Can a Single Person Realistically Afford To Buy a House in 2025?

Summary

The Ramsey Show Highlights: Can a Single Person Realistically Afford To Buy a House in 2025?

Released on February 26, 2025

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Introduction

In this episode of The Ramsey Show Highlights, hosted by the Ramsey Network, the discussion centers around a pressing question from Travis in Vermont: "Can a single person realistically afford to buy a house in 2025?" Travis outlines his financial situation, expressing concerns about adhering to the recommended mortgage guidelines amidst rising home prices.

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Understanding the 25% Mortgage Rule

The primary focus of the conversation is Dave Ramsey's well-established guideline that suggests a mortgage should not exceed 25% of one's take-home pay. Travis, earning $70,000 annually and aiming to save for a $150,000 starter home, questions the feasibility of this rule given current real estate market trends.

Notable Quote:

"The reason that we say 25% of your take home pay is cuz we want you to be able to live like we want you to be able to breathe out here."
— Speaker B at [00:50]

Rationale Behind the Rule: Speaker B emphasizes that limiting the mortgage to 25% ensures financial breathing room. This allocation allows for:

• Investments: 15% of income
• Giving: 10% of income

Exceeding this percentage, especially approaching 40%, can severely restrict disposable income, leaving individuals "with nothing" to cover essential living expenses.

Notable Quote:

"When that happens, these people can't breathe. Like they can't pay for a pot to piss in. Like they don't have anything."
— Speaker B at [02:03]

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Challenges for Single Buyers in 2025

The discussion delves into the escalating costs of real estate, making homeownership increasingly challenging for young, single individuals. Speaker A shares personal anecdotes about his early experiences purchasing a home, highlighting the emotional and financial strain even with a substantial down payment.

Notable Quotes:

"Even though we put a nice down payment on, it was over 20, but it still felt like, what have I done."
— Speaker A at [03:46]

"It's very expensive. And with other things being expensive, inflation and things like that, it does make it feel harder to be able to accomplish this dream."
— Speaker B at [04:55]

Adjusting Expectations: Both speakers agree that future homebuyers may need to adjust their expectations regarding the size of the property, location (zip code), and the timeline required to save for a down payment. Speaker A illustrates this by recounting how his first home felt overwhelmingly large at $198,000, adhering strictly to Ramsey's teachings.

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Real-Life Experiences Shared

Speaker B shares a personal journey of paying off $460,000 in debt over a decade before successfully purchasing a home. This period involved strategic financial decisions, including renting and having roommates to minimize expenses.

Notable Quotes:

"We rented Ken for 10 years and during the course of that 10 years we paid off $460,000 of debt and then we saved up and were able to do, you."
— Speaker B at [05:24]

"I don't regret it at all. There's no part of me that thinks back in regret at all."
— Speaker B at [06:22]

Benefits of Delayed Homeownership: By delaying the purchase, Speaker B and his partner were able to eliminate significant debt and build substantial savings, leading to a more secure and stress-free homeownership experience later on. This strategy underscores the importance of financial stability over the immediate gratification of owning a home.

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Strategies for Affording a Home

The speakers offer actionable advice for single individuals aspiring to own a home without compromising financial health:

1. Save Intensively for a Down Payment: Aim for at least a 20% down payment to avoid mortgage insurance and secure better loan terms.

2. Manage Debt Responsibly: Prioritize paying off high-interest debts before committing to a mortgage, ensuring manageable monthly obligations.

3. Consider Alternative Living Arrangements: Living with roommates or renting out portions of your home can significantly reduce expenses, accelerating savings.

4. Adjust Property Expectations: Be flexible with the size and location of the home to align with financial capabilities.

5. Utilize Ramsey’s Resources: Access free tools and guides such as Ramsey's Real Estate Home Base available at ramseysolutions.com/real-estate to navigate the home-buying process effectively.

Notable Quotes:

"If it takes 10 years, so be it. You'll be a homeowner."
— Speaker B at [06:10]

"The last thing I needed was more stress of then feeling like, okay, now I've also got this mortgage that I have to, you know, be accountable for."
— Speaker B at [07:37]

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Resources Offered

While the discussion briefly touches upon Ramsey’s Real Estate Home Base as a comprehensive resource for potential homebuyers, the emphasis remains on building financial foundations before embarking on property ownership.

