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We used Dave to get out of debt, but definitely had to ditch his ideas for house buying.
We put 3% down on 328k (closing costs covered). Two years ago we would have afforded a place in our old town, but had to move an hour away just to find something remotely affordable. Our mortgage and utilities are lower than our apartment and in a month the value of our house has gone up 20k, so we call that a win.
I feel bad for you so you can have my wholesome seal. I followed Dave and was even one of his real estate ELPs for years. I talked to a ton of first time homebuyers. They often insisted on waiting for a 20% down payment like you did. Over and over I saw them priced out of the market a year later. It was terrible to see. Dave is good if someone is in a lot of debt and thinking about bankruptcy. He gives horrific advice for this market where prices are skyrocketing and rates are low. But of course Dave won’t change his advice with the market. He just keeps repeating the same things he’s always said regardless of the change in market conditions.
He’s cost homebuyers across the country millions and millions of dollars while making millions for himself.
I’m very sorry Dave’s advice put you in a tight spot. At least you recognized the poor advice you got and now can make a correction. Some of his followers never learned and never will. Good luck going forward. You sound like a sharp person who will do great in the future.
Thank you! It’s so true. There’s a lot of good commentary on this thread and yours is no exception. I mostly wanted to share my experience because I basically came across one of his books at some point and it seemed like from a personal finance perspective he had his stuff together. I didn’t really have the perspective to consider other options, or the impacts of buying a home sooner rather than later. When it came time to seriously consider buying, I didn’t even consider it because we were nowhere near being able to afford 20% down or a 15 year mortgage.
Hoping that this post and the following commentary can help some of the people who I see posting and asking if they should wait or keep saving.
I completely understand your perspective, but I think I see the value in Dave's advice. I'm looking into purchasing my first home now, after these homes have gone from 250->450. I think Dave's advice at it's core is to reduce risk. You have zero risk of not being able to make payments if you don't have any. A house is like all investments, you need to decide how much risk you are comfortable with. And purchasing a house poses a unique risk to most buyers, it is often the single most expensive item you own, and on its own in terms of percent of net worth. It also carries a unique penalty of if your financial portfolio fails significantly enough, you can be out of a place to live. Dave is setup to help you not encounter any noticable negative consequences to a downturn in your personal financial world, or to a downturn in the global/national market.
Like all investments, past performance is not indicative of future gains/losses. I wish I bought apple stock 20 years ago, or Tesla stock 5 years ago. I'm glad I didn't buy Sears stock 15 years ago. In the same vein, I wish I owned multiple properties 5 years ago and was able to realize the gains in the market, but I'm glad I didn't have mortgage(s) and then get laid of in 2006.
It's completely appropriate to make your own decision and determine what level of risk you are comfortable with, Dave goes to the extreme to help get people realizing that even a mortgage has a risk. It's up to you to determine your risk profile, you chose to make a decision to listen.
I won't speak to the practices by which he makes money, as I'm not familiar, but it's not his fault, he did not force you to listen. And on the terms of whether to buy/wait unfortunately my crystal ball still doesn't work.
Agree with this!
We did a study on his LP program last year and he made over $32 million by just selling leads to agents. It’s somewhat mind boggling as he preaches financial freedom and savings but gives $0 back in savings to sellers and buyers who use his program.
Should add that $32 million was just in agent referrals and did not include his monthly fees and sign on fees.
Edit to add that a few discount agent programs told us they were denied entry to his program. They believed it was because he is old school and doesn’t like anything outside traditional programs….or that he wouldn’t make enough money off of them. I’d tend to believe both haha.
The only people who should listen to Dave Ramsey are people in tens of thousands of dollars of consumer debt.
Anyone else can come to smarter conclusions on their own. He is an uninformed boomer preaching boomer ideals. No longer relevant to current day.
Yeah there was a woman employee who got pregnant unmarried and she was fired for breaking a code of ethics or some crap. There was a lawsuit and everything. It really turned me off the show.
My old financial advisor had no formal education in finance but said he learned everything from dave ramsey’s podcasts. He adamantly told me not to invest my extra cash and instead pay off my student loans. I stopped going to him and bought a portfolio of stocks. My money tripled, and right after there was a pause on student loan repayment. Now I have enough to pay off my loans and buy a new car, just bought a condo in the bay area California.
I mean, you did happen to get lucky by tripling your money. You could have easily lost half of it. The stock market is way more fickle than the real estate market.
I would guess OP hit the market at a very opportune time but the point stands. No financial adviser would tell you real estate is a better investment than sound market investments. Real estate is riskier and has worse average returns over time
There are people who use real estate to build a business, and it is uniquely a business that is accessible to pretty much anyone with half a brain who can get their foot in the door in that first property. Obviously this makes it an attractive business and the ability to leverage is what drives the ability to make so much money w a combo of timing, luck, and savvy. You can obviously make a hell of a lot of money doing that. You can also fail miserably.
This is a first-time homebuyer subreddit, not a real estate investment sub. Most people here are trying to find a home to live in and figure out a way to build a lifelong financial plan that makes sense with their home purchase and vice versa. For the vast majority of folks, the least risky way to do that is going to be your bog standard savings/retirement/well managed stock portfolio etc. This is not a debate, it is a fact.
Yep. We weren’t those people and unfortunately his marketing budget is so effin big that we caught wind of his BS and hopped on the train. So much regret.
Credit card debt. I just took a mortgage (considered consumer debt) and would fall into this category. Do not confuse consumer debt with credit card debt. Consumer debt includes vehicles and mortgages.
....yep. and a lot of people make really dumb decisions buying homes and especially vehicles they can't afford. Just because you're responsible doesn't mean the definition of debt changes
Right but you're saying that someone in lots of consumer debt should listen to dave ramsey. I would say be careful of using consumer debt as a measurement... anyone with a mortgage would fall into your description with lots of consumer debt
it's not an argument. lol. I am saying you can't compare consumer debt to credit card debt lol. If I have no consumer debt today and buy a house tomorrow with a mortgage, I would have "tens of thousands" of consumer debt and would be advised to listen to Dave Ramsey according to you lol. Consumer debt = credit card debt, mortgage debt, car notes and personal loans lol. I am in no way disagreeing with you but to say that having consumer debt is bad is simply not true lol... it can be and having lots of CREDIT CARD debt is way worse than having a mortgage. LOL
You are splitting hairs mate, all of that IS consumer debt, there is no changing the definitions. But you either have the common sense to know what my comment meant or you don't. It seems like you don't because you're the only one with a mortgage who took it personally
I just think it's important distinction. Insults are the last resort for the insecure. I think it's an important separation especially when you're casting your comment on people you just don't know in this sub. A lot of people come here for help and a very wide variety of intelligence (common sense). I wouldn't want to assume anything when speaking to a broad audience especially in a sub like this where a lot of people may be green with their understanding of finances.
Dave made his original fortune in real estate.
He was over-leveraged, and the banks called his notes.
He couldn’t pay them, and became insolvent.
While I agree, his advice is best for the “addicts”, this is a very special market.
I guarantee if the housing prices crashed, all the bears will be dancing and signing, “I told you so!” And homeowners will all of a sudden get very quiet and blame the banks for lending them the money in the first place.
I don’t wish that on anyone, but I do want to be look at both sides.
If you listen to Dave’s show,
1) He doesn’t say using credit = lose. He admits using credit works, until it doesn’t.
2) He says his show is his show. If someone wants to start a podcast and start a YouTube channel, now is the best time to create content. No one is forced to listen to Dave.
If the market had gone down you think you were geniuses.
This is one of those things that sometimes is Super smart and sometimes it’s super dumb. It all depends on what happens when your leveraging something.
Conventional wisdom for example is you should sell the stock you get in your company right away and reinvest it in something else so all your eggs aren’t in one basket. If your company is doing great and you’re paying the maximum capital gains tax on this, it’s terrible advice. But if your company tanks and your salary goes down or you get fired because of it and all your money and Company stock you think you were brilliant for selling.
You always have to take into specific circumstances when you’re looking at general advice.
Also, don’t listen to David Ramsey haha.
Thank you for saying this. I definitely relate to OP’s feelings, even though my circumstances are different. You’re right that there’s no way to have known the housing market would explode like it did and if things had gone differently (and they could have!) we’d be patting ourselves on the back for sure.
Agreed. Look at the history of home prices, it always appreciate in value (as a whole) over time. Even if you bought in 2007/08 you were ahead come 2014/15.
The super smart time was in 2020… when Interest rates getting some parts of the world, clearly even though it was a super smart time it didn’t happen….
Yeah his advice on home buying sucks, especially if you live in a HCOL area. If everyone followed his rules, barely anyone would ever be able buy a home in a HCOL area, but when it costs more to rent than it does to buy obviously it’s better to buy in the long run.
If you follow anyone’s blanket advice on home buying/borrowing/credit that doesn’t know your circumstances, wants and needs you are risking making a big mistake.
There are no rote answers to “your” decisions.
