so today we're going to be talking about
whether or not you can afford a house
that you are looking at or maybe
unfortunately you're in a situation
house oh my god I might be leaving that
in there now I just want you guys to
know I just wanted to share an update
with you guys I'm going to be doing a
really massive holiday giveaway I don't
have the details for it yet but I'm
going to be giving away off for example
at least one free enrollment in my stock
market mastery course I might be giving
away a free membership to passion to
paycheck as well maybe a one-year
membership so I'm gonna be doing a
massive giveaway I'll keep you guys
posted on that but I want you guys to
leave me some comments in the screen in
the description of other things you
might be interested in whether it be
books or do you want Amazon gift cards
or possibly I don't know what iPhone
something like that let me know what the
major giveaway items are that you guys
would be interested in and hopefully I
can make it happen and you know give
back to you guys because you've given me
so much but anyways let's get to the
point of this video and talk about
whether or not you can afford a certain
house and we're gonna look at the
numbers and I'm actually going to be
using Dave Ramsey's numbers here as well
because I was doing some research and
he's like the really conservative side
and we're also going to share the
traditional advice out there as far as
whether or not you can afford a certain
house so first of all let's talk about
the traditional model of whether or not
you can afford a house the traditional
model says that you can take out a
30-year mortgage on a property and you
should be able to reasonably afford 35%
of your pre-tax income per month can go
into your housing expenses and this
should also include things like your
housing insurance as well just so that
way that's your total cost of your
housing payment as well as maybe your
taxes and things like private mortgage
insurance if you have PMI as well so
that's like your total housing bill
right there so according to the
traditional model that can be up to 35%
of your monthly pre-tax income on a
30-year mortgage now Dave Ramsey is very
conservative and he's honestly a genius
when it comes to helping people get out
of debt and he's definitely a big
inspiration to my channel so I want to
give him a shout-out in this video I'm
sure he doesn't need it but I really
like his model
as far as buying a house because this is
a very conservative approach he says
that a 15 year mortgage is the only way
to go don't even think about a 30-year
mortgage and the maximum housing payment
is going to be 25 percent of your post
tax income now notice over here we said
pre-tax on the traditional and Dave
Ramsey says even less 25 percent of your
post tax income is his guideline for
what you can reasonably afford for a
housing payment so let's go ahead and
crunch these numbers using $100,000 for
comparison's sake that would be like
$100,000 mortgage which is very
inexpensive but down at the bottom here
these are more practical examples
whereas the top one I just wanted to use
it for comparison sake so you guys could
see the drastic difference in the
monthly payments of the Dave Ramsey
model versus the traditional model okay
so if you had $100,000 as a mortgage for
30 years at 4% your monthly payment on
that 30-year mortgage would be 477 a
month which is obviously much lower than
most people are paying for their housing
payment for their mortgage now following
that Dave Ramsey model on the same exact
value of $100,000 on a 15-year mortgage
at 4% that housing payment is now 740 a
month so significantly more than that
30-year mortgage obviously because it's
a much shorter term so if we would have
followed this model let's say you were
trying to have a housing payment of 477
dollars a month
what would your salary need to be to
afford that following the traditional
model so according to that traditional
model if you had about sixteen thousand
five hundred dollars of pre-tax income
you would be able to reasonably afford a
housing payment of 477 per month now
following the Dave Ramsey model okay if
you had a housing payment of 740 because
remember he says that the 15 year
mortgage is the only option then you
would be 25 percent of 35 thousand 520
post okay now that number is a lot
closer to what most people probably take
home in fact many people out there
probably have thirty five thousand five
twenty pre-tax income all right so the
Dave Ramsey model is super conservative
and in your model may fall somewhere in
between there I just wanted to show you
guys the lenient side versus the
conservative side that way you guys can
get an idea
where your numbers should fall but if
you guys are looking for the best-case
scenario then I would follow that Dave
Ramsey model I mean those numbers are in
place for a reason this guy knows what
he's talking about all right so let's go
ahead and do a practical example now
okay so we know that the average salary
is forty four thousand one hundred forty
eight dollars and as such your post tax
salary assuming 33% taxes would be
twenty nine thousand one hundred
thirty-eight dollars per year as your
salary so if this was your salary if you
were the average person out there how
much house can you afford
now this isn't how much house you can
buy because you can buy a lot more house
than you can probably afford because
someone's gonna lend you that money but
this is about what can I actually afford
how can I be comfortable with my life
and not be burdened by a crazy housing
payment so following the traditional
model there okay on forty four thousand
one hundred forty eight dollars so your
pre-tax income on that salary is thirty
six seventy nine and following the
traditional model your housing payment
can be 35 percent event or 1287 per
month now how much house can that buy
you if we're assuming a four percent
interest rate on a 30-year mortgage then
you could afford a $270,000 house now
would I go out there if this was my
salary would I buy a two hundred seventy
thousand dollar house absolutely not I
don't think that you guys should follow
this traditional model I think that is
way too lenient and that would put most
people in a pinch as far as having a
almost a $1,300 a month housing payment
when you're only making about forty five
thousand dollars a year I think that is
way too high now let's look at the Dave
Ramsey model just to compare so 25
percent of your post tax monthly income
which would be about twenty four twenty
eight after we account for about thirty
three percent taxes that would mean that
your monthly payment would be 607 per
month that is what you can reasonably
afford now remember Dave Ramsey says a
15-year mortgage is the only way so you
could afford a eighty-two thousand
dollar mortgage for 15 years at four
percent interest that would be what you
could afford as far as the house so
that's just crazy to me guys that if you
follow the traditional model they say
you can spend two hundred seventy
thousand dollars on a house while Dave
Ramsey says you can afford eighty-two
thousand dollars worth of house because
he obviously says to do the 15-year
mortgage so where is your number gonna
lie it all depends on your tolerance for
risk and your comfort because if you're
somebody who is good in other areas of
your life as far as spending and you
have your budget under control maybe you
can afford more house maybe you'll be
leaning more towards the traditional
model but if you're someone who is super
conservative and you want to have a
positive cash flow of $500 or more to
invest or do something else with then
you're obviously going to be more
towards that Dave Ramsey that
conservative model as far as what you
can afford for a house I want you guys
to you know do these numbers for
yourself figure out what your what your
salary is what you make per year and
then go through the traditional model
and then the Dave Ramsey model and see
how much house you could realistically
afford given your current salary all
right I know many people make the
mistake of buying way too much house
than they can afford and there's a term
for this called house broke we mentioned
this in one of my other videos where
pretty much your monthly housing
payments eat up all of your income and
you got barely two nickels to rub
together at the end of the month so you
don't want to be in that situation but
then again if you follow that Dave
Ramsey model I don't know what kind of
house you're gonna find for $82,000
maybe you'll find a shed in the woods
depending on where you're looking but
anyways guys I thought this would be
kind of cool to compare these two and
give you guys an idea of what you can
afford for a house if you guys enjoyed
this video please drop a like if you're
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uploads and as always I thank you for
taking the time to watch this video
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