Dave Ramsey vs. the FHA 30-Year Mortgage: Who Wins?

April 30, 2023

Financial pundits come and go, but some persist despite the whims of fame on the internet and television. One such financial pundit is Dave Ramsey, who offers financial advice in across a variety of sectors, including the mortgage industry.

One such post, by "Ramsey Solutions" notes, "You can probably qualify for a much larger loan than what 25% of your take-home pay will give you. But it's not wise to spend more on a house because then you will be what Dave calls "house poor."

Carefully noting how much your home loan will actually cost you is smart advice. And if the article stopped there, one might be forgiven for agreeing with a celebrity finance pundit. But the next step in the article raises some eyebrows.

“The really interesting thing about 15-year mortgages is that they always pay off in 15 years,” the article notes, adding this zinger:

“Thirty-year mortgages are for people who enjoy slavery so much they want to extend it for 15 more years and pay thousands of dollars more for the privilege. If you must take out a mortgage, pretend only 15-year mortgages exist.”

That may be sound, accurate financial advice from the perspective of “Why pay more for your mortgage over 30 years when you could pay it off with less interest payments in 15 years?”

The problem is, the article writer’s privilege is showing here. Not all house hunters can afford the comparatively higher payments that a 15-year mortgage requires. 

Some must choose the 30-year options because their financial situation is such that lower monthly payments are the goal rather than the cheapest home loan possible.

On paper and doing the math, the Ramsey Solutions advice is not terrible. It’s just that many Americans cannot afford to do what he suggests; the terms Dave Ramsey’s website uses here include “slavery” (see above), and for the borrower who prioritizes lower mortgage payments over faster payoff, that tone is particularly offensive.

To read Dave Ramsey’s advice above, it’s as though the borrower had the luxury of picking one option and willfully chose the more expensive 30-year loan despite the advice.

FHA mortgages do come in 15-year and 30-year options. But taking Dave Ramsey's advice about qualifying for a much larger loan “than what 25% of your take-home pay will give you?”

Remember that the advice included, “...it's not wise to spend more on a house” because of the “house poor” issue. So a borrower who tries to take both types of advice finds themselves in an tug-of-war. What’s the best answer?

Do the math, know how much you would save with the 15-year option, and determine how much the mortgage payments will affect your monthly bottom line. Don’t be pressured into a 15-year mortgage if the numbers don’t work out right for you with your monthly budget. That’s the surest way to get into trouble on your home loan in the earliest days of the mortgage. Ignore the opinions of people who seem to sneer at your financial position, they don’t necessarily have your bottom line in mind. It is smart to seek out financial advice, but don’t take it all from a single source.

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