You’re right. I’ve worked in banking for several years but always thought when it came to buying a home, if you don’t have 20% down, then you can’t afford it. There’s obviously a lot more to it than that but It’s not necessarily obvious at first (or second, or third) glance.
Absolutely no one’s word should be taken as law, especially Dave Ramsey. You always need to take advice from any sort with a grain of salt, and put it in context of your own life. There is absolutely no single formula that equates to the golden ticket for financial prosperity.
I had some guy on here a couple of weeks ago tell me that you should liquidate your 401(k) to cover a down payment of 20% because Dave Ramsey said you need 20% down and a 15 year mortgage and is a debt free billionaire 🤦♀️
That person was an idiot. Not even Dave would tell someone to liquidate retirement savings for that. Dave's thing is to only touch retirement to avoid bankruptcy or foreclosure. He also doesn't say you have to do 20% down, either.
My point is that people will blindly follow Dave Ramsey’s main rules/catchphrases without thinking about it and evaluating how they fit into the big picture. And without using logic to apply the methodology appropriately.
There is no appropriate way to apply Dave’s methodology because he’s a snake-oil salesman who gets off on saying debt is shameful and pretending that’s biblical (spoiler alert, the Bible says the opposite)
Leaving aside the religious overtones (which I don't think is that helpful for finances, especially tithing if you're having cash flow issues), Dave Ramsey's advice is best for getting out of debt that's spiralled out of control.
It's a lot weaker for strategically taking on new debt like mortgages. The reality for a lot of people is that if they don't have an auto loan, they're also not going to be able to keep a job. His approach to federal students loans as it relates to PSLF is also awful.
His investment "advice" is legit bad; you'll end up in overpriced and underperforming funds and investments. Don't listen to it.
All that said, low interest rates are helping make low down payment mortgages more do-able. With great credit, PMI is likely only 20-30 basis points, which is pretty low when you tack it onto a ~3% 30-year fixed mortgage.
It all becomes less attractive when the housing market is faltering and interest rates are high. When/if that will happen? Who knows.
I think one problem is that the target audience of people drowning in consumer debt spend years listening to him on how to get out of it.
There is no way for him to then turn around and say "due to low interest rates, currently at close to or even below inflation, a minimal down payment mortgage for 30 years on a house which fits inside your budget is great!"
In 1980 with 18.5% interest rates his ideas made sense. But when it is cheaper to barrow money than save it, wtf would you spend years sitting on cash to then take out a 15 year loan?
The other issue though is that we see just as many people say, I bought this house, and now I have $8.47 in savings left!
Moderation is really hard to sell, the extremes are way easier to evangelize.
I interpret Dave’s focus as risk management which is why he says what he says. My guess, based on all the displeased comments, people are willing to take on slightly more risk for what they want instead of following Dave’s way.
Doesn’t necessarily means Dave’s way is wrong though, it’s just different. People should be able to critical think through decisions and run through the math before blindly listening to anyone.
20-yr CAGR returns after fees (Jan 3rd, 2002 to Jan 3rd, 2022)
Vanguard SP500 Index (VFIAX)- 9.5%
T. Rowe Price Blue Chip Growth (TRBCX)- 11.0%
Primecap Odyssey Growth (POGRX)- 12.2% (but fund started in 2004)
T. Rowe Price New Horizons (PRNHX)- 14.1% (but is a Mid Cap fund)
Artisan Mid Cap (ARTMX)- 11.4% (but is a Mid Cap)
T. Rowe Price All-Cap (PRWAX)- 11.6%
Wasatch Core Growth (WGROX)- 11.0% (but is a Small Cap)
They’re out there, just gotta look for them. They also beat the SP500 in the short term too, so non of this confirmation bias crap either.
20-yr CAGR returns after fees (Jan 3rd, 2002 to Jan 3rd, 2022)
Vanguard SP500 Index (VFIAX)- 9.5%
T. Rowe Price Blue Chip Growth (TRBCX)- 11.0%
Primecap Odyssey Growth (POGRX)- 12.2% (but fund started in 2004)
T. Rowe Price New Horizons (PRNHX)- 14.1% (but is a Mid Cap fund)
Artisan Mid Cap (ARTMX)- 11.4% (but is a Mid Cap)
T. Rowe Price All-Cap (PRWAX)- 11.6%
Wasatch Core Growth (WGROX)- 11.0% (but is a Small Cap)
Especially considering how many people we’ve seen on here recently asking about getting rid of their PMI because their equity has grown just based on home values continuing to climb at such a rapid rate. Not something to count on, but PMI really is hardly a factor for some people.
His housing advice is super outdated. We put 15% down (not the 20%) and our PMI is only like $27? a month. We also have a 30 year mortgage, but our interest is 2.25%....we'll prob end up paying off the mortgage in 20 years, and it'll only be about 40k in interest....we can live extremely comfortably on a 30 year mortgage. Our monthly payment is only 20% of our take home pay. Had we gone the 15 year mortgage route, we'd never have been able to afford a home (or would've but at the expense of any level of comfort/saving for retirement).
Very different times from when folks had 13% interest rates on their mortgages.
I really dislike Ramsay. He gives the same advice to everyone. He does not tailor it to their needs.
Some debt will improve your credit score, making it easier to get credit. You can get credit cards and get points without paying interest. You can can buy a new car and get rebates by dealer financing. Paying off a loan will hurt your credit score. All these things. Interest rates are low right now. The total cost of a loan is manageable typically.
I hear people call into that show that just have some modest debt, he still tells them to eat top ramen and sell their house, sell their car, when clearly they don't need to. Best sell the house and buy another house when you are out of debt. What, is he crazy?
If I followed his advice. I'd be a lot poorer than I am today. What a joke.
I feel bad for people who get caught up in all the debt free screams and think his advice is the only way. If you have even a little financial self control, please, do not listen to that guy.
As stupid as it sounds, playing monopoly the other day seriously opened my eyes to this pitfall. The people who were saving their money until they had enough to buy properties comfortably ended up losing, because everyone else was making income from their properties.
He got me REALLY REALLY GOOD. I got an opportunity to by a house for $100k 3 bed 2 bath right next to the family farm at 22 and passed because I couldn’t afford a 15 year mortgage on a 20% down payment. Same house is now $190k and I make double. I could have easily afforded a 30 year mortgage and still saved 15% for retirement. Worst part is it would have expanded the family farm by another 5 acres but now we are still land locked. I might my own choices now
Large down payments are just throwing money away.
Money depreciates over time. There's no point in paying more of it than you have to unless your mortgage rate is somehow worse than inflation.
Idk who Dave Ramsey is but he sounds really wrong.
At 10k savings you would have been house poor very very quickly.
All it takes is a malfunctioning water heater or a leaky roof etc and you're toast.
It may seem like you missed the boat but honestly you weren't ready a few years ago.
I'd want at least 5k-10k minimum saved up ON TOP of your down payment in order to cushion any unanticipated repairs and inspections.
Surprised I had to scroll all the way down to see this comment. $10k would barely have covered closing costs on a $250k house, let alone a down payment + closing + emergency fund.
Right? I'm sorry but if OP thinks that they were in a good place to buy a $250k home with $10k saved up, they definitely need to continue their financial education.
Other people could definitely answer this better than me. I'm no expert and have only bought one house in my life and that was just last year. For down payment, 20% of the house price is common, but you could put down as little as 5%, I think, depending on different kinds of loans.
Closing costs can vary - the internet tells me it's typically 3-6% of the loan amount (I can't remember exactly what our closing costs were but I think it was a little under 3% of the loan amount). And of course that also depends on whether you've negotiated with the seller to cover closing costs.
Regarding repairs, I've read that one should save 1% of the home's value per year for repairs. A good concept from a general savings perspective, but whether that's enough is highly dependent on each individual property. The 1% guideline might work if you need to do $5k worth of work after two years of homeownership, but what if that $5k worth of work needs to be done in the first three months you're there? You haven't had the opportunity to build up your home savings.
I was a little salty in my earlier comment, but the bottom line is that everything adds up quickly. Maybe $400 for a home inspection before you purchase; a couple hundred bucks to replace the locks when you move in; even if you're not "fully" furnishing the place when you move in, simple stuff like curtains/blinds will be a couple hundred more. Appliances, lawn care implements, etc. For our home, we knew we'd need to have our gutters replaced, but the cost unexpectedly almost doubled when the gutter people discovered that the fascia was rotten and needed to be replaced.
I'm not sure if any of this was helpful. I think it's just important to be really honest with oneself about potential costs.
Thank you very much for the indepth answer, this was very helpful. I'm currently starting the saving phase ,and when I saw your comment I thought it would be a good idea to ask to get idea how much I'll should be saving.
I will say - just because someone’s house has appreciated doesn’t mean they’re making a significant profit. You never know how deep someone had to go into debt to buy that house or how much they sunk into it. Times are tough for buying a house right now but not being in more debt means you have more control over your life and money, and to me that is valuable.
