When I look at my parents, they moved out at 18-19 with nothing and began working. That was the norm back then. They started at the bottom, and slowly worked their way up as they gained experience, they all shared apartments with siblings and friends in order to cut their living expenses, and they all prioritized saving towards getting into a house. By 30, most were already homeowners, with over 10 years of working to build up that foundation. Compare that to today, where the majority are only beginning their working years in their mid 20s, likely with 10s of thousands of dollars of debt….and it’s no wonder people feel like they can never get ahead. It is taking people well into their 30s just to be at a similar starting point that their parents were at around 18-20 years old.
George is totally disconnected from what it costs to live here. His principles don’t apply to this area. You’re right GT, then he says “then rent.” Again, clueless because he also has no idea how high rent is, in this area. You would NEVER save enough money to put down on a house.
Let me guess, then he’d say “drive for Uber,” make more money! Mmhmm. He has no good advice for high cost of living areas.
@@Plantation1984 then you’re too broke to live there. Move. That’s not harsh, it’s just reality. Yes, it sucks. But yhere is no answer to your question because it’s not a question, it’s just venting.
Median home price in the DMV as of July 2023? $592,500. By Dave's calculator you need 118,500 down payment and an after tax salary of $235,056.
Easy for any normie 😂
Yep. Insanity!!
So whats the issue?
@@RoBDeeZL42is that a serious question? 90% of the population dont even make close to that.
@@marcelrodriguez2067 What's stopping them?
Here in Indiana 160k might buy you a small plot of land to build on 😂 Numbers are a bit fudged for sure
I’m about 95 percent on the Ramsey train. The thing that is holding me back is the paying off the mortgage early. I refinanced from a 30year in 2015 at %3.375 to a 15year in 2021 at a %1.75. My current savings account is getting me a 5.3 percent return and that’s not my investing account. I get paying it off early but man, my interest each month is nothing compared to my savings or even my investment accounts. Anybody else feel this way?
Yes, I don’t agree with that either
Look at your mortgage agreement and see what your final total will be if you stick to the terms!
I bought my house in 2015 for 250k , paid 20% down to avoid PMI, and borrowed 200k on a 30 year fixed 3.25% mortgage. If I continued to make standard monthly payments over the 30 year length of the loan, I would have ended up paying almost $500k on the initial $200k borrowed… so I paid it off faster and saved close to 300k in interest payments!
I want to mention that car dependency is a huge cost that people often overlook. It just sucks to have to pay for gas just to live your life, and for those who dont like cars, maintainence & sky-high insurance.
It's totally worth it to save up to live closer to where you work.
That's why I Own a ev
Ha! Watching from Des Moines, Iowa...just 15 minutes south of Ankeny. This felt personal 😂😂 I agree finding an affordable area that fits your wage is important. Sometimes you need to make the hard choice to change jobs or change locations. I made a career change and haven't regretted it one bit.
Based upon your math, my ideal house is my little green mobile home. 400$/month. Screw it, I turned 50 in 2 days, I invest in my retirement and my daughter's future.
Retirement at 65-67, stay healthy and active and enjoy my retirement until my death by traveling the country, visit all 48 states, Hawaii is a bit tricky if I drive my little tiny house.😊
One thing everyone leaves out when they say "oh it's so simple just start with a condo or town home" is that those come with a $300-400/mo HOA fee and surprise assessments. Those drive the monthly payment to be the same, if not more than a more expensive house.
Why are people expecting to be able to pay for single family homes on a single income? That’s never been achievable no matter what the media tells you.
When I made 60k I bought my place for 225k. With a condo fee I was paying more like 50% of my income on it. I made a good bit more now but its still nowhere near 25%.
I however don't have an auto loan so I could put that payment to work on the house, and build equity. My house just for zestimate right now is 380k so I think I did all right spending above that %. I only recently was able to start paying some extra on the mortgage however.
If you live in an area with $162000 homes, chances are you aren’t making $75000…unless you’re part of a 2 income household (both making $37.5k), in that case this is more realistic.
There’s no hope for the single people.
And even with the suggestion of a condo/townhome, the purchase price would have to decrease to ~$150k to make room for the HOA fees.
I like the Ramsey Baby Steps, but the 25% housing rule is extremely difficult to achieve ESPECIALLY on a 15 year mortgage.
good luck finding decent housing for under 175k
I was able to purchase my first home for 200k in MN making around 35k a yr no debt. I put 3% down. My mortgage was almost the same as renting in my area. Rent 1250 vs mortgage 1275. It didn't follow this 25% rule but I've increased my income since and now. I'm at 62k which puts me at 40% after taxes and contributions. If you've found the place you don't intend to leave and it's similar to what you'd be paying to rent it's better to buy a home. Edit for clarity I bought the home in June 2022.