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Conclusion

The episode concludes with a reaffirmation that while the current real estate market presents challenges, single individuals can still achieve homeownership by adhering to prudent financial practices. By prioritizing savings, managing debt, and adjusting expectations, the 25% mortgage rule remains a viable guideline to ensure sustainable and stress-free homeownership.

Final Thoughts:

"You took seven and a half years, paid off all the debt... that's it... you'll be a homeowner. I can tell you. You will."
— Speaker B at [06:22]

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For those seeking to navigate the complexities of buying a home in 2025, this episode provides valuable insights and practical advice aligned with Dave Ramsey’s financial principles.

Transcript

[A]

Brought to you by why refi refinance your defaulted private student loans [e-mail] Ramsey.

[B]

All right, today's question comes from Travis in Vermont. He says I'm 23 and saving for a home down payment which should only take 12 to 18 months. However, I've heard that you recommend not having a mortgage of more than 25% of your take home pay. Even if I went even, even if I were to save enough for a 20% down payment, I wouldn't be able to get a mortgage anywhere near that. I earned 70,000 per year, which is above average for coming straight out of college. There are no starter homes in this area for less than 150,000. Do you think young people will ever have a chance at purchasing a house if we stick to your 25% guideline? All right.

[A]

Oh, that's a good question. Yeah.

[B]

Let's talk about it from a couple of angles. Number one, I love that you want to buy a house. I, I think that's great. I, I think the dream of real estate is, is the American dream, right? To own something that's yours outright. It's great. What you first said was you could save for a down payment in 12 to 18 months, which lets me know whatever you had in your mind. You thought I, this number will get me in the door, but the door that it's going to get you in is a dangerous door for you. The reason that we say 25% of your take home pay is cuz we want you to be able to live like we want you to be able to breathe out here. Because yeah, at some point you have to think about like this. At some point of the 100% pie of income that you have, at some point you're going to want to invest 15%. So there's that. At some point you're going to want to give 10%. So there's that. That's already at 25. At some point you have a mortgage. Let's say it's more than 25%. Let's say it's at 40%. Well suddenly you don't have much to live off of. Right. You've really cut that wedge really, really small for you. And we find people all the time who call in and say, oh my gosh. I mean it happened the other day, Ken, folks calling at 50% because they'll give you a mortgage up to 50.

[A]

Oh my goodness.

[B]

And when that happens, these people can't breathe. Like they can't pay for a pot to piss in. Like they don't have anything.

[A]

One of my all time favorite phrases, by the way, you dusted that one off. That's like an old came from the depths. It did. That's like an old school phrase.

[B]

I think I probably heard my dad say it, but. Oh, I promise you anyway, you know, that's the point. It's not. It has nothing to do. It has nothing to do with being a Ramsey ism. Right?

[A]

That's right.

[B]

It's about you. We want you to be able to live.

[A]

So there's margin and emotion attached to that margin.

[B]

And so that's kind of what I want you to leave here with. It's not about us. It's about you being able to enjoy your home and have the money to do the things that you need to be able to do. So that's thing one. Now let's answer the question of do you think single people will ever have a chance at purchasing a house if we stick to your 25% guidelines? The answer is yes, but comma, and you'll have to change your expectations on possibly the piece of real estate and the timeline that it will take to get you there.

[A]

That's right. And the zip code.

[B]

And the zip code. All these things.

[A]

And what you grew up in doesn't mean that that's what you're supposed to start in.

[B]

Facts.

[A]

That's the biggest thing.

[B]

Yeah.

[A]

It's like, well, you grew up in a four bedro room, three car garage and you think that that's what you're supposed to start with. And I'm like 23. Wow. I think a lot of people do think that they. And it's like, wait a second. I mean, the first house Stacy and I started with, it was. It's like a matchbox compared to what we live in now.

[B]

You know, I do know.

[A]

And we thought it was massive and scared to death of it. By the way, it's $198,000. Wow. I thought. And I thought. And by the way, I did it by the book.

[B]

Uhhuh.

[A]

The down payment. The way Ramsey teaches about. But I thought I had mortgaged my life away because of the sheer price of the home.

[B]

Yes.

[A]

$198,000. Back then, that was like I thought I was gonna die.