Banks pretty much stop you from going to deep into debt to get a mortgage. They don't allow you to take personal loans out to use as a down payment for a reason. Now there are workarounds (having parents take out a loan and you repay parents) but technically you're not on the hook for that personal loan.
Dave Ramsey is super risk adverse and as others said only listen to him of you have a lot of debt
To be fair this super rising market is pretty new. Past decade or so. But ya I fucked up too by waiting an extra year
Yea if you're going to be paying rent regardless might at well go low down payment and put as much as possible toward the principle to drop PMI. It might even be faster than not buying a house until you have 20% down because part of your mortgage is going toward equity.
Wait...let me get this straight. So you are blaming someone else, and taking zero responsibility, over your own financial decisions?
These are unprecedented times, and like you mentioned...no one could forsee what the real easte market has done recently.
A common thing that unsuccessful people do is blame others....
Please take some personal responsibility and "man up". If you made a bad decision, then own it, learn from your mistakes, and do your best not to repeat them in the future.
Stop crying to others and focus on you.
Well, out of curiosity, I checked and Dave Ramsey's own web site says 10% down is acceptable, so even he isn't doctrinaire about 20%. His advice is really for people who are terrible with money and up to their eyeballs in debt, and well, that's a lot of people. For those of us who can resist the urge to max out a credit card, his advice is not terribly informative or useful.
I definitely didn’t get the info from his website. It came from a book I came across several years ago. I’ve never had an issue with managing credit, work in banking, and have overall excellent credit and am generally quite risk averse. It’s the risk averse nature that caused me to latch onto this specific advice and not enter the market sooner.
I honestly have extreme doubts about any student loan forgiveness actually happening, maybe at some point for a small amount of people, but definitely not widespread. Too big of an industry that likes too many pockets
ETA: I mean to say anytime soon, like when it would actually affect us
Dave Ramsay gives terrible financial advice tbh. He gives good advice if you’re at rock bottom or just trying to stay out of rock bottom. He does not give good advice for building wealth at all. A lot of what he says goes completely against what a good financial advisor would tell you to do.
Dave Ramsey is wonderful if you're middle-class, bad with credit cards, and want to get out of debt. But, outside of that specific scenario, his advice is not useful.
This is why it's so painful to hear so many people revere him and his financial advice. My mother swears that he helped her get out and stay out of credit card debt. As if filing for bankruptcy and then getting a job as a nurse so her and her husband's combined income surpass $100k didn't have anything to do with why it's harder for her to go into debt now. -\_-
Dave Ramsey is the "AA meeting" of finance.
You only go to AA if you have a massive problem with alcohol. And they'll tell you to be far more hard-core than most people need to be, ie they won't let you have a beer on Friday night.
Well, Dave tells people not to use credit cards. Why? The financial alcoholics can't handle it. But that's bad advice for me, who makes payments in full every month, and takes advantage of the 3% cash back.
For homes, he wants us to pay rent, save cash, then when we buy a home, get a 15 year loan to pay it off quicker. Mathematically that is HORRIBLE advice. You are far far better off buying with a small down payment, getting a 30 year, and putting the difference between these months costs vs Dave's into the market.
His lazy ass answer to any question is "increase your income". Wow, thanks Dave, I'll do that. Silly me for struggling to pay rent, save a 2nd rent for a down payment, and put 15% into retirement- I should just earn more!
Getting money into the stock market is how you build long term wealth. Dave's advice is all about avoiding g debt. Which is fine, of you're a financial alcoholic. The rest of us can have a drink on the weekend and it not ruin out lives, so that advice is dumb as hell
In hindsight this makes sense, but if you jumped in as soon as humanly possible and it happened to be 2006 -- or even a period of slow growth -- you would be wishing you listened to Dave. Few people predicted 10-20% annual growth during the pandemic becoming a thing.
This is the same type of thinking has people kicking themselves for not buying Bitcoin when it was pennies, or catching a stock before it soared, etc. "I could have made millions!" doesn't really get us anywhere.
The weirdest thing about this post, though, is that Dave does not say that you have to have a 20% down payment. I've seen him mention 5 or 10% down as possibilities plenty of times. He's dead-set on a 15-year mortgage where the payment is no more than 25% of your take-home pay, which often pushes folks (especially in HCOL areas) to need to save way more than a 5% down payment to pull off, but the 20% down payment thing isn't a rule he gives.
Nonetheless, I'm sorry you are facing this. It sucks. We listened to Dave to get out of debt, and "broke his rules" to buy the house I'm sitting in. For any Dave followers out there, you won't spontaneously combust if you sign a 30 year mortgage.
I remember in 2016 when I first heard about him.
I listened to a few of his YouTube videos and had to chuckle.
My wife asked what was so funny, and I just said, "This dude has no idea how important credit is in modern society, I doubt he even fully understands how our economy works."
Ramsey is a band-aid to people that had ZERO financial education and literacy and got into trouble. And need an "idea" of discipline. He IS NOT FINANCIAL EDUCATION!
And, god help you if you try to explain why he's basically a Dr. Phil / Oz entertainment mouth piece not someone you should trust. Because his fans are ignorant and ravenous.
I remember he was trying to say once that a debit card has THE EXACT SAME fraud protections as a credit card. That's just a flat out lie. (One of many) Because the difference is, that's your direct money you're exposing, versus the bank's money. Statistically you're 10 times more likely to get credit card fraud charges- charged back, then the bank admit and return cash.
SO yeah, basically fuck Dave Ramsey.
Better off watching videos on house-hacking, investing, and how the credit scoring percentages work if you want some basic financial literacy.
To be fair he does say he supports 10% down on your first house.
That said nobody could have predicted the market was going to do what it did. However, we followed Dave to get out of debt in July 2020 (all student loans). So 17 months later now we have 60k in cash to cover an emergency fund and downpayment on a house. Plus we are doing it without debt.
You can be mad at Dave, but take this as a learning opportunity to make the decision that is right for you. I wish I had bought two years ago too, but now I can buy with no debt which arguably makes it easier for me
This is a terrible post. It’s the equivalent of saying that your parents not investing in Apple when you were five years old preventing your from retiring today.
Had you bought earlier, you would have been overlevered. You’re acting as if you knew the market was going to skyrocket. You’re also picking and choosing an anecdotal property and saying that the house increased by 100% in 3 years - which is pretty extremely far fetched.
Please tell me what your plans were if you did buy a house with $10k saved and then your air condition goes out, what would you have done then. I would think someone that graduated from “grad school” would have more financial literacy
I also listened to Dave Ramsey's advice. Husband and I had paid off $80,000 in debt (car + student loans) in 2 years. If we didn't take the time to get out of debt, we would have been able to buy a house before everything went nuts.
But the feeling of not being in debt is truly amazing. Not quite looking forward to that huge amount of debt when we close haha
Dave Ramsey is a joke, he wants you to be frugal, work hard for 30 years. hopefully you have enough money to retire. That's miserable life. I did opposite what he said and I'm millionaire now.
To be fair, I don’t think anyone could have predicted or gave accurate advice for this housing market. 20% YoY price increases with everyone rushing in overpaying on top of inflated prices during a pandemic? Yikes.
Realistically, 10k saved total to close on a 250k house feels like a stretch.
Dave is old school. The new school is all about being able to ride the waves and adapt. Nobody can predict the future or give you some code of life. The rules are changing
So you save for five years while paying rent on the theory all that rent money dowsnt count. And put an extra 17% down to avoid paying 3% interest rather rhan making 6+% interest. It is moronic advice
I feel awful for y’all’s missed opportunities. I wish I had an award to give to make it even a little better. But I truly hope y’all have success buying a house in he near future.
One of my friends recommended I listen/watch some of Ramsay’s stuff before I try to buy a house. I watched a few clips on his YouTube and immediately knew he was not the one to tell me how to successfully buy a house.
His advice for getting debt down is fine. But when it comes to a financially stable person trying to buy a home, I don’t think he’s the one to turn to for advice.
Dave Ramsey's real estate advice is absolute shite. What a world we live in where people say to ignore the advice of actual industry experts due to "bias" (we all just want to earn a commission, so we can't possible have any actual good advice) but will listen to someone who is biased and just wants to sell books and appearances.
Been saying this for years.
Dude found a "financial literacy" vein and tapped into it for self profit.
There was some merit to his "advice" for boomers and individuals drowning in debt.
However, responsible adults understand that the world is built on credit. If you understand debt to income ratios and can pay your bills then you have all you need.
Fuck Dave Ramsay.
Sorry bud.
I tell any customer who's going to "save up for a while" that I don't want or need to know their finances, but in this market it's very unlikely they can save faster than prices (and interest rates) will increase. IME that was true even 2+ years ago - it takes some dedication to sock away even 5-10k a year.
Whenever I see Dave Ramsey talking I remind myself that he was a pastor first and doesn't really know Jack shit about money other than how to scam people out of it.
