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How much did you spend on your "forever" home in relation to your income

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  • How much did you spend on your "forever" home in relation to your income

    Early 30s. 2 years out of training. Job and family (wife, 2 kids) are stable. My wife and I are looking to buy our first home in a MCOL area given our life stability. While nobody actually knows if it will be a "forever" home, that is our hope. I'm fortunate to have a solid physician income and paid off loans which gives us plenty of opportunity in terms of what we can afford. I also am aware of the mortgage < 2x annual income in normal areas. However, my wife and I are struggling to figure out how much we want to spend that will meet our needs/wants without unnecessarily going higher than we need. As a reference, we went to an open house last week and met the criteria of <2x but it was at the very top of the budget at probably 1.2-1.3 million. Even with 20% down, I cringe when I see the mortgage payments and I'm sure increased upkeep costs. However, the home and location are amazing. Conversely, there are homes cheaper in the 700-1 mil range that are also nice but also aren't anywhere as incredible as the home that we just visited. It's been amazing how much money we've been able to save living below our means since graduating residency. However, we definitely want to upgrade and only move once. However, I'm very analytical and the <2x numbers work but I also don't want to regret the "big doctor house." Maybe some paralysis by analysis.

    Family and friends have not been as helpful as they are in different phases of their life, different geographic areas, or different income levels. As such, I was thinking of starting a thread to see what other high income professionals have purchased as their "forever" home and essentially if they would do it again.

    -Me: 2019. early 30s. ~600k income. MCOL area. Will put 20% down. Debating purchasing home with mortgage 1-2x income (600-1.1 mil mortgage).

     

    Thanks!

  • #2
    if you are early 30s and without loans, you're probably fine and certainly suffering from analysis paralysis. It all depends on who you are as a person and/or what your family is like. Do you guys like to travel a lot, or go out a lot? Or are you home bodies?

    As long as you are saving at least 20% towards retirement you can spend the rest on whatever you want. If that's a home, then fine. Maybe factor in saving for college too. How likely do you think your HH income will stay at 600k? That's a lot of money for a MCOL. I'm sure people here will tell you that you never know if it's your forever home. That is true, but there are people who successfully make their doctor house their forever home (including us at this point and we've been in this house for 7 years).

    I'll give you a comparison as we're in a MCOL area. When we bought we only put 10% down because that's what we had. 10% was a HELOC and the mortgage was the rest. At the time, the mortgage was 3x our gross income. So that breaks the rule. But today, 7 years later, obviously the balance is down and our incomes are up. We've also paid off the HELOC. Today the mortgage is 1.9x gross income. We also got a 30 year mortgage, which also probably isn't generally advised here. I'm still very confident we'll be in the position to retire if we want to between age 50-55 but we also don't mind working and aren't trying to reach FI ASAP.

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    • #3
      Ours was 1x, a foreclosure during GFC. With recovery and upward creep of COL, it is now worth easily 2x. (Well, 4x, because I'm also subsequently part time.) I would have paid full price in retrospect, because I'm quite happy here. But it would have taken longer for FI....

      Ultimately, there will always be a nicer house than the one you have. Of course a 1.5M house is awesomer than a 700k house. Buy what will make you happy within the constraints of what you can afford.

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      • #4
        i wouldn't do it. putting 200K down and still owing the bank a million wouldn't make me feel good.

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        • #5
          What percentage of the population can get priced into 1.2-1.4 MM? Basically, is it guaranteed appreciation or would it be a hope to break even? Around here, you're almost guaranteed a loss for a house that costs that much because only a small population can purchase said home. It may be different in your area.

          Affordability, I think it's possible. But if you're already stressing about the cost pre-purchase, imagine what it's like when you actually have to put that money towards it.

          I'm currently looking for a home, and it's a constant struggle between what we could afford (which is pretty much everything here) and what would be a hassle to up-keep once the house is purchased.

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          • #6
            We spent 2x, but were ten years older than you and nearly FI. It's been fine and we've even spent some additional money upgrading. Prior to that our homes had been anywhere from less than 1x to 1.5x to .5x. obviously there were costs to moving as well, which you will avoid if this is truly your forever home. However don't be surprised if your needs and wants are different ten years from now. Your family is relatively young, things change.

            I think 2x is fine in almost every case if your best and most honest analysis truly supports that your job and income and living situation are all stable for the medium to long term. That should produce a very manageable monthly payment. 2x in your early 30s will delay FI somewhat but money isn't everything.

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            • #7
              i'll just answer the question you asked. We spent 25% of our income.

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              • #8
                We're in the process of designing/building.

                Looks like it's going to end up being right about 2x or slightly above.

                IMO... worth it.

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                • #9
                  havent even gotten a first home let alone forever....

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                  • #10
                    You can certainly afford it but it'll be a question of how much it bothers you. Just be prepared to spend some money on maintenance and repairs. The last thing you want to do is buy a nice house and then cheap out on maintenance.

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                    • #11
                      Less than half in LCOL.  But considering building a garage shop which would cost almost as much as the house.

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                      • #12
                        I think for younger physicians this rule of 1x and 2x of income might be good but as you enter the mid and later phases of your career the rule might be silly and a % of your net worth might be a better indicator.

                        When we got your tiny house years ago it was 1/2 to 1/3 of my income. Now I am building one and it is 14 times my very part time physician income. But in the interim period my net worth has improved significantly and I don't need a physician income as much as I did a couple of decades ago.

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                        • #13

                          Me: 1995 28yo bought “forever”, current, home for ~190K on 115K income


                          Multiply house/income by 5.5 would be ~1M home on ~600K income so similar ratio

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                          • #14



                            Me: 1995 28yo bought “forever”, current, home for ~190K on 115K income


                            Multiply house/income by 5.5 would be ~1M home on ~600K income so similar ratio



                            Click to expand...


                            Was the new house much bigger, much nicer, or both?

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                            • #15


                              Was the new house much bigger, much nicer, or both?
                              Click to expand...


                              Still in my 1995 house, I was multiplying values to make a comparison to JK's situation.

                              Unfortunately my income never increased by 5.5 and home is not worth 1M.

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