The 1250 rent includes maintenance. The 1275 mortgage does not. If you're smart and skilled about maintenance or have a lot of luck, it could work out. But if your 1275 mortgage came with a 15-year old HVAC, 29 year old roof, previous family that poured fat/grease down the drain, or zero appliances, then your not comparing apples to apples. Adding $50/m for home warranty might help to make it work, but now you're talking at least $1325/m plus trade call fees and deductibles, depending on the home warranty company. You'll likely have higher utilities costs as well.
Also, you'll probably need to furnish the house. That'll cost anywhere between $3000-$10,000 either immediately or over time (furniture, appliances, lawn care, etc.). Either way you need to factor that into your "mortgage".
The $1250 rent is cheaper, you don't have to worry about the cost of maintenance, utilities lower, and you likely already have enough furnishings. It also allows you to focus more on increasing income and savings, instead of spending time learning maintenance and getting bids for things you cannot do yourself (HVAC is a big one).
@@victorn6065 @victorn6065 utilities are 125 for gas and electric and 66 a month for water and trash. Which I paid for my own electric and water at my apartment so it's comparable.
Also, the electrical, plumbing, hvac and appliances were all replaced prior to my purchase. The only thing I had to add was an AC unit.
I checked permits and had the property thoroughly inspected prior to purchase. The estimated age of the roof was about 10 years and there were no signs of leaks or patch work.
I also still have a 3 month emergency fund just in case anything goes wrong.
Furniture is the same regardless of an apartment or house. I have everything from my apartment in my house. IDK where your getting 3k-10k from. There's goodwill, Amazon or even craiglist for very good cheap furniture if you wanted to refurnish everything.
Now would I recommend keeping your income at 35k for this house? No, but my first job out of college was not going to be my career and I intend to keep making steps to increase my income. Also, staying out of debt is key. I'm up to 62k now and I plan to keep growing.
Your vids are hilarious. 😂👏
I agree that renting isn’t a waste of money especially if you don’t know if you’ll be staying in the area long term. On the other hand, we built a house in 2021 that was definitely outside Ramsey’s guidelines (25% of take home but 30 year), and now that we’re considering selling, the conservative estimates have us selling the house for $100-150k more than it cost us for the land and construction. The more aggressive estimates are $200-250k. The house appreciated way faster than we ever could’ve saved if we were renting. We’ll now have a hefty down payment for another house when we move. We might even be able to buy our next house in cash if we find a foreclosure.
You built a house two years ago and now want to sell it? Why?
@@tyanabarnes6060 because we have a 10 acre farm and it’s overwhelming trying to keep up with it while working full time. We’re also trying to move back to a lower stress job in an area where our allergies aren’t as bad.
@@ghfan2011 ohhh okay that makes sense. Good luck, and glad you’re making it out on top!
A lot of people that bought within the past few years have been pretty lucky, myself included. It's a blessing to be in this kind of situation.
But it's important to understand that the recent levels of appreciation in real estate have more to do with luck. Sometimes, the less optimal choices can get ahead of the less risky ones. It's not something to use as an "I told you so!" or a "Hey it worked for me, see?" kind of thing.
The Ramsey method is one with the least amount of risk and constitutes universal advice that will work for almost anyone's situation. Will it take longer than riskier choices? It certainly can sometimes. But it definitely can be just as fast, if not faster, all other times. All depends on situation and timing. Of course a string of bad luck will wreck anyone's plans.
@@victorn6065Exactly, acting like this will happen everytime you buy a house (I mean that fast rate increase in home value) has the potential to land you in trouble
The recommended houses are in Memphis and Cleveland. Jeez do you sell life insurance too?
I live in Ontario, in a very small town and for some insane reason, the average house in this town is currently $419,000. Vacant land is just as over priced. Major housing bubble. My net pay is 60% of my gross. I make very good money and I'm not even close to being able to afford a house here or in surrounding towns within range for my work. Canada is in a bad state. We're just saving up money until the day comes that we can get something reasonable. Who knows, maybe we'll pay cash at some point if there's a housing correction in the future
George, do you all consider the house payment just the house payment or does that include the escrow payment as well? Thanks
Yes. PITI - principal, interest, property taxes, homeowners insurance. Also, HOA/PMI if applicable
This was depressing af.
Thank you.
The value of our house went up an estimated 50% in seven years. I believe it is a housing bubble where I live. The property taxes are driving people out of the area.
