Real Estate the Ramsey Way - Are We House Poor?

Episode Date: July 13, 2026

A couple is worried they may have stretched too far to buy their home. We walk through their numbers and help them determine whether their housing costs are putting too much strain on their finances. Next steps: ·   🏠 Not sure what to do next when buying or selling your home? Check out our ⁠⁠Real Estate Home Base⁠⁠ for free tools and resources to guide your next steps. ·   🏠 And if you’re ready to buy or sell your home, ⁠⁠connect with a RamseyTrusted® real estate agent⁠⁠. They’re experts who’ll help you confidently navigate homeownership the way we teach. Explore more from Ramsey Network: 💸 The Ramsey Show Highlights 🧠 The Dr. John Delony Show 🍸 Smart Money Happy Hour 💰 George Kamel 📈 EntreLeadership   Ramsey Solutions Privacy Policy

So I wanted to ask the basic question of did my fiance and I make a poor decision on the house we just bought. And I was hopeful to kind of briefly go over my plan going forward and see if it aligns with y'all's advice slash what you might suggest I do differently. Okay. What do you do on the house? Tell me about it. So the house was a $670,000 house. and we did 10% down. And so our monthly payment is $4,700.

And what do you make? So I have a salary of $120,000 per year, and my fiance has a salary of $70,000 per year. The big variable in that is that I work in sales, and I get a bonus every quarter that can vary. Typically, it can three of the quarters will vary between $10,000 and $40,000, and then one quarter will vary between $30,000, all the way up to maybe $100,000. Okay. Well, what we recommend for married people is that your payment should not be more

than one-fourth of your take-home pay, and you should be well under that with the numbers you gave me. So that's what I was, so with the outside of the bonuses, if you remove the bonuses, our take-home pay is roughly $11,540 per month. Yeah, but we're not removing the bonuses because they're there. even on the small end they maybe around 60,000 per year at the small end, that would still fall. It still puts you to fourth of your take home pay. I guess our main question was, you know, did we overindulge?

Because it did drain pretty much all of our savings to get to it. Now, I did invest. and the way I did it was before listening to y'all's show and learning your take on it. I invested in real estate before I was paid off fully on. So we do have some debt that I wanted to go over as well. And so I, but I, long story short, I invested in real estate prior to paying off all of our debt. And not only, and including only having 10% down on our primary residence worried me a little bit. And I know that that's not.

It's not best. And no, I would not be investing in real estate before you bought a house. And no, I would not be buying a house if you didn't, if you weren't debt-free. But you already did. So now let's get out of debt. Why don't you sell the rental and pay off the debts? That was going to be one of my questions. We've only owned it for about a year and a few months.

My thought was selling the rental before it appreciating to its full value. It's not going to appreciate to its full value. It's not going to appreciate to it. full value at what date? When does it stop appreciating? Yeah, no, I understand that. There's no end to that question. But you just feel like the quick turn after you pay commissions and everything. All you're doing is admitting your mistake, and that's the problem. Yeah, but if you sold the property, Chris, I mean, if you only had it for a year, it probably doesn't have much equity in it. Which means it sucks. Like it's, because it should have some

equities? No, it's draining him. He's not making any money on it. Right. Unless you got a bunch of equity, you're not making money on it. Yeah, but if he sells it for the same price, basically, he bought it for a year ago because it hasn't really appreciated much. And he pays commission, I mean, fees all of it. He's going to be under, you know, can you get out even, Chris? Yeah, that's my question. We probably could get out even, yes. We have 20% equity in it. We have 20% equity in it, but we do have very stable monthly income on it. We're not No, you don't. No, you don't. I agree. I agree. It's useless.

You're spinning your wheels. You're breaking even at best on the monthly cash flow. By the time you include vacancy repairs and crap owning rental property, you have to make a lot more than you're making to break even. You are not breaking even. Not net, net, net over a 12 to an 18 month period of time. When you look back on it, that's what's going to have. I own $600 million worth of real estate. Believe me, you have to have more margin than you've got to break even. Now, so I would get out of that. That's what I would do. And then all of a sudden your house starts looking smarter. And I would, you know, use anything I can do to clear up.

What other personal debts have you guys got? I have 20,000 student loans, 9,000 car. She has 20,000 roughly student loans. Yeah. And you guys make a pile of money, so clean that mess up. Yeah. Yeah. See, if you don't have, if you don't have this rental property hanging over your head,

like a hatchet, and you don't have this any personal debt at all, all of a sudden we're not sweating the house. Yeah, but I do hear you, Chris, with when the bonuses come, depending on the month, right? The instability is, yeah, on the low end, you said if you bring home 11,000, right? And 5,000 almost of its being taken by the mortgage on that one particular month. You need to have a fund. We call it the peaks and valleys fund. So when the bonuses do come in, throw some of it in that fund.

So when there is a low month, you can pull from that fund and that the house is fine, that it is around a fourth year take-home pay. If you didn't have any car payments, so you wouldn't be noticing it. Okay. Okay. Yeah, I mean, my plan going forward was to try and save three months reserves and then get to 20% equity in the house, so you would add step one to that, be sell the condo. I would sell the condo.

I'd get debt free. I'd build my emergency fund, baby steps. Do you guys have any cash saved, Chris? So we really did pretty much get very much very low. Very low, but in a few days. When's the wedding? In October, we are very lucky that we do have family help for that. We did put a small portion of our money already into it, but that wasn't a big factor.