[B]

And that's so important to note, Ken. So important. Despite what your monthly payment for the mortgage might be, you still that first home, you feel the weight of whatever the entire amount is.

[A]

Even though we put a nice down payment on, it was over 20, but it still felt like, what have I Done. And so there's a responsibility there which by the way makes me think I want to just add one thing. I thought your answers were great. This is why we created what I think is one of the best resources we've ever created at Ramsey. And by the way, it's all free. It's called Ramsey's Real Estate Home Base. So anybody watching and listening right now, this is free and it's absolutely chock full of. It's a podcast on there, we've got a book on there, we've got a video series, how to articles, start to finish guides on buying or selling anything real estate related. If you're kind of going, what do I do?

[B]

Yes.

[A]

And you trust us. Us go to ramseysolutions.com real estate. Let me say that again. Ramseysolutions.com real estate. If you couldn't write it down, can't remember it. Go to the show notes for today. It's there. Very important that you understand what all is involved here. So really good question.

[B]

And can let me drive that down. Let me drive this point home one more way.

[A]

Drive it down the lane.

[B]

There's always, there's always a new listener, someone who doesn't know our backgrounds. Right. So my husband and I, I, I loved this question because right now the real estate, it's gotten more and more expensive. It started to cool out in some areas. But the truth is it is very expensive. And with other things being expensive, inflation and things like that, it does make it feel harder to be able to accomplish this dream. That is the truth.

[A]

Well, the numbers have gone up. You're right about that. It is a higher level.

[B]

Yeah. And so I like to remind people when my husband and I were getting out of debt, of course we couldn't buy a house during that time because we say you should really pay off your debt before you become a first time home homeowner. And so Sam and I rented Ken for 10 years and during the course of that 10 years we paid off $460,000 of debt and then we saved up and were able to do, you.

[A]

Know, people living with you too? I feel like you say what? Didn't you have a bunch of people living with you too?

[B]

Not a bunch of folks. We had roommates at one point. We did.

[A]

That's what I'm saying.

[B]

Yeah.

[A]

I'm not knocking that.

[B]

We had, we were married and we had another married couple that lived with us for a year.

[A]

I thought that was extreme.

[B]

10 out of 10 would not recommend Ken.

[A]

But you did it.

[B]

We did It.

[A]

But. But the point is, I said a bunch of people. I'm sorry.

[B]

It kind of sounded like we were just on the block.

[A]

Like you're living in a shoe.

[B]

Coming through. I think. In a shoe? No, just reframing like a time frame. If it takes 10 years, so be it. You'll be. You'll be a homeowner. I can tell you. You will.

[A]

And here's the key. Actually, I'm really glad you brought that up, because I think some people right now are still going 10 years. Before you throw shade at my friend, I want to bring this back to you because that 10 years of rent I'm sitting here with you today, and I'm going to take a guess that you don't feel like you pissed that money away.

[B]

Not at all.

[A]

So what did the 10 years of rent, which some people right now are on TikTok Instagram going, yeah, yeah. How did that 10 years of renting give you freedom to get to where you are today? Break it down.

[B]

Well, a. I don't regret it at all. Like, here in my life. I'm 41 years old. I don't go, oh, man, if only I had bought my house when I was 23. Like, there's no part of me that thinks back in regret at all.

[A]

Why?

[B]

Because it was worth it to do things right. You took seven. We took seven and a half years, paid off all the debt. Then we took. We lollygagged a couple years because we were tired. Took some more time to save up. That's.

[A]

Well, you were paying off half a million dollars.

[B]

That's right.

[A]

You deserve a water break.

[B]

Took some time to save up. And then when we finally bought our house, I was pregnant. I had just had my first son, and I was 36 years old, and it was great.

[A]

And now here you are, homeowner.

[B]

Homeowner. I'm on my second house.

[A]

People think that that's wasting money. And in your case, it was actually the freedom and margin you needed to get out of debt.

[B]

That's right, because it was cheaper. It was far cheaper for us to rent. We had a season of roommates, and it freed up money. And like we said before, the last thing I needed was more stress of then feeling like, okay, now I've also got this mortgage that I have to, you know, be accountable for.

[A]

Why? Refi. Refinances delinquent private student loans for struggling borrowers. [e-mail] Ramsay.