Another option is to ignore there 15%, get one for 30 and then with 20% you can afford a 250k house which in alot of areas still wont get you much but its much better then there option. Sometimes in some economies and housing rates, flexibility is key but we know the DR plan has zero flexibility and it's do it all my way, no deviations
I don't know. This seems extremely conservative. I bought in 2019 and had 4.4% or something like that on a $300k home. I went with 30 year and was making about $85k at the time. Now, maybe everything worked out fine because I refinanced and/or because I got a significant raise later on. But I'm glad I budgeted carefully and decided I could afford more house because less house was very unappealing. I wouldn't want to encourage anyone to get themselves in a tight financial situation, but I consider myself pretty risk averse. Always have had a pretty healthy emergency fund in the bank. Lived extremely frugally most of my life. I think it's okay to stretch Ramsey's rules a bit here.
Crazy down payment's the only way we're gonna make it ig, better start saving now Preston.
In massachusetts, the average 1 family homes are 500,000 and 3 bedroom 2 bath is close to 1 million! Rent for apartment (its a hotel room with bathroom) start at 2,000 per month. Its out of control and there is talk about stopping people from buying homes just to rent them out and im 100% on board with this.
All right let's do a case study:
Scenario 1:
It's 2020, you make $75,000, looking to buy a $250,000 home. 15 year mortgage rate is 2.5%
You have a 20% down payment which puts your mortgage at 1788, but you want to live by Ramsey rules. Since you're not under the 25% of your take home, you decide to save an additional $50,000 over the next 3 years. With an increase in pay, you expect this will put you right in line with the Ramsey rules.
It's now 2023 and you've been sacrificing so you now have $100,000 total saved up, and your pay has increased to $100,000. It's now 6.5% interest and the same house is now worth $350,000. You can either now get a much worse house, or save an additional $75,000 over the next 3 years, hoping the prices don't continue to increase in the meantime.
Scenario 2:
It's 2020, you make $75,000, looking to buy a $250,000 home. 30 year mortgage rate is 3%, and since it's just over 25% of your take home, you decide to go with it. You save the same $50,000 over the next 3 years, but your home also grew in value by $100,000, and you were able to pay an additional $15,000 towards principal. Your home payment now feels much lower due to inflation and you've locked in your lower interest rate.
Is it really better to keep saving for a higher down payment and avoid a 30 year at all costs?
Plus if you do get the 30 yr loan. You can pay more to decrease the interest penalty and if money got tight for a few months you are only obligated to pay the lower monthly mortgage.
However the small issue thinking that way is people use the 30yr just to buy too much house compared to their income, and doesn’t allow any room to make extra payments etc.
@@xxtoptankxx6873things don't always have to change for the worst..bi bought my house making 40k a year .. it was tough.. but now I'm at 80k four years later. Things can change for the best too!
This right here is the way idk wtf is up with dave thinking 15 year mortgage is a good idea for most people.
Everyone is talking about how unrealistic these guidelines are, and I'll admit they do seem unrealistic. But here's a question... if everyone in America followed these rules and refused to buy at the current outrageous prices would the housing market come down? Prices go up because people are willing to pay... Home appraisals are based on comparable sales in the area...
I mean of course. More people would have more “skin” in the game as their DP would be more.
But not everyone is gonna do that.
You CAN do it. I saved up 70k + closing 13k. Bought 330k house. Ended up owing 269k. 1233 payment with tax & ins included. Living in a coastal town. Beautiful house, great schools and 25 miles from an airport (jax).
From Europe it seems like a strange situation if you don't know US zoning and the minimum parking rule.
Now that single-family homes (the most expensive for obvious reasons) are going towards their normal prices (very high, only for the rich), the lack of condominiums is being felt.
Where I live most people buy a normal condo in a normal city (where parking is few and paid so people prefer to go on foot).
And condos have much more accessible costs for most people here and are obviously many more (because there is no zoning dedicated to single-family homes and there is no minimum parking required).
Moreover, in 2023 here, with thick walls with thermal insulation and sound insulation, not only you spend much less money on bills, you don't hear a thing from your neighbors.
I don't know if people in the US want to change these rules, but I think it would be a good solution to have a middle ground between the dilapidated condo of the pre-zoning era and the single-family home of the rich.
It's true that having a garden is nice, but paying for the maintenance of a single-family house yourself is an enormous expense... in a condominium with 10-20 tenants, on the contrary it is almost always a minimal expense (for common areas such as the roof) and living in the city with services all nearby is very convenient. The alternative is probably to stay in rent for your whole life or go into heavy leverage on your mortgage and pray that everything goes great.
I can't afford a pot to pee in, or a window to throw it out, so...
I wish I had videos like these 11 years ago when I was out of college. No one told me that a higher down payment would be this beneficial for a house.
But this is just basic math, there isn't anything special happening here. The higher the down payment the lower the monthly payment.
@@jackdaniels5134 no one explained how down payments worked to me. My parents never told me this stuff. School never did. Of course it's basic math but no one teaches you about the home buying process
@@jackdaniels5134He may be talking about PMI, but that can be taking off when your appraisal is over 20% or he pays off over 20%. I haven’t paid off 20% and I removed my PMI over a year ago.
