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The author, Sarah Martinez Shaw, holds up the keys to her house.
Sarah Martinez Shaw
My husband and I were both raised on Dave Ramsey’s no-debt money advice.
When we went to buy our first home, we were stuck — we didn’t have credit scores.
We took out a secured credit card to build our score and were able to buy a home in 2021.
I grew up listening to Dave Ramsey’s radio show in my parents’ car. Frequently citing his own faith and hitting the right notes of personal responsibility, Ramsey has major appeal in conservative Christian circles.
Ramsey’s personal finance advice is famously centered on paying off and staying out of debt at all costs. Ramsey’s listeners call in and, after describing how they paid off their debt by following Ramsey’s advice, scream, “WE’RE DEBT-FREE.”
On the surface, advice to stay out of debt seems reasonable and even necessary. Debt can have a chokehold on your finances and your future; the average American adult has over $50,000 in debt, including mortgages, student, auto, and personal loans. Ramsey rails, in particular, against credit card debt, although that makes up around $3,000 of that $50,000 debt the average American owes.
Neither my husband nor I were prepared when we wanted to buy a home
Growing up, the extent of the financial advice I received was to use the envelope system (taking your paycheck out in cash and dividing the cash into envelopes for each category of your budget so you can visualize your spending) and to avoid credit cards.
My husband also grew up with parents who listened to Dave Ramsey. When we reached our mid-20s and started thinking about buying a home, neither of us had credit cards, car payments, or a history of paying student loans (I haven’t yet graduated, and I attend an affordable state school). While that has been largely a good thing, unfortunately it meant that we also didn’t have credit scores — something Ramsey calls an “I love debt” score.
Speaking with loan officers of various mortgage lenders, I learned that having a credit score was actually pretty important to buying a house! It’s very difficult without one. With a non-existent credit score, I couldn’t even get approved for a normal credit card.
We started building our credit from scratch
To build credit from nothing, we got a secured credit card, which required a deposit of a few hundred dollars. We put our utility bills on the credit card and then paid it off each month. It took us a little over a year to get our credit scores high enough to allow us to take out a mortgage.
When my husband and I discussed our plans to buy a home with our families, and mentioned how we had built up our credit to do so, we were surprised to face a little disapproval. One family member mentioned that Ramsey’s advice is to save longer and pay for a house in cash.
We broke down the facts: At the beginning of 2021, when we were ready to buy, the average cost of a home in the United States was over $300,000. It had taken us five years of strenuous budgeting to save up $60,000 (most of which we would use as a down payment). It would take many more years to save up enough to buy a modest house in cash if the market stayed the same. However, the market would undoubtedly outpace us — a year later, the average cost of a home was $365,000.
It doesn’t matter that we are responsible with our money and make good financial choices. The math doesn’t add up in a way that would make buying a house in cash possible for us, now or in the future.
In fairness to Ramsey, he does not completely condemn mortgages the way he does other types of debt. He even recommends a mortgage company that offers no-credit approval if you meet other requirements. But these requirements include a 20% down payment and a 15-year term instead of a 30-year term, increasing your monthly payment. And then, even while making a higher mortgage payment, Ramsey advises that your housing costs (including utilities, taxes, and HOA fees) should not exceed 25% of your monthly take-home pay.
This advice doesn’t fit working-class people
As a working-class person like many of his listeners, much of his advice feels out of touch with my life and would put homeownership out of reach for me forever if I followed it. Paying for a home in cash, in fact, would be achievable only to the quite wealthy.
Meanwhile, he stigmatizes legitimate paths forward, such as having a credit score built on years of responsible credit use. I know from my upbringing that his views create a culture of finger-pointing and judgment about finances even among people too poor for his advice to be applicable.
Homeownership is one of the best ways to become upwardly mobile and break cycles of poverty, even if you don’t meet Dave Ramsey or his listeners’ standards. In my own journey to buy a home, I saw clearly that Ramsey’s advice is not given with my circumstances — or my success — in mind.
This article was first published in April 2022.