When it comes to borrowing for your home, Dave Ramsey recommends that folks...
- Utilize only 15-year, fixed-rate mortgages, and
- Stick to a price range which allows a monthly payment that is no more than 25 percent of your household's total take-home pay.
Of course, Dave would rather see you buy a home with the "100% Down Plan" — meaning you pay for your home with cash.
It can be done, but it ain't easy.
For anyone new to the home-buying experience, it's worth noting that Dave's guideline for mortgage payments (25 percent of take-home) is very conservative. It is NOT going to jive with what your real-estate agent or mortgage broker tells you. Those guys are paid by commission, as a percentage of the price (mortgage dollars) they "move." Thus, it's in their interest to get you into as much home as you can possibly qualify for. So be ready to battle them on this issue.
For more on this subject, you'll want to grab of copy of his book, The Total Money Makeover. In it, he devotes a fair amount of time to discussing mortgages and the financial perils of owning a home.
Additionally, I wrote an article on this topic in August of 2002: "Home, Expensive Home"