Dave Ramsey Slams Plan to Buy Parents’ Home on $75K Salary
Home ownership remains a key pillar of the American Dream. As one of the biggest expenses that consumers will ever make in their lifetime, real estate financing is not easy to come by for everyone. As a result, some people may be willing to compromise in order to see that dream come to pass. One […] The post Dave Ramsey Slams Plan to Buy Parents’ Home on $75K Salary appeared first on 24/7 Wall St..
Home ownership remains a key pillar of the American Dream. As one of the biggest expenses that consumers will ever make in their lifetime, real estate financing is not easy to come by for everyone. As a result, some people may be willing to compromise in order to see that dream come to pass. One such individual happened to call into the Dave Ramsey personal finance program to document their journey of moving on up.
Unfortunately, Ramsey was not impressed with the hoops this caller was willing to jump through, and for good reason. This caller shared how he and his family, including small children, had outgrown their house and were in search of a bigger home. His parents swooped in, most likely with good intentions, offering to sell their home to the couple for a discounted price of $340,000, 11.7% lower than the market price of approximately $380,000. On an annual salary of $75,000, it sounded too good to be true, so the caller didn’t look before he leapt.
Ramsey was quick to call out the issues with this family agreement, labeling it a “disaster.” The finance guru didn’t hold back, pointing to the mess that the caller had made and nearly finding himself at a loss for words. Fortunately, Ramsey found his composure and was able to offer some financial advice.
Key Points
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A caller into Dave Ramsey’s personal finance show detailed how he plans to buy his parent’s home.
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But without his name on the mortgage, this caller just made a big mistake. Finance expert Dave Ramsey didn’t hold back.
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In Over His Head
Ramsey exposed many holes in the caller’s plan. The 800-pound gorilla was the fact that the couple had not actually purchased the home from their parents. All this family did was come to a personal agreement, allowing the couple to live in the home. But as far as the bank was concerned, the home still belonged to the parents, whose names were on the mortgage.
As Ramsey pointed out, the caller had exchanged being a homeowner for becoming a renter, considering he didn’t own his parents’ house, nor could he afford to do so. The homeowners still carried a mortgage of $90,000 on the property, for which the caller was paying $2,000 per month. The problem is that this amount was one-third of his take home pay, and according to Ramsey it was too high a price to pay.
It gets worse before it gets better. The caller was deep in debt and unable to muster up enough cash for a down payment on his folk’s home. With a debt load of $30,000, and only a few thousand dollars in his savings account, this individual was nowhere near able to save enough money for a down payment. And without a down payment, no lender would issue him a mortgage. Therefore, he was stuck paying for a home for which he had no ownership rights. Ramsey explained that there was no way to put the mortgage in the caller’s name because any transfer of the title would lead the bank to call the mortgage due, resulting in a foreclosure, hence the mess.
Ramsey refrained from hanging up and went on to offer the caller some advice despite maintaining that he was paying rent on a home that was out of his league. After admonishing him, the finance expert advised the couple to get multiple jobs so that he could save enough money for a down payment as soon as possible. Option No. 2 would be for the parents, who are the homeowners, to gift the couple $30,000 out of the remaining equity and assign it as a down payment, allowing them to potentially take out a mortgage and shift the house into the buyer’s name.
Mortgage Payments
The writing was on the wall with this situation, and Ramsey had no choice but to let the caller have it. Why would anyone make mortgage payments on a home that wasn’t there’s in the first place? By doing this, they are missing out on one of the biggest perks of homeownership: building equity in the home they are paying for. Additionally, this couple was directing too much of their modest take-home pay toward housing, which is likely to leave any growing family strapped.
If he is somehow able to pull off getting a mortgage, he is going to find that mortgage rates remain elevated, with the average 30-year mortgage rate hovering just above 7% as of May 2025. Even after the equity down payment gift, he is going to find it difficult to find a monthly payment of less than the $2,000 he’s paying now. Chances are it will even be a bit higher.
This caller could have saved himself a lot of grief if he had spoken with a financial advisor before making this major decision. While the damage has been done, it is not too late to turn to a financial advisor to help him dig out of the mess that this family has created. In fact, that is likely his only hope because as smart as Ramsey is, he can only do so much on a 10 minute phone call.
The post Dave Ramsey Slams Plan to Buy Parents’ Home on $75K Salary appeared first on 24/7 Wall St..