But I should be in a few days, I'll be getting another one of those quarterly bonuses that will at least replenish some of that. So the advice I gave you is what you do from today forward. okay had you called me a year ago here's what i would have told you for the rest of you guys out there not to shame chris but for the rest of you guys out there don't buy a home until you're married number one number two don't buy a home unless you're out of debt period don't buy a home unless you're out of debt and have three to six months of expenses plus a down payment and then don't buy a home where the payment on a 15-year fixed is more than a half or more than a quarter of your take-home pay, and don't buy rental property unless you pay cash for it, which is way after all those other don't things that I just covered.

So if you had done that, you would now have, you'd be planning a wedding with a pile of money sitting there and no debt. and you'd have no rental property and no house. And you'd be looking at October going, I'm sure, ready for it to come. And then the following spring after your marriage, after renting an apartment for six months, I would talk about buying a home. By then you'd have a great down payment and you'd have no debt. And you'd have an emergency fund too. That changes the level of anxiety to this discussion dramatically.

And when you buy a home with someone you aren't married, to you are extremely vulnerable both of you. It is legal and financial suicide to do this. They're probably going to get away with it because it's probably going to work out. Well, they actually have a wedding date. They have a wedding date. They're like, we're not sure. I mean, Saturday works for me as a wedding date.

But the, you know, because she, I mean, if something happens with this relationship and everything's already, exactly tied down and tight. And so we're stressing this relationship right now. And if anything, God forbid, happens, y'all are going to find out what screwed looks like. It's going to be a mess. So, but I'm hoping that for y'all, it just sails right on through October, and you can just execute the plan we talked about.

And we're going to start selling stuff and we're going to get this mess cleaned up. But that's what I, not, again, not to shame him, but all, you know, you guys got to quit buying houses aren't married yet. It's really, the nightmare stories that come into this show. By houses together when you're not married, yes. Both your names on it. It's just, you, je, je, je, je, the stuff that can happen is all bad and not good. So, yeah, please don't do this.

Again, Chris, we're hoping for you that this all works, go out. We're not trying to beat you up, but you called and asked, so we're going to tell you. He says, my wife and I move every few years for work, and we rented homes each time. Our friends recently bought a house for $1.5 million, which I know is out of their price range. So I asked how they did it. They said they did an interest-only mortgage. What are your thoughts on this type of loan? It sounds like it's renting a house, but you get the benefits of ownership. Would buying a house this way be a smart move for somebody that relocates frequently or should we keep renting? So there's two concepts in there.

there's the friends who have the $1.5 million house, which that feels like they're personal residents. They're not relocating as often as you do. But you're saying, is this a good idea for us since we relocate? And I would say, no, under any auspices of the idea, this is a horrible idea. And it's, the product is really just what it's, what it is. You're only paying interest. So if you're not paying any of the principal, you're never paying down the mortgage. So in essence, you're just renting a house. That's really what you're doing for a period of time. So there's no real advantage that I can think of for you to do this.

I mean, after the interest period ends, your payment's going to jump up anyway because you will start paying principal. And you're just paying more interest over time. It's probably, I got to believe it's one of the most expensive ways that you could buy a house. And actually, on the short term, owning a home is, more expensive than renting. Heat and air goes out. Sure.

Roof leaks. Property taxes go up. Uh-huh. Homeowner's insurance goes up. All of those things, you've still got all those things. And if you move and try to sell the house and you've reduced the principle, not at all, you're likely going to take a loss. Oh, yeah.

Be upside down. Between how often you move. So, no, you need to stay away from it. So anything that sounds too good to be true is. and your friends, Parker, are short-term thinkers. Yeah, that wasn't very smart. They're not thinking long-term. There are people that think, thank God, it's Friday, oh, God, it's Monday.

I want something, I want it now, and I'm going to buy it even though I can't afford it. And by the way, the interesting thing is, the difference in a payment on an interest-only loan and a 30-year, which we don't recommend, not much difference. Not a lot of difference. No. Because think about your 30-year mortgage. the first payment you pay has almost no principal reduction. It's almost all interest.

So the payment's almost the same. It's not $50 difference or something like that. It's not a lot different. But the concept is way different because it describes someone who's thinking short term and is immature rather than someone that's thinking long term. The other part of this that I can't help but just call out is if you said, hey, they bought this house for 1.5. I know it's out of their price range.

so I asked how they did it. That's the wrong question to ask. You don't look at someone who you see. You ask how they did it so you don't do it. Right. Not so you go, oh, they're buying things they can't afford. Let me figure out how to do it too. How I can buy things I can't afford, yeah.

It's not a great method. Really bad. Yeah, that was kind of laying there and I missed it on the page. Hey, guys, thanks for listening to Real Estate the Ramsey Way. Now, if you're here, you're probably thinking about buying or selling a house. It's exciting, and one of the biggest financial decisions you'll ever make. But you don't want to do it with an inexperienced agent who will rush you into costly mistakes, like the ones some of our callers find themselves in.

You need a pro who knows what the flip they're doing and will keep you on track with your financial goals. That's why we only recommend Ramsey trusted real estate agents. These are vetted, hand-picked pros who actually listen to your needs, guide you through the process, and fight to get you the best deal. To find a Ramsey trusted agent near you, go to Ramsey Solutions.com slash trusted agent. That's ramsysolutions.com slash trusted agent.