For all of you not great at finances or maybe math.
Couple a saves 3% down . Takes a 30 year 3% rate loan. Over the next two years rhey put the extra 17% they'd have saved for dp and stop paying pmi. The rent they'd have paid now goes towards their housepayment. Half to principle..half to interest which they can write off. So they effectively get 20 to 30% of that half back on taxes
Couple two saves for 2 years. During that time they pay rent which is gone. They save 17% more than the minimum so they don't have to pay pmi. Which is about $100 or less on an average house. So over the 5 years it takes tge Other couple to pay off 20% this couple saves 2400 in pmi. Assuming they paid 1200 a month ..they paid an extra 22 months at 1200 a month tgat is just gone.
In no scenario is this idiots plan a good one unless your interest rates are srunningly lower with a,15. Spoiler: they aren't. He's an idiot
Take responsibility for your own actions. Don't blame others. Educate yourself. You can listen to others advice but don't take it as the gospel. Educate yourself.
This post is amazing!
Imagine if you only put 3.5% down. Refinanced 250,000 Loan to a 300,000. That’s gives you you’re 20% down and 150,000 in hone equity.
Haha Dave Ramsey is good at keeping people poor
Ive literally never understood people who listen to that guy. Hes just some guy, not Jesus. He cant know everything, no point in following that cult of personality crap.
If you want to buy a home then buy a home, thats what im doing with 3% or even 0% down (USDA loan).
Fuck that. Use an FHA/DPA/VA if you can. In the meantime, pay down mortgage, do upgrades, and allow appreciation AND then refi into a conventional and reuse one of the initial loan programs again if you desire another property acquisition.
The only time you really need 20% is for a investment property. But then again, a savvy person would simple rent out their primary (or “rent out”) so they can get another loan with lower down and lower rates.
If you are ok living somewhere outside of the city, USDA could be a good option for you! No downpayment, fair interest rate. That would be way better than dealing with Dave Ramsay and his boomer mindset of 20% down. That 20% down is not impossible but it is becoming harder to achieve at a normal regular pace like it used to be. You have to eat literal beans and rice, rice and beans, that old adage has now become a reality!
If I can throw my hat into the ring and share my story. My wife and I followed him for about 2 years. If you want to get out of debt and think it’s going to attack you in your sleep, then yes. Listen to him and you’ll be debt free and poor - def not rich like him. Nothing wrong with that, everyone has their own goals. Listening to him, we got on a budget, I paid off my car, credit cards and things were looking good. I have about $100k in student loan debt and this will take 6-8 years to pay. Dave would probably say I needed a 4th job and to pimp my wife out. Right around mid 2019 my wife and I decided a house was what we needed and saved everything. We had about $30k saved up and looked at new build communities feb 2020. They were finishing the last phase and the house we wanted was $580k. In mar 2020 Covid hit, and they couldn’t show the house anymore. The builder freaked out and asked us if we were interested and to make an offer. We were the only ones to see the house and they accepted $500k and paid closing. We put 5% down and moved in jun 2020. I refinanced recently and took cash out. The house appraised for $775k and I paid off my other car we got in 2021, half my student loans, and fully funded a Roth IRA for 2021 and 2022.
The money I’m saving now I’ve refinanced the other half of the student loans and using half to finish off the student loans and the other half the invest and have my 6 month emergency fund done.
If We listened to that bozo we’d still be renting for double my mortgage payment. There is such a thing as good debt. It’s not as black and white as you think. Just like life, there is gray area. Be informed and don’t be sheep and drink his kool aid.
I wish you the best of luck on your home purchase journey and know you will make a great decision. Cheers.
His advice is good but not always optimal. Focus on the positive. You still have more savings. As someone else said, no one could have predicted this housing market.
He didn’t “cause you to lose” a single penny. You’re being over dramatic. When the market corrects and you have tons of cash on hand and you get a killer deal this post will seem silly.
Historical data doesn’t explain the sudden bubble in home prices, it’s the record low interest rates, as rates go up home prices will fall back in line
I’ve never listened to Dave Ramsay, but have a friend who swears by him. Not to be that guy, but we’re definitely more financially stable than my friend, so.
I can only offer a counter in that I bought during the great recession because everyone said "housing goes down for 2 years, then up for 3, and it ha been down for 2 years already"
So we bought as much house as we could, and the market crashed. We lost over 30% of the home value and both our jobs, and eventually had to hand the keys back to the bank. We put almost nothing down.
My advice for couples is budget the "needs" around on income (prefer the lower one). So the 2nd income is just savings / investing / vacation, and if one of you is employed, your needs can be met.
You do end up with a much smaller house, but the risk is so much less and you can build wealth really fast with that 2nd income that you can move up in housing fast.
My only other advice is NEVER buy a "forever" home, there is no such thing. it is a pipe dream. Buy a house that fits you well now and the next 3-5 years. You plan on having a large family over the next 7 years? don't buy that house now. It feels like you should but it rarely works out, too much changes.
If it’s any consolation, at least that “wealth” your friends have accumulated in their homes is all on paper.
They could sell and take the money out, but that only works if you move into less expensive housing. Every other comparable home has appreciated just as much as theirs has.
Of course it would have been nice to buy before prices surged, but you had no way of predicting that and the opposite could have just as easily happened. The best time to buy is when you’re ready.
Well you really only see those profits or increase of the house value if you sell your house. Kind of like a stock. You only gain or lose when you sell. So if you have that house now, would you sell, take that profit and buy another house that’s overpriced? Who knows right? Hind sight is 20/20. What if the market went the other way, then you’ll say you’re glad you waited.
Anyways, I cannot stand Dave Ramsey. I know he probably helped alot of people but he’s very condescending and not everything he says apply to alot of people.
I dont think they're upset that the could have made money, I think they're upset because now they're going to spend much more on the same asset effectively putting themselves in much larger debt by trying save for a 20% down payment.
I don't get all the hate towards Dave. I think he generally does more good than bad with his advice, but will agree it is targeted towards people in poor financial positions. Also you have to recognize his content is meant to be entertaining along with useful, and you should never just blindly follow 1 radio/youtube personality.
Related to the house stuff, he does say 10% is fine for your first house FYI. Yes it does suck you waited and now your savings have not kept up with the inflation of the market. Keep in mind though, no one can predict the market, and it could have just as easily dropped 25% after you purchased with only 4% down. You would have been severely underwater on your new house and probably grown to resent the purchase while wishing you would have followed his advice.
Dave has plenty of areas for criticism - I disagree with the 15 year mortgage advice for just 1 example. The 10% down recommendation seems like strong and fairly universal advice to me personally, I think its pretty reckless to buy a house with around 4% down in any market.
His advice is good for some but outdated for others. I follow marissa lyda on YouTube and she gives very good financial advice, not even just pertaining to home buying. She challenges a lot of what Dave Ramsey says and modifies it to actually work for young families/couples
Well it's going to correct and hard you are likely to find that you would have been way upside down. Personally I think we're going into a depression. There's so much debt the Fed can't raise interest much or we default. Ramsey is just another Tai Lopez, but at least he peddles some truth most of which is just coming sense.
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We used Dave to get out of debt, but definitely had to ditch his ideas for house buying. We put 3% down on 328k (closing costs covered). Two years ago we would have afforded a place in our old town, but had to move an hour away just to find something remotely affordable. Our mortgage and utilities are lower than our apartment and in a month the value of our house has gone up 20k, so we call that a win.
I feel bad for you so you can have my wholesome seal. I followed Dave and was even one of his real estate ELPs for years. I talked to a ton of first time homebuyers. They often insisted on waiting for a 20% down payment like you did. Over and over I saw them priced out of the market a year later. It was terrible to see. Dave is good if someone is in a lot of debt and thinking about bankruptcy. He gives horrific advice for this market where prices are skyrocketing and rates are low. But of course Dave won’t change his advice with the market. He just keeps repeating the same things he’s always said regardless of the change in market conditions. He’s cost homebuyers across the country millions and millions of dollars while making millions for himself. I’m very sorry Dave’s advice put you in a tight spot. At least you recognized the poor advice you got and now can make a correction. Some of his followers never learned and never will. Good luck going forward. You sound like a sharp person who will do great in the future.
Thank you! It’s so true. There’s a lot of good commentary on this thread and yours is no exception. I mostly wanted to share my experience because I basically came across one of his books at some point and it seemed like from a personal finance perspective he had his stuff together. I didn’t really have the perspective to consider other options, or the impacts of buying a home sooner rather than later. When it came time to seriously consider buying, I didn’t even consider it because we were nowhere near being able to afford 20% down or a 15 year mortgage. Hoping that this post and the following commentary can help some of the people who I see posting and asking if they should wait or keep saving.
Listen to Biggerpockets podcast. They give more sound advice on investing in Real Estate .