Ankeny is a great town!
I feel this is technically good advice but not practical. Theres a difference between looking for a dream home and not getting a run down shack which is exactly the difference in DFW between what you should pay vs what you can pay. Im not saying go and pay 40%+ of your income, but I think you can be successful up to 35% depending on your income level. Finances are smart decisions across the board not just the mortgage. If you can cut costs elsewhere and get a little more than you can afford, maybe you won't have to wait 10 years to own a home or move away from your friends/family/work and/or commute over an hour to work everyday. These costs dont have a monetary value but still add up. 295k in DFW does not get you something you'd feel confident wasn't in very bad shape and will immediately incur lots of repair costs. And 150k is certainly not a typical income here either.
For the longest time myself and wife were on national minimum wages, the fact we managed to buy a modest home is nothing short of miraculous
But the real key is that we haven’t played the “property ladder” game and we’re still in that original home which is near paid off at 42
With the median house price at 362,000 and my salary being 49,000 I took that super handy advice and crunched the numbers where i put a larger down payment! To stay under a 796.25 monthly payment I'd only have to put 93% down or 336,660. Gosh I'm just blessed to live here in the usa where i will die before owning a home.
My home was about 45% of my after-tax income, not counting side hustles, and even then I don’t make that much. But I’m still able to save about 1k a month after paying bills. A big part of it is that I don’t have a car, nor eat out much. Just depends on what sacrifices people want to make
I live near Ankeny...don't do it...winters are hell...and the property taxes are actually off the charts and that is our invisible wall around the state...on the flip side gasoline sold in Ankeny is 20 cent less a gallon than other cities in the area...
Our household annual income is 220k and following Ramsey plan, we can only afford a 415k house. But! Every month we can breath and no money fights whatsoever
In 2016 the bank said we could borrow 600k based on our income. We thought that was INSANE and only borrowed 230k to buy a 300k home. Fast forward to now, we are in our 2nd home and sold the first home that we bought in 2016 during the peak in the pandemic in late 2021. We used the profits and all those years of almost paying off our mortgage we used it to pay off our primary home! Our property tax is only 7.8% of our monthly net income. That was a couple of years ago and now we are debt free which allowed us to max out our retirement accounts yearly, have 0 debt of any kind, built up 2 year emergency fund incase we both lose our jobs, fund 2 kids 529s per month and we save about 35% of our income. We are in our mid to late 30s so feel very blessed.
Hello George and Dave Ramsey's followers! I'm a single guy (28), and although I've just learned about Dave Ramsey (I'm an immigrant, 3 years in the US) I always lived with the similar financial principals. So here's the question. When you say that the payment shouldn't be more than 25% of take home pay do you also include other payments that come with owning a house like HOA, property taxes and insurence? I make $65k, have $80k I could put on a downpayment but the property taxes are so big I'm afraid I'm not gonna make it. Ideally, I want to keep my housing expenses, meaning mortgage, utilities, taxes under 35% of my take home pay, but I'm not sure if that's even possible with this income.
My wife and I just bought a 1900 SQ foot home, 3 bed 2 bath, full finished basement, 2 car garage, huge back yard...for 250k (in a suburb of Omaha, Nebraska)
Cleveland does Rock 😆
George, can you do a video on this for us Australians who are looking to get into the market? Housing market here is BS - so would like to hear your take on "what's actually achievable" based on what can be affordable with $80-100k salary
Imagine this thought process; he say’s your killing it at 150k a year and you get to splurge on a 300k house….🤦🏻
Oh, this is quite conservative. I thought 30% of the gross income is the max.
I'm from Tennessee and i'd recommend moving to Crossville or Cookeville, nice area that is developing more and more by the day
Places in Cookeville can be had for $140k-$180k if you are willing to settle for only 2-3 bedrooms and no garage.
(Please don't move to Memphis tho, it's considered the Detroit of Tennessee by people from here) Can't have shit in Memphis....
Still doom scrolling zillow for hope. I have to get my 6 month emergency fund then I'll go to open a high interest account and start saving a house down payment. Probably will take 5-6 years but I'm hoping that the prices on houses goes down by then or that I am able to boost my income in some way because barring that everything in my area that is under 300k is pretty much unlivable and needs new roofs or a total interior gut job according to pictures so maybe in a few years I can either afford to take a project like that on or the housing market comes back to reality.
When he said buying in “todays world” AND seems to think 25% housing payment max is feasible…I got whiplash
Ankeny is nice. Used to live there.
Hey George! Could you please do an example with the median home cost in NJ with the median salary in NJ? Also, include median rent costs in NJ?
Hate to say it, but he has no practical advice for this because he has no idea how much it costs to live in the greater NYC area.