The Dave Ramsey Approach To Mortgage Debt
Dave Ramsey has an interesting approach to how much you should borrow for a home purchase. While many say the rule of thumb is that your mortgage shouldn’t be more than a third of your income, Dave’s approach is much more strict.
The rule that Ramsey uses is that your payment on a 15 year mortgage should not exceed 25% of your take home income. I would guess that 90% of homeowners are out of line with this standard (myself included). This is a very conservative approach and would definitely limit the price of the homes you’re considering.
With the housing bust, you have an opportunity to purchase much more house for the money than in recent years. The smarter financial decision would be to resist the urge to buy more house and instead, buy the same amount of house for significantly less money. This would surely be in line with Ramsey’s idea of keeping your payment under 25% of a 15 year mortgage.
I love it and wish I had heard this advice prior to purchasing my current house!
How about you? Is your mortgage payment in line with Ramsey’s standard?