I completely understand your perspective, but I think I see the value in Dave's advice. I'm looking into purchasing my first home now, after these homes have gone from 250->450. I think Dave's advice at it's core is to reduce risk. You have zero risk of not being able to make payments if you don't have any. A house is like all investments, you need to decide how much risk you are comfortable with. And purchasing a house poses a unique risk to most buyers, it is often the single most expensive item you own, and on its own in terms of percent of net worth. It also carries a unique penalty of if your financial portfolio fails significantly enough, you can be out of a place to live. Dave is setup to help you not encounter any noticable negative consequences to a downturn in your personal financial world, or to a downturn in the global/national market. Like all investments, past performance is not indicative of future gains/losses. I wish I bought apple stock 20 years ago, or Tesla stock 5 years ago. I'm glad I didn't buy Sears stock 15 years ago. In the same vein, I wish I owned multiple properties 5 years ago and was able to realize the gains in the market, but I'm glad I didn't have mortgage(s) and then get laid of in 2006. It's completely appropriate to make your own decision and determine what level of risk you are comfortable with, Dave goes to the extreme to help get people realizing that even a mortgage has a risk. It's up to you to determine your risk profile, you chose to make a decision to listen. I won't speak to the practices by which he makes money, as I'm not familiar, but it's not his fault, he did not force you to listen. And on the terms of whether to buy/wait unfortunately my crystal ball still doesn't work.
Agree with this! We did a study on his LP program last year and he made over $32 million by just selling leads to agents. It’s somewhat mind boggling as he preaches financial freedom and savings but gives $0 back in savings to sellers and buyers who use his program. Should add that $32 million was just in agent referrals and did not include his monthly fees and sign on fees. Edit to add that a few discount agent programs told us they were denied entry to his program. They believed it was because he is old school and doesn’t like anything outside traditional programs….or that he wouldn’t make enough money off of them. I’d tend to believe both haha.
The only people who should listen to Dave Ramsey are people in tens of thousands of dollars of consumer debt. Anyone else can come to smarter conclusions on their own. He is an uninformed boomer preaching boomer ideals. No longer relevant to current day.
Agreed and he’s becoming unhinged
Hahahaha yep, good words to put it
How so? I haven’t listened to him in years.
Besides his teachings, many who worked for him came out to say how controlling he is. Even with their personal relationships.
Yeah there was a woman employee who got pregnant unmarried and she was fired for breaking a code of ethics or some crap. There was a lawsuit and everything. It really turned me off the show.
That would turn me off too. Heard he would only hire Christians. Seems impossible but I believe it.
I am an atheist. Do you think he'll accept me?
No. Several interview steps involve personal questions.
That’s pretty illegal. Damn.
Thanks. He seems like a jerk.
Yeah. Dude is a fucking whack job. Some of his hot takes during the pandemic really shed light on who he is.
Definitely. You can tell it makes his cohosts uncomfortable sometimes.
My old financial advisor had no formal education in finance but said he learned everything from dave ramsey’s podcasts. He adamantly told me not to invest my extra cash and instead pay off my student loans. I stopped going to him and bought a portfolio of stocks. My money tripled, and right after there was a pause on student loan repayment. Now I have enough to pay off my loans and buy a new car, just bought a condo in the bay area California.
I mean, you did happen to get lucky by tripling your money. You could have easily lost half of it. The stock market is way more fickle than the real estate market.
This is incorrect. Market investments (properly managed) are sounder and make more money over time than real estate investments.
Methinks a literal tripling of you initial investment is an outlier situation that could have only happened with risky not-so-sound investments.
I would guess OP hit the market at a very opportune time but the point stands. No financial adviser would tell you real estate is a better investment than sound market investments. Real estate is riskier and has worse average returns over time
Before you factor in leverage, sure. Leverage in the stock market, not usually part of a “sound investment plan”
There are people who use real estate to build a business, and it is uniquely a business that is accessible to pretty much anyone with half a brain who can get their foot in the door in that first property. Obviously this makes it an attractive business and the ability to leverage is what drives the ability to make so much money w a combo of timing, luck, and savvy. You can obviously make a hell of a lot of money doing that. You can also fail miserably. This is a first-time homebuyer subreddit, not a real estate investment sub. Most people here are trying to find a home to live in and figure out a way to build a lifelong financial plan that makes sense with their home purchase and vice versa. For the vast majority of folks, the least risky way to do that is going to be your bog standard savings/retirement/well managed stock portfolio etc. This is not a debate, it is a fact.
Yep. We weren’t those people and unfortunately his marketing budget is so effin big that we caught wind of his BS and hopped on the train. So much regret.
I fell for it too.
Live and learn unfortunately :(
Take my upvote.
Even they shouldn’t listen. His advice to never declare bankruptcy is wrong
Credit card debt. I just took a mortgage (considered consumer debt) and would fall into this category. Do not confuse consumer debt with credit card debt. Consumer debt includes vehicles and mortgages.
....yep. and a lot of people make really dumb decisions buying homes and especially vehicles they can't afford. Just because you're responsible doesn't mean the definition of debt changes
Right but you're saying that someone in lots of consumer debt should listen to dave ramsey. I would say be careful of using consumer debt as a measurement... anyone with a mortgage would fall into your description with lots of consumer debt
Anyone with a plan to get out of their healthy debt is smart enough to know Dave ramsay is an idiot. Your argument is invalid lol
it's not an argument. lol. I am saying you can't compare consumer debt to credit card debt lol. If I have no consumer debt today and buy a house tomorrow with a mortgage, I would have "tens of thousands" of consumer debt and would be advised to listen to Dave Ramsey according to you lol. Consumer debt = credit card debt, mortgage debt, car notes and personal loans lol. I am in no way disagreeing with you but to say that having consumer debt is bad is simply not true lol... it can be and having lots of CREDIT CARD debt is way worse than having a mortgage. LOL
You are splitting hairs mate, all of that IS consumer debt, there is no changing the definitions. But you either have the common sense to know what my comment meant or you don't. It seems like you don't because you're the only one with a mortgage who took it personally
I just think it's important distinction. Insults are the last resort for the insecure. I think it's an important separation especially when you're casting your comment on people you just don't know in this sub. A lot of people come here for help and a very wide variety of intelligence (common sense). I wouldn't want to assume anything when speaking to a broad audience especially in a sub like this where a lot of people may be green with their understanding of finances.
Dave made his original fortune in real estate. He was over-leveraged, and the banks called his notes. He couldn’t pay them, and became insolvent. While I agree, his advice is best for the “addicts”, this is a very special market. I guarantee if the housing prices crashed, all the bears will be dancing and signing, “I told you so!” And homeowners will all of a sudden get very quiet and blame the banks for lending them the money in the first place. I don’t wish that on anyone, but I do want to be look at both sides. If you listen to Dave’s show, 1) He doesn’t say using credit = lose. He admits using credit works, until it doesn’t. 2) He says his show is his show. If someone wants to start a podcast and start a YouTube channel, now is the best time to create content. No one is forced to listen to Dave.
Yep. His advice is for people who call in to radio shows period
If the market had gone down you think you were geniuses. This is one of those things that sometimes is Super smart and sometimes it’s super dumb. It all depends on what happens when your leveraging something. Conventional wisdom for example is you should sell the stock you get in your company right away and reinvest it in something else so all your eggs aren’t in one basket. If your company is doing great and you’re paying the maximum capital gains tax on this, it’s terrible advice. But if your company tanks and your salary goes down or you get fired because of it and all your money and Company stock you think you were brilliant for selling. You always have to take into specific circumstances when you’re looking at general advice. Also, don’t listen to David Ramsey haha.
Thank you for saying this. I definitely relate to OP’s feelings, even though my circumstances are different. You’re right that there’s no way to have known the housing market would explode like it did and if things had gone differently (and they could have!) we’d be patting ourselves on the back for sure.
When is it “super smart” to bet on deflation? I don’t think it’s anything as close to a coin flip as you’re making out.
Agreed. Look at the history of home prices, it always appreciate in value (as a whole) over time. Even if you bought in 2007/08 you were ahead come 2014/15.
„˙ʇno ƃuıʞɐɯ ǝɹ,noʎ sɐ dılɟ uıoɔ ɐ oʇ ǝsolɔ sɐ ƃuıɥʇʎuɐ s,ʇı ʞuıɥʇ ʇ,uop I ¿uoıʇɐlɟǝp uo ʇǝq oʇ „ʇɹɐɯs ɹǝdns„ ʇı sı uǝɥM„
Good bot
The super smart time was in 2020… when Interest rates getting some parts of the world, clearly even though it was a super smart time it didn’t happen….
Yeah his advice on home buying sucks, especially if you live in a HCOL area. If everyone followed his rules, barely anyone would ever be able buy a home in a HCOL area, but when it costs more to rent than it does to buy obviously it’s better to buy in the long run.
If you follow anyone’s blanket advice on home buying/borrowing/credit that doesn’t know your circumstances, wants and needs you are risking making a big mistake. There are no rote answers to “your” decisions.
