Can't Afford To Buy A Home? Dave Ramsey Has Some Suggestions

Navigating the housing market can be a daunting task, especially in 2024 when prices seem out of reach and the 30-year fixed rate sits above 7.5%. Whether you’re looking to buy your first home or upgrade to a larger space, affordability is a key concern for many. 

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Only Buy What You Can Afford

Ramsey recommends keeping monthly housing costs at 25% or less of monthly take-home pay. For example, if someone brings home $10,000 a month, the maximum house payment should be $2,500. This rule of course is limited in high-cost areas where many people would struggle to keep housing costs at even 50% of their pay, but it does reflect Ramsey's low-debt conservative approach. 

Ramsey recommends saving for a longer period to make the home more affordable and renting a cheaper place in the meantime to raise more funds. 

Consider Moving While Boosting Your Income

When housing costs require people to put too much of their income toward a new home purchase, they can either increase their income or consider moving. A higher-paying job or a side hustle is one way to make a home more affordable. However, you should hesitate to work so many hours that you cannot enjoy the new home. 

Relocating to a new area (ideally with a new job or transfer) is often the best option for prospective home buyers. According to data from the National Association of Realtors that examines 2023 median home prices in different metropolitan areas, there's a wide range of home prices. For example, the median home price in Akron, Ohio, is approximately $196,000, while in the San Diego-Carlsbad metropolitan area, it is approximately $931,000. There are differences in wages between the two areas, but not to the same extent as the spread between housing costs. Housing is 4.75 times higher in San Diego than in Akron, but people are not paid anywhere close to that multiple, which creates an affordability gap. 

Ramsey recommends moving to a less expensive part of a city or moving to a new area altogether to get as close as possible to the 25% max spending rule. 

Trending: Can you guess how many Americans successfully retire with $1,000,000 saved? The percentage may shock you. 

Reset Expectations

Ramsey and his team recommend buyers assess wish lists when buying a home and do a classic needs versus wants assessment. They suggest purchasing a home with fewer bedrooms or a smaller lot when it will provide a financial cushion while still proving functional for the homeowner. You can also make adjustments regarding your desired home's location, such as choosing a home without a lake view that's $200,000 cheaper than a comparable home with the view. Or, consider picking a home in a different well-regarded school district that's your second choice but still very good.

Rachel Cruze from Ramsey Solutions wrote in a blog post, "Letting go of the idea of a luxury kitchen or gleaming hardwood floors might be tough, but it's worth it to avoid getting in over your head financially. Remember, you can always upgrade your home's features down the road."

Figuring out how much house you can afford is complicated. Consider looping in a financial advisor to help you budget and plan for the future. A professional adviser can run the numbers with you so you understand how a home purchase fits into your long-term financial goals. 

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

Aran Richardson has written about personal finance, investing and a range of related topics for a variety of publications. He 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 Richardson 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.