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  • Did I buy too much house

    First time poster here but have been lurking for a year or two but never thought I had anything to add so I have just been trying to learn.

    Maybe I am in sticker shock but I wanted to get everyones thought on my situation.

    I am about 3.5 years out of residency and just purchased a house. I have about 60k in students loans left but should have those paid off in the next 6 months. I purchased a home for about 512k and was able to put down about 95k down as a down payment to keep me under the jumbo loan. I now am a "proud" owner of a home. I opted for the 30 year mortage as I wanted to put more into savings due to the time value of money. My loan is 417k @ 4% with no PMI.

    I max out my 401k, HSA and back door Roth accounts for my wife and I and also am trying to save about 6-8k month to a after tax account. My current income has been plus or minus 300k annually.

    I did keep my mortgage to income below 2 (1.4) per WCI recommendations but am wondering if even this is too high. I am concerned about cost of putting in a yard, property taxes, maintenance of a home and etc. I did think about these things before but after dropping so much down on downpayment I want to rebuild my savings and can now see some of this money going to take care of the house. Renting was just so easy. Anyway, I was hoping to get some feedback and hope to be posting more in the future and continue to learn.

     

  • #2
    Looks reasonable to me. Unless you hate your job and are planning on quitting/retiring/moving sometime soon. Or have some extravagant expense you're not telling us about (20 kids or something like that).

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    • #3
      I think objectively, buying a house that's 1.4x your annual salary is not "overbuying." But in the end, only you can know if you are uncomfortable with what you purchased. Houses come with expenses, especially the first couple of years. I like you am a relatively new homeowner (less than 1 year) and I'm finding here will always be projects. Just take your time and don't stretch yourself too thin from a financial standpoint.

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      • #4
        Mountain level, doesn't sound like it. Ground level, hard to say. So many things I don't know about your situation that financial planning calls for (if any clients are reading this, you know what I mean). Hopefully, your goal is to pay it off in half the time, perhaps apply the student loan payments to it after 6 mos?

        But for a $500k house at a $300k income, there's no mortal wound here and it sounds as if you are suffering buyer's remorse after renting for so long, which is reasonable. Actually, overall, it appears to me that you are in a really good spot. You'll be fine once you adjust, especially after your student loans are paid off.
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5
          Is the house in a place where it will hold its value?

          Property taxes, routine maintenance and emergency repairs to the house - calculate a rough estimate

          Do you have children where you may have expenses like daycare and 529?

          Pay off the student loans before you start projects inside and outside the home.

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          • #6
            I think you're probably fine with that ratio. Now imagine if you were at 2.8 and you'll understand why I tell people to keep it to under 2.
            Helping those who wear the white coat get a fair shake on Wall Street since 2011

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            • #7
              A common mistake (that I made) is to scrap your money together to buy your first house and not have much left in reserve for emergencies or those unexpected things that pop up that need to be fixed or replaced in your new house.

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              • #8
                No. You did not. Enjoy your new home.

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                • #9
                  I agree that you're fine. As long as you like your job, like your city/neighborhood and are saving what you need to save. For what its worth, my situation is similar to yours (income, debt). My mortgage is 296k at 4% and I still sometimes have buyers remorse. So I think it just comes with being a home owner.

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                  • #10
                    I'm not thrilled about the 4% rate (looks like 2.67% after tax deduction), but no, not awful, esp not with that income.  Unless you have to leave the house too soon or you have some awful unforeseen home-related expenses, as far as money goes, you'll probably come out superior to renting.  Plus, it's "yours" to do with as you please.  You should still have plenty of room, especially since you're putting away $16,000/month into student loans and into taxable (assuming you're paying $10,000 into student loans).

                    ...actually where's that money coming from, to pay off $60k in student loans over 6 months and put $6-8k into taxable every month?  That $16,000/month equates to $192,000 a year, and assuming an effective tax rate of 25% (prob low, includes WH/SS/MCR) you net $225,000/year, minus $18k for 401(k), $11k for two IRAs, $6750 for HSA = less than zero, not including anything for living or doing anything (although obv those are monthly expenses)...are you paying the student loans with something other than cash flow, like other investments, or not putting into taxable while paying student loans, or does your wife have additional income beyond your $300k?  Not telling you you're wrong, just want to get a feel of how you're actually doing that to ensure that you haven't indeed bought "too much" house or might need to scale back this or that.

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                    • #11
                      You're fine.
                      Erstwhile Dance Theatre of Dayton performer cum bellhop. Carried (many) bags for a lovely and gracious 59 yo Cyd Charisse. (RIP) Hosted epic company parties after Friday night rehearsals.

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                      • #12
                        Thanks for all the responses and help. I hope this is a long term house but you never know. I think the area has great upside for the future but again you never know. Schools seem to be good and the neighborhood should be good place to raise my 3 younger kids. Wife is a stay at home mom and does occasionally do some side stuff but nothing to really add to the bottom line.

                        I guess I just need to settle in for a year or two and see if I am still stressed about it or still having buyers remorse, I sure hope not. I am just concerned about the longer term and don't want to have to be working till 65 because I have to but rather because I want to. This is obviously a big purchase and I do not want to make any mistakes that would affect my long term financial freedom.

                        To clarify I will pay off my student loans in about 6 months with with bonus money and regular income then after my loans are paid I will be adding 6-8K month into after tax account but will not be able to add to after taxable account until loans are finally finished.

                        I to am not  happy about the 4% rate as well but rates really shot up in the last 2-3 months. If I could have locked just a month or 2 prior when I did I was looking at a 30 year note at 3.25 % or 15 year note at 2.5%. Still a solid rate at 4% but 3.25% on 30 years would have been phenomenal.

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                        • #13
                          Congratulations!

                          It all sounds entirely reasonable to me. We spent more than that in an area where the average house sold for under $100,000, and that was before the housing bubble burst. Waiting until you've been out for 3.5 years is impressive, too. Most have a house purchased when they're more than 3.5 months away from finishing residency.

                          Stay in your current job for at least a few more years and I think you'll be just fine. Bummer that rates have been on a rapid rise, but 4% isn't so bad.

                          Cheers!

                          -PoF

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                          • #14
                            Seems very mathematically reasonable, but the question is are you happy? If you are less happy owning than renting then the price you paid is irrelevant.

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                            • #15
                              Taking the info that you have given and the financial discipline you have, you will do fine. In a year or two this will not even enter your thoughts. Just resist the temptation of upgrading to a bigger home when you are finances are better.  

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