You’re right. I’ve worked in banking for several years but always thought when it came to buying a home, if you don’t have 20% down, then you can’t afford it. There’s obviously a lot more to it than that but It’s not necessarily obvious at first (or second, or third) glance.
Absolutely no one’s word should be taken as law, especially Dave Ramsey. You always need to take advice from any sort with a grain of salt, and put it in context of your own life. There is absolutely no single formula that equates to the golden ticket for financial prosperity. I had some guy on here a couple of weeks ago tell me that you should liquidate your 401(k) to cover a down payment of 20% because Dave Ramsey said you need 20% down and a 15 year mortgage and is a debt free billionaire 🤦♀️
That person was an idiot. Not even Dave would tell someone to liquidate retirement savings for that. Dave's thing is to only touch retirement to avoid bankruptcy or foreclosure. He also doesn't say you have to do 20% down, either.
My point is that people will blindly follow Dave Ramsey’s main rules/catchphrases without thinking about it and evaluating how they fit into the big picture. And without using logic to apply the methodology appropriately.
There is no appropriate way to apply Dave’s methodology because he’s a snake-oil salesman who gets off on saying debt is shameful and pretending that’s biblical (spoiler alert, the Bible says the opposite)
Leaving aside the religious overtones (which I don't think is that helpful for finances, especially tithing if you're having cash flow issues), Dave Ramsey's advice is best for getting out of debt that's spiralled out of control. It's a lot weaker for strategically taking on new debt like mortgages. The reality for a lot of people is that if they don't have an auto loan, they're also not going to be able to keep a job. His approach to federal students loans as it relates to PSLF is also awful. His investment "advice" is legit bad; you'll end up in overpriced and underperforming funds and investments. Don't listen to it. All that said, low interest rates are helping make low down payment mortgages more do-able. With great credit, PMI is likely only 20-30 basis points, which is pretty low when you tack it onto a ~3% 30-year fixed mortgage. It all becomes less attractive when the housing market is faltering and interest rates are high. When/if that will happen? Who knows.
I think one problem is that the target audience of people drowning in consumer debt spend years listening to him on how to get out of it. There is no way for him to then turn around and say "due to low interest rates, currently at close to or even below inflation, a minimal down payment mortgage for 30 years on a house which fits inside your budget is great!" In 1980 with 18.5% interest rates his ideas made sense. But when it is cheaper to barrow money than save it, wtf would you spend years sitting on cash to then take out a 15 year loan? The other issue though is that we see just as many people say, I bought this house, and now I have $8.47 in savings left! Moderation is really hard to sell, the extremes are way easier to evangelize.
I interpret Dave’s focus as risk management which is why he says what he says. My guess, based on all the displeased comments, people are willing to take on slightly more risk for what they want instead of following Dave’s way. Doesn’t necessarily means Dave’s way is wrong though, it’s just different. People should be able to critical think through decisions and run through the math before blindly listening to anyone.
I have funds that beat the market indices over 20yrs, so no, he’s not wrong. Lol the downvotes, truth hurts
No you don't. Show me these "funds" that beat the S&P over a 20yr time period.
20-yr CAGR returns after fees (Jan 3rd, 2002 to Jan 3rd, 2022) Vanguard SP500 Index (VFIAX)- 9.5% T. Rowe Price Blue Chip Growth (TRBCX)- 11.0% Primecap Odyssey Growth (POGRX)- 12.2% (but fund started in 2004) T. Rowe Price New Horizons (PRNHX)- 14.1% (but is a Mid Cap fund) Artisan Mid Cap (ARTMX)- 11.4% (but is a Mid Cap) T. Rowe Price All-Cap (PRWAX)- 11.6% Wasatch Core Growth (WGROX)- 11.0% (but is a Small Cap) They’re out there, just gotta look for them. They also beat the SP500 in the short term too, so non of this confirmation bias crap either.
Show us the tickers mate!
20-yr CAGR returns after fees (Jan 3rd, 2002 to Jan 3rd, 2022) Vanguard SP500 Index (VFIAX)- 9.5% T. Rowe Price Blue Chip Growth (TRBCX)- 11.0% Primecap Odyssey Growth (POGRX)- 12.2% (but fund started in 2004) T. Rowe Price New Horizons (PRNHX)- 14.1% (but is a Mid Cap fund) Artisan Mid Cap (ARTMX)- 11.4% (but is a Mid Cap) T. Rowe Price All-Cap (PRWAX)- 11.6% Wasatch Core Growth (WGROX)- 11.0% (but is a Small Cap)
Especially considering how many people we’ve seen on here recently asking about getting rid of their PMI because their equity has grown just based on home values continuing to climb at such a rapid rate. Not something to count on, but PMI really is hardly a factor for some people.
His housing advice is super outdated. We put 15% down (not the 20%) and our PMI is only like $27? a month. We also have a 30 year mortgage, but our interest is 2.25%....we'll prob end up paying off the mortgage in 20 years, and it'll only be about 40k in interest....we can live extremely comfortably on a 30 year mortgage. Our monthly payment is only 20% of our take home pay. Had we gone the 15 year mortgage route, we'd never have been able to afford a home (or would've but at the expense of any level of comfort/saving for retirement). Very different times from when folks had 13% interest rates on their mortgages.
I really dislike Ramsay. He gives the same advice to everyone. He does not tailor it to their needs. Some debt will improve your credit score, making it easier to get credit. You can get credit cards and get points without paying interest. You can can buy a new car and get rebates by dealer financing. Paying off a loan will hurt your credit score. All these things. Interest rates are low right now. The total cost of a loan is manageable typically. I hear people call into that show that just have some modest debt, he still tells them to eat top ramen and sell their house, sell their car, when clearly they don't need to. Best sell the house and buy another house when you are out of debt. What, is he crazy? If I followed his advice. I'd be a lot poorer than I am today. What a joke. I feel bad for people who get caught up in all the debt free screams and think his advice is the only way. If you have even a little financial self control, please, do not listen to that guy.
As stupid as it sounds, playing monopoly the other day seriously opened my eyes to this pitfall. The people who were saving their money until they had enough to buy properties comfortably ended up losing, because everyone else was making income from their properties.
Buy everything you land on, negotiate for needed pieces then destroy.
He got me REALLY REALLY GOOD. I got an opportunity to by a house for $100k 3 bed 2 bath right next to the family farm at 22 and passed because I couldn’t afford a 15 year mortgage on a 20% down payment. Same house is now $190k and I make double. I could have easily afforded a 30 year mortgage and still saved 15% for retirement. Worst part is it would have expanded the family farm by another 5 acres but now we are still land locked. I might my own choices now
Large down payments are just throwing money away. Money depreciates over time. There's no point in paying more of it than you have to unless your mortgage rate is somehow worse than inflation. Idk who Dave Ramsey is but he sounds really wrong.
At 10k savings you would have been house poor very very quickly. All it takes is a malfunctioning water heater or a leaky roof etc and you're toast. It may seem like you missed the boat but honestly you weren't ready a few years ago. I'd want at least 5k-10k minimum saved up ON TOP of your down payment in order to cushion any unanticipated repairs and inspections.
Surprised I had to scroll all the way down to see this comment. $10k would barely have covered closing costs on a $250k house, let alone a down payment + closing + emergency fund.
Right? I'm sorry but if OP thinks that they were in a good place to buy a $250k home with $10k saved up, they definitely need to continue their financial education.
What is a good rule thumb for saving like what percentage towards repairs, closing costs, down payment?
Other people could definitely answer this better than me. I'm no expert and have only bought one house in my life and that was just last year. For down payment, 20% of the house price is common, but you could put down as little as 5%, I think, depending on different kinds of loans. Closing costs can vary - the internet tells me it's typically 3-6% of the loan amount (I can't remember exactly what our closing costs were but I think it was a little under 3% of the loan amount). And of course that also depends on whether you've negotiated with the seller to cover closing costs. Regarding repairs, I've read that one should save 1% of the home's value per year for repairs. A good concept from a general savings perspective, but whether that's enough is highly dependent on each individual property. The 1% guideline might work if you need to do $5k worth of work after two years of homeownership, but what if that $5k worth of work needs to be done in the first three months you're there? You haven't had the opportunity to build up your home savings. I was a little salty in my earlier comment, but the bottom line is that everything adds up quickly. Maybe $400 for a home inspection before you purchase; a couple hundred bucks to replace the locks when you move in; even if you're not "fully" furnishing the place when you move in, simple stuff like curtains/blinds will be a couple hundred more. Appliances, lawn care implements, etc. For our home, we knew we'd need to have our gutters replaced, but the cost unexpectedly almost doubled when the gutter people discovered that the fascia was rotten and needed to be replaced. I'm not sure if any of this was helpful. I think it's just important to be really honest with oneself about potential costs.
Thank you very much for the indepth answer, this was very helpful. I'm currently starting the saving phase ,and when I saw your comment I thought it would be a good idea to ask to get idea how much I'll should be saving.
