It might be your fault you can't afford a house, says finance guru Dave Ramsey

• Buying a house right now is difficult for a whole bunch of reasons, Dave Ramsey said.
• But some people can't afford one as they waste money and rack up debt, the radio host said.

Buying a house has become especially hard, but some people can't afford one because they're mismanaging their money, personal finance guru Dave Ramsey says.

"It is mathematically tough right now, it is economically tough. But I think more than those two, it's psychologically tough right now because there's just this perception, this dark cloud over the subject of buying a house right now," he said on a recent episode of "The Ramsey Show."

House prices have surged to record highs, and the interest rate on a typical 30-year fixed-rate mortgage has jumped from below 3% in late 2021 to around 7%, fueling an affordability crisis.

People are also spending more on basics like food, fuel, and rent thanks to high inflation — and paying more each month for their car loans, credit cards, and other debts after the Federal Reserve raised interest rates to curb rising prices.

Ramsay's point is that consumers face a painful combination of lofty home prices, more expensive mortgages, steeper living costs and debt payments, stagnant wages and layoffs in several industries, and ongoing recession fears.

The result is that for many people, it feels harder than ever to save enough money, secure sufficient financing, and plunk virtually their entire net worth into a single asset, even if they plan to live in it.

Overspenders can't complain

Despite those challenges, the talk show host and author called out people who make bad financial decisions and then complain they can't afford a house.

"You're spending money you don't have, to do crap you don't need to be doing, and you go in debt to do it," he said.

"You're sitting there with stinking car payments around your neck, a bass boat payment, and paying for last year's Disney vacation on your credit card, and you can't figure out why you can't afford a house," he said. "Well I just told you why you can't afford a house: Your stinking overspending."

Ramsey advised people against making a home purchase until they've paid off their debts and built an emergency fund that covers three to six months of expenses.

He recommended they make a 20% down payment if possible, never take on a mortgage with a monthly payment exceeding 25% of their take-home pay, and stick to a fixed-rate mortgage that protects them from rate increases, as they can refinance if rates fall.

Blessing, not a curse

Ramsey also urged prospective buyers to account for closing costs and ownership expenses like home insurance, maintenance, and utilities.

"I want the house to be a blessing, not a curse," he said. "When you are broke and in debt, don't have an emergency fund, and sign up for a mortgage payment you can't afford, that is not smart real estate. That's going to slow down your wealth building, bring anxiety to your home, stress to your relationships."

Ramsey also cautioned that many people's wages have risen less slowly than prices and interest rates, which means "you can probably no longer afford the home you thought you were going to get."

He said the upshot is that buyers will probably have to compromise on things like the neighborhood and commuting distance to the city if they want to secure a home in their price range.

It's worth noting that some people have found success in buying a home by ignoring Ramsey's advice, and others have rejected his gospel of debt-free living as outdated and unrealistic.

Yet the financial expert's principles will surely remind others of Warren Buffett, the legendary investor who preaches prudence, frugality, and careful risk management when it comes to money.