Dave Ramsey Insists 'If You Can't Afford A Home On A 15-Year Mortgage, It Means You Can't Afford The House. Period.' — But Under His Recommendations, You Need To Bring Home $12,000 A Month Plus An $86,000 Down Payment

Dave Ramsey delivered a definitive stance on the debate between 30-year and 15-year mortgages. Responding to an inquiry from Julie about the potential benefits of a 30-year mortgage over a 15-year option, Ramsey’s response was unequivocal: “Let's see, how should I put this? No! If you can't afford a home on a 15-year mortgage, it means you can't afford the house. Period.”

Ramsey elaborated on the conditions under which a homeowner might consider refinancing to a 30-year mortgage, such as avoiding foreclosure or bankruptcy. However, he said, “It doesn't make it better than a 15-year mortgage. You'll never hear me recommend a 30-year mortgage.” 

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His critique of the 30-year mortgage centers on the prolonged debt period it entails, questioning the financial wisdom behind such a decision. “Why would you want to stay in debt for 30 years? Do you have a fear of winning with money?” Ramsey asked rhetorically, emphasizing the financial inefficiency of the longer mortgage term.

Supporting her father’s viewpoint, Rachel Cruze, also a financial adviser, shared her perspective on the Ramsey Solutions website. She advised, “‘Whatever you do, never buy a house with a monthly payment that’s more than 25% of your monthly take-home pay on a 15-year fixed-rate mortgage (which has the overall lowest total cost).” Cruze also cautioned against opting for “expensive loans like FHA, VA and USDA,” aligning with the principle of minimizing debt and interest payments. 

Lenders typically use the 28/36 rule as a benchmark, where no more than 28% of your gross monthly income should go towards housing expenses, and your total debt should not exceed 36% of your income.

Despite the strong endorsement of 15-year mortgages by the Ramseys, there are compelling arguments for choosing a 30-year mortgage as well. These perspectives highlight the importance of considering individual financial situations, goals and the flexibility that a longer mortgage term can offer.

In a video shared on Instagram, a certified financial educator (CFEI) named Patrick provided an in-depth analysis specifically referencing the cost of purchasing a median-priced home following the recommendations of Ramsey. 

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The median home sale price was identified as $431,000 as of 2023, according to the video. With the average interest rate on a 15-year mortgage at 6.47%, the post detailed that a 20% down payment, amounting to $86,200, would be required. This initial payment leads to a monthly mortgage expense of approximately $2,998. 

The educator emphasized that an individual or household would need a monthly take-home income of at least $12,000 to afford such a mortgage comfortably. However, the average median household income is $6,215 per month or $74, 580 annually, based on census data.

One of the primary advantages of a 30-year mortgage is the lower monthly payments, which can make homeownership more accessible or allow for the purchase of a more expensive home within budget. A lower payment can offer financial flexibility, enabling homeowners to allocate funds toward other expenses or investments. The predictability of fixed payments over the long term offers stability, especially in fluctuating economic environments​​.

Financial advisers can provide personalized guidance tailored to an individual’s unique financial situation, goals and risk tolerance. They possess the expertise to assess various factors, including income stability, future financial goals and current financial obligations, to recommend the most appropriate mortgage option.

A financial adviser can also help navigate the complexities of the mortgage application process, interpret the long-term implications of different mortgage terms and strategize ways to optimize financial health while pursuing homeownership. They can offer insights into how a mortgage fits into a broader financial plan, including savings, investments, retirement planning and debt management.

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*This information is not financial advice, and personalized guidance from a financial adviser is recommended for making well-informed decisions.

Jeannine Mancini has written about personal finance and investment for the past 13 years in a variety of publications including Zacks, The Nest and eHow. She is not a licensed financial adviser, and the content herein is for information purposes only and is not, and does not constitute or intend to constitute, investment advice or any investment service. While Mancini believes the information contained herein is reliable and derived from reliable sources, there is no representation, warranty or undertaking, stated or implied, as to the accuracy or completeness of the information.