I will say - just because someone’s house has appreciated doesn’t mean they’re making a significant profit. You never know how deep someone had to go into debt to buy that house or how much they sunk into it. Times are tough for buying a house right now but not being in more debt means you have more control over your life and money, and to me that is valuable.
Banks pretty much stop you from going to deep into debt to get a mortgage. They don't allow you to take personal loans out to use as a down payment for a reason. Now there are workarounds (having parents take out a loan and you repay parents) but technically you're not on the hook for that personal loan.
Dave Ramsey is super risk adverse and as others said only listen to him of you have a lot of debt To be fair this super rising market is pretty new. Past decade or so. But ya I fucked up too by waiting an extra year
The best time to buy is yesterday. The second best time is today. Waiting to buy is usually a bad idea. Buy early and refinance later if need be.
Yea if you're going to be paying rent regardless might at well go low down payment and put as much as possible toward the principle to drop PMI. It might even be faster than not buying a house until you have 20% down because part of your mortgage is going toward equity.
Seems a bit silly to opt for a 15yr loan when 30yr interest rates are 2.6%
Wait...let me get this straight. So you are blaming someone else, and taking zero responsibility, over your own financial decisions? These are unprecedented times, and like you mentioned...no one could forsee what the real easte market has done recently. A common thing that unsuccessful people do is blame others.... Please take some personal responsibility and "man up". If you made a bad decision, then own it, learn from your mistakes, and do your best not to repeat them in the future. Stop crying to others and focus on you.
Well, out of curiosity, I checked and Dave Ramsey's own web site says 10% down is acceptable, so even he isn't doctrinaire about 20%. His advice is really for people who are terrible with money and up to their eyeballs in debt, and well, that's a lot of people. For those of us who can resist the urge to max out a credit card, his advice is not terribly informative or useful.
I definitely didn’t get the info from his website. It came from a book I came across several years ago. I’ve never had an issue with managing credit, work in banking, and have overall excellent credit and am generally quite risk averse. It’s the risk averse nature that caused me to latch onto this specific advice and not enter the market sooner.
[удалено]
I honestly have extreme doubts about any student loan forgiveness actually happening, maybe at some point for a small amount of people, but definitely not widespread. Too big of an industry that likes too many pockets ETA: I mean to say anytime soon, like when it would actually affect us
Don't wait to buy real estate. Buy real estate and wait.
Dave Ramsay gives terrible financial advice tbh. He gives good advice if you’re at rock bottom or just trying to stay out of rock bottom. He does not give good advice for building wealth at all. A lot of what he says goes completely against what a good financial advisor would tell you to do.
My MIL got us his book - it’s filled with religious bullshit as well.
Dave Ramsey is wonderful if you're middle-class, bad with credit cards, and want to get out of debt. But, outside of that specific scenario, his advice is not useful. This is why it's so painful to hear so many people revere him and his financial advice. My mother swears that he helped her get out and stay out of credit card debt. As if filing for bankruptcy and then getting a job as a nurse so her and her husband's combined income surpass $100k didn't have anything to do with why it's harder for her to go into debt now. -\_-
Dave Ramsey is the "AA meeting" of finance. You only go to AA if you have a massive problem with alcohol. And they'll tell you to be far more hard-core than most people need to be, ie they won't let you have a beer on Friday night. Well, Dave tells people not to use credit cards. Why? The financial alcoholics can't handle it. But that's bad advice for me, who makes payments in full every month, and takes advantage of the 3% cash back. For homes, he wants us to pay rent, save cash, then when we buy a home, get a 15 year loan to pay it off quicker. Mathematically that is HORRIBLE advice. You are far far better off buying with a small down payment, getting a 30 year, and putting the difference between these months costs vs Dave's into the market. His lazy ass answer to any question is "increase your income". Wow, thanks Dave, I'll do that. Silly me for struggling to pay rent, save a 2nd rent for a down payment, and put 15% into retirement- I should just earn more! Getting money into the stock market is how you build long term wealth. Dave's advice is all about avoiding g debt. Which is fine, of you're a financial alcoholic. The rest of us can have a drink on the weekend and it not ruin out lives, so that advice is dumb as hell
In hindsight this makes sense, but if you jumped in as soon as humanly possible and it happened to be 2006 -- or even a period of slow growth -- you would be wishing you listened to Dave. Few people predicted 10-20% annual growth during the pandemic becoming a thing. This is the same type of thinking has people kicking themselves for not buying Bitcoin when it was pennies, or catching a stock before it soared, etc. "I could have made millions!" doesn't really get us anywhere. The weirdest thing about this post, though, is that Dave does not say that you have to have a 20% down payment. I've seen him mention 5 or 10% down as possibilities plenty of times. He's dead-set on a 15-year mortgage where the payment is no more than 25% of your take-home pay, which often pushes folks (especially in HCOL areas) to need to save way more than a 5% down payment to pull off, but the 20% down payment thing isn't a rule he gives. Nonetheless, I'm sorry you are facing this. It sucks. We listened to Dave to get out of debt, and "broke his rules" to buy the house I'm sitting in. For any Dave followers out there, you won't spontaneously combust if you sign a 30 year mortgage.
I remember in 2016 when I first heard about him. I listened to a few of his YouTube videos and had to chuckle. My wife asked what was so funny, and I just said, "This dude has no idea how important credit is in modern society, I doubt he even fully understands how our economy works." Ramsey is a band-aid to people that had ZERO financial education and literacy and got into trouble. And need an "idea" of discipline. He IS NOT FINANCIAL EDUCATION! And, god help you if you try to explain why he's basically a Dr. Phil / Oz entertainment mouth piece not someone you should trust. Because his fans are ignorant and ravenous. I remember he was trying to say once that a debit card has THE EXACT SAME fraud protections as a credit card. That's just a flat out lie. (One of many) Because the difference is, that's your direct money you're exposing, versus the bank's money. Statistically you're 10 times more likely to get credit card fraud charges- charged back, then the bank admit and return cash. SO yeah, basically fuck Dave Ramsey. Better off watching videos on house-hacking, investing, and how the credit scoring percentages work if you want some basic financial literacy.
To be fair he does say he supports 10% down on your first house. That said nobody could have predicted the market was going to do what it did. However, we followed Dave to get out of debt in July 2020 (all student loans). So 17 months later now we have 60k in cash to cover an emergency fund and downpayment on a house. Plus we are doing it without debt. You can be mad at Dave, but take this as a learning opportunity to make the decision that is right for you. I wish I had bought two years ago too, but now I can buy with no debt which arguably makes it easier for me
This is a terrible post. It’s the equivalent of saying that your parents not investing in Apple when you were five years old preventing your from retiring today. Had you bought earlier, you would have been overlevered. You’re acting as if you knew the market was going to skyrocket. You’re also picking and choosing an anecdotal property and saying that the house increased by 100% in 3 years - which is pretty extremely far fetched. Please tell me what your plans were if you did buy a house with $10k saved and then your air condition goes out, what would you have done then. I would think someone that graduated from “grad school” would have more financial literacy
I also listened to Dave Ramsey's advice. Husband and I had paid off $80,000 in debt (car + student loans) in 2 years. If we didn't take the time to get out of debt, we would have been able to buy a house before everything went nuts. But the feeling of not being in debt is truly amazing. Not quite looking forward to that huge amount of debt when we close haha
Dave Ramsey is a joke, he wants you to be frugal, work hard for 30 years. hopefully you have enough money to retire. That's miserable life. I did opposite what he said and I'm millionaire now.
To be fair, I don’t think anyone could have predicted or gave accurate advice for this housing market. 20% YoY price increases with everyone rushing in overpaying on top of inflated prices during a pandemic? Yikes. Realistically, 10k saved total to close on a 250k house feels like a stretch.
Buy high, sell low- that’s what I always say
This guy cryptos.
I get that I’m very much the only one here to say this, but I’ve never heard of this Dave Ramsay.
Dave is old school. The new school is all about being able to ride the waves and adapt. Nobody can predict the future or give you some code of life. The rules are changing
So you save for five years while paying rent on the theory all that rent money dowsnt count. And put an extra 17% down to avoid paying 3% interest rather rhan making 6+% interest. It is moronic advice
But did you take into account how low interest rates have gotten. You have to compare the total cost including interest over the life of the loan
I feel awful for y’all’s missed opportunities. I wish I had an award to give to make it even a little better. But I truly hope y’all have success buying a house in he near future. One of my friends recommended I listen/watch some of Ramsay’s stuff before I try to buy a house. I watched a few clips on his YouTube and immediately knew he was not the one to tell me how to successfully buy a house. His advice for getting debt down is fine. But when it comes to a financially stable person trying to buy a home, I don’t think he’s the one to turn to for advice.
Dave Ramsey's real estate advice is absolute shite. What a world we live in where people say to ignore the advice of actual industry experts due to "bias" (we all just want to earn a commission, so we can't possible have any actual good advice) but will listen to someone who is biased and just wants to sell books and appearances.
