Buying a home is one of the biggest — and longest — financial commitments most Americans will make in their lives. Saving for a down payment can take several years, and the average home price typically increases with time.
Balancing the rising cost of living, elevated mortgage rates, increased competition, and rising home insurance costs have made homeownership more expensive than ever.
Financial expert Dave Ramsey shares the ideal down payments for home buyers and how mounting debt makes it difficult for potential buyers to save up enough to purchase a home.
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Though making a small down payment may be a tempting way to enter the housing market, it could create financial strain in the long term.
Prioritizing savings and finding a home priced within your budget will ensure you can afford your monthly mortgage payments.
Ramsey explains the dos and don’ts of down payments below.
A couple celebrates the purchase of a new house. Rising home prices, mortgage rates, and debt levels have made it more difficult for first-time homebuyers to save for a down payment. Dave Ramsey explains why having affordable mortgage payments should be the top priority for buyers.
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Affordable mortgage payments are key to financial stability
Though the median homebuyer typically makes a down payment of between 10% and 19% of the home’s value, first-time home buyers tend to put down just 8%.
Aiming for 20% is a good rule of thumb, but it may not be as realistic for younger buyers who are balancing rent, student loans, or other expenses. However, if they don’t have at least 5% of the home price saved, it may not be the right house for them.
“Anything less than 5–10% is actually a very weak down payment, not to mention a sure-fire way to wind up upside down on a home,” Ramsey wrote. And you’ll waste a lot of money in interest and fees over the life of your mortgage.”
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Home prices have increased 7% year-over-year, and the median monthly mortgage payment reached $2,753 in January 2025. Committing to a decade or more of housing payments you can’t afford can lead to extra fees and even put your home at risk of foreclosure.
Ramsey explains that the most important home-buying rule is to ensure that your monthly mortgage payments don’t exceed 25% of your monthly income.
“No matter what, make sure your mortgage payment is no more than 25% of your monthly take-home pay on a 15-year fixed-rate conventional loan (the overall, lowest total cost mortgage),” he continued. “Otherwise, you’ll be charged so much extra in interest and fees. It’s not worth it! You need that extra money to tackle home maintenance and your other financial goals.”
Rising debt is making it hard for buyers to save for down payments
Inflation has affected the cost of food, housing, and utilities particularly hard, driving up the overall cost of living and making it difficult for many households to make ends meet. This financial hardship has made it difficult for buyers to save for a down payment, especially as home prices hit record highs.
Zillow estimates that a median-income household would need to put down 35.7% of the home’s value to afford the average home in the U.S. This is double what the typical home buyer saves as a down payment, indicating how housing prices have far outpaced wages.
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Ramsey reveals why down payment amounts are declining and how debt may be a factor.
“Down payment amounts have significantly decreased over time,” he explained. “Not to bore you with a history lesson, but around 30 years ago, the median down payment for all buyers was at a much healthier 20%.”
According to the National Association of Realtors, 51% of all student loan holders indicate that their student debt has prevented them from buying a home. As housing costs continue to outpace wage growth, paying down debt and saving for financial milestones becomes more difficult.
“The reasons today’s buyers say they struggle to save a bigger down payment are all debt-related: student loans (51%), credit card debt (45%), and car loans (38%),” Ramsey elaborated. “That’s why we teach people to pay off 100% of their consumer debt and save a fully funded emergency fund before saving for a house. That way, you’ll have enough room in your budget to save for a big down payment faster and have cash to cover unexpected home repairs.”
Related: Veteran fund manager issues dire S&P 500 warning for 2025