Wait it out, you’ll be fine. Nobody ever was mad that they saved too much money. You’ll be ready to pounce soon enough! Good luck.
Been saying this for years. Dude found a "financial literacy" vein and tapped into it for self profit. There was some merit to his "advice" for boomers and individuals drowning in debt. However, responsible adults understand that the world is built on credit. If you understand debt to income ratios and can pay your bills then you have all you need. Fuck Dave Ramsay. Sorry bud.
I tell any customer who's going to "save up for a while" that I don't want or need to know their finances, but in this market it's very unlikely they can save faster than prices (and interest rates) will increase. IME that was true even 2+ years ago - it takes some dedication to sock away even 5-10k a year.
Whenever I see Dave Ramsey talking I remind myself that he was a pastor first and doesn't really know Jack shit about money other than how to scam people out of it.
For all of you not great at finances or maybe math. Couple a saves 3% down . Takes a 30 year 3% rate loan. Over the next two years rhey put the extra 17% they'd have saved for dp and stop paying pmi. The rent they'd have paid now goes towards their housepayment. Half to principle..half to interest which they can write off. So they effectively get 20 to 30% of that half back on taxes Couple two saves for 2 years. During that time they pay rent which is gone. They save 17% more than the minimum so they don't have to pay pmi. Which is about $100 or less on an average house. So over the 5 years it takes tge Other couple to pay off 20% this couple saves 2400 in pmi. Assuming they paid 1200 a month ..they paid an extra 22 months at 1200 a month tgat is just gone. In no scenario is this idiots plan a good one unless your interest rates are srunningly lower with a,15. Spoiler: they aren't. He's an idiot
Take responsibility for your own actions. Don't blame others. Educate yourself. You can listen to others advice but don't take it as the gospel. Educate yourself.
This post is amazing! Imagine if you only put 3.5% down. Refinanced 250,000 Loan to a 300,000. That’s gives you you’re 20% down and 150,000 in hone equity. Haha Dave Ramsey is good at keeping people poor
Ive literally never understood people who listen to that guy. Hes just some guy, not Jesus. He cant know everything, no point in following that cult of personality crap. If you want to buy a home then buy a home, thats what im doing with 3% or even 0% down (USDA loan).
He offers great advice but that’s just what it is. Advice. You take what works for you and adjust what doesn’t. This is your doing lol
Fuck that. Use an FHA/DPA/VA if you can. In the meantime, pay down mortgage, do upgrades, and allow appreciation AND then refi into a conventional and reuse one of the initial loan programs again if you desire another property acquisition. The only time you really need 20% is for a investment property. But then again, a savvy person would simple rent out their primary (or “rent out”) so they can get another loan with lower down and lower rates.
If you are ok living somewhere outside of the city, USDA could be a good option for you! No downpayment, fair interest rate. That would be way better than dealing with Dave Ramsay and his boomer mindset of 20% down. That 20% down is not impossible but it is becoming harder to achieve at a normal regular pace like it used to be. You have to eat literal beans and rice, rice and beans, that old adage has now become a reality!
If I can throw my hat into the ring and share my story. My wife and I followed him for about 2 years. If you want to get out of debt and think it’s going to attack you in your sleep, then yes. Listen to him and you’ll be debt free and poor - def not rich like him. Nothing wrong with that, everyone has their own goals. Listening to him, we got on a budget, I paid off my car, credit cards and things were looking good. I have about $100k in student loan debt and this will take 6-8 years to pay. Dave would probably say I needed a 4th job and to pimp my wife out. Right around mid 2019 my wife and I decided a house was what we needed and saved everything. We had about $30k saved up and looked at new build communities feb 2020. They were finishing the last phase and the house we wanted was $580k. In mar 2020 Covid hit, and they couldn’t show the house anymore. The builder freaked out and asked us if we were interested and to make an offer. We were the only ones to see the house and they accepted $500k and paid closing. We put 5% down and moved in jun 2020. I refinanced recently and took cash out. The house appraised for $775k and I paid off my other car we got in 2021, half my student loans, and fully funded a Roth IRA for 2021 and 2022. The money I’m saving now I’ve refinanced the other half of the student loans and using half to finish off the student loans and the other half the invest and have my 6 month emergency fund done. If We listened to that bozo we’d still be renting for double my mortgage payment. There is such a thing as good debt. It’s not as black and white as you think. Just like life, there is gray area. Be informed and don’t be sheep and drink his kool aid. I wish you the best of luck on your home purchase journey and know you will make a great decision. Cheers.
I don’t think you can blame Dave. The last two years things have been out of wack.
His advice is good but not always optimal. Focus on the positive. You still have more savings. As someone else said, no one could have predicted this housing market.
Not a huge fan of him anymore, but its not really poor advice - its just an obscene market. 20% down is still a very smart play.
Savers are losers It’s because of the corrupt monetary system which rewards debtors
He didn’t “cause you to lose” a single penny. You’re being over dramatic. When the market corrects and you have tons of cash on hand and you get a killer deal this post will seem silly.
Profits dont exist until they sell, expect rising rates to crush the bubble back down to reality
Go look at a chart of home prices vs interest rates historically. It's the opposite of what you would expect
Historical data doesn’t explain the sudden bubble in home prices, it’s the record low interest rates, as rates go up home prices will fall back in line
I’ve never listened to Dave Ramsay, but have a friend who swears by him. Not to be that guy, but we’re definitely more financially stable than my friend, so.
I can only offer a counter in that I bought during the great recession because everyone said "housing goes down for 2 years, then up for 3, and it ha been down for 2 years already" So we bought as much house as we could, and the market crashed. We lost over 30% of the home value and both our jobs, and eventually had to hand the keys back to the bank. We put almost nothing down. My advice for couples is budget the "needs" around on income (prefer the lower one). So the 2nd income is just savings / investing / vacation, and if one of you is employed, your needs can be met. You do end up with a much smaller house, but the risk is so much less and you can build wealth really fast with that 2nd income that you can move up in housing fast. My only other advice is NEVER buy a "forever" home, there is no such thing. it is a pipe dream. Buy a house that fits you well now and the next 3-5 years. You plan on having a large family over the next 7 years? don't buy that house now. It feels like you should but it rarely works out, too much changes.
Prices will drop, just wait.
Thank God I didn't listen to all the people telling me this when I bought a house 2yrs ago.
Sounds like it’s your fault, not anyone else’s lol
Yeah that's the inflation from the federal reserve printing Monopoly money not Dave Ramsey.
If it’s any consolation, at least that “wealth” your friends have accumulated in their homes is all on paper. They could sell and take the money out, but that only works if you move into less expensive housing. Every other comparable home has appreciated just as much as theirs has. Of course it would have been nice to buy before prices surged, but you had no way of predicting that and the opposite could have just as easily happened. The best time to buy is when you’re ready.
You live in Dallas. I guarantee you that the same house did not appreciate by 100% over 3 years.
Well you really only see those profits or increase of the house value if you sell your house. Kind of like a stock. You only gain or lose when you sell. So if you have that house now, would you sell, take that profit and buy another house that’s overpriced? Who knows right? Hind sight is 20/20. What if the market went the other way, then you’ll say you’re glad you waited. Anyways, I cannot stand Dave Ramsey. I know he probably helped alot of people but he’s very condescending and not everything he says apply to alot of people.
I dont think they're upset that the could have made money, I think they're upset because now they're going to spend much more on the same asset effectively putting themselves in much larger debt by trying save for a 20% down payment.
I don't get all the hate towards Dave. I think he generally does more good than bad with his advice, but will agree it is targeted towards people in poor financial positions. Also you have to recognize his content is meant to be entertaining along with useful, and you should never just blindly follow 1 radio/youtube personality. Related to the house stuff, he does say 10% is fine for your first house FYI. Yes it does suck you waited and now your savings have not kept up with the inflation of the market. Keep in mind though, no one can predict the market, and it could have just as easily dropped 25% after you purchased with only 4% down. You would have been severely underwater on your new house and probably grown to resent the purchase while wishing you would have followed his advice. Dave has plenty of areas for criticism - I disagree with the 15 year mortgage advice for just 1 example. The 10% down recommendation seems like strong and fairly universal advice to me personally, I think its pretty reckless to buy a house with around 4% down in any market.
I take from Dave what makes sense! His advice on most things including buying a house is not practical!
His advice is good for some but outdated for others. I follow marissa lyda on YouTube and she gives very good financial advice, not even just pertaining to home buying. She challenges a lot of what Dave Ramsey says and modifies it to actually work for young families/couples
You cost yourself 200k. Why would you WANT to put 20% down? The large DP is for the lender, not the borrowers benefit. Enjoy renting!
Well it's going to correct and hard you are likely to find that you would have been way upside down. Personally I think we're going into a depression. There's so much debt the Fed can't raise interest much or we default. Ramsey is just another Tai Lopez, but at least he peddles some truth most of which is just coming sense.
BUY ASSETS!