How much house would you be comfortable buying?

[Gas_Doc]

I've posted this in a thread comment section before, but I'm curious what the forum thinks. Here's my situation:

- I'm 31 y/o, married, no kids (yet) but planning to start soon, med school loans paid off, ~$200k in retirements accounts between the two of us, and another $110k in cash for a home down payment. Additionally, my wife's parents have offered to give us a $100k "loan" (really a gift, but it has to be an interest-only loan where the principle is forgiven over a 2-3 of years so they are not taxed) to help with a down payment or renovations. Credit score 780+.

- Anesthesiology fellow, done in 6 month

- Private practice job lined up, 3 years to partnership, very stable group (1 associate in their 30-year history has not become partner due to inability to pass boards). Pay as an associate is around $200k, $250k, $350k plus benefits the first three years. Partners then make about $500k + benefits

- The expense of the home market is average to above average, and we know we want to live in that particular metro area for the duration of our adult lives as we are both originally from the area
My question is, given the above scenario with the escalating pay toward partnership, how much house would you be comfortable purchasing at the end of fellowship?

(Also, let's assume renting is not an option.)

[Joseph]

Depends on how seriously you are going to take the "kids planning to start soon" part.

You have everything perfectly aligned; you can do whatever you want.

A $500k house is not going to be a reach at all.  Do you want a million dollar home? Sure, you could do that but it is more house than a married couple with no kids needs...

 

[nyu04]

Based on your post, I am assuming a few things:

1. Your job security is excellent

2. You will have a hefty down payment

3. Your wife may be contributing to your income

From what I can tell, your financial position is awesome for someone your age (congratulations!)  I personally would buy something in a good neighborhood with great schools.  Doesn't have to be a huge house but at least big enough to have kids down the line so you don't have to immediately upgrade if you decide to stay put.

Having said that, I have no idea how much houses like that would cost in your neck of the woods.  For our area, I would be comfortable buying in the 350-500k range myself if I were you.

 

Again, good job - dude!!

[The White Coat Investor]

$400-800K purchase price is probably fine.

[dragonfruit]

The chances of somebody staying in their very first job for more than 3 years is less than 50%.  I would buy only 1x your salary so this can be your starter home, then when you have kids, you can upgrade one more time for your forever home so you can be sure you love your job and that your house really reflects what you want.  I didn't know I want a really huge mud room until I had kids!

[docnews]

Better question: how much house do you need? Your finances are solid just choose a home that fits your family so it doesn't become just an expense item for you. If you get a 5 bedroom house, are you really going to need 3 guest bedrooms plus an unfilled nursery? I worry about my house becoming a time suck as well. I plan on paying more for location. But as for the amount you spend, you could still be considered financially smart going for a $1mill house with your 20% down and lock in a great interest rate. But in my area $500k would be plenty of house in a good location for the same size family as you (first baby on the way).

[tex]

-haha, congratulations on your upcoming very non stressful decision... you have a sizeable net worth and what appears to be only great income and job security in your future. you'll be fine.

-whatever mortgage payment still allows you a 20% gross savings rate on your starting salary still probably ends up being on the conservative side of "affordability"

-not personally knowing you or the group or the market in question, the biggest assumption i'm making by recommending buying at all is that you'll still be in this job in 3 years

 

[RetiredERdoc]

This was one are where I always lived WAAY below my means. I bought my first home for 62k and my second for 240k (<1x salary). I live in a part of the country where housing costs are reasonable. I remember watching Suze Orman and people would call in who made less than half my salary and bought homes that were 3x mine. I never could figure out what they were thinking.  Dave Ramseys advice of mortgage payment <25% of take home pay on a 15 yr loan always seemed reasonable to me.

[PhysicianOnFIRE]

dragonfruit wrote:

The chances of somebody staying in their very first job for more than 3 years is less than 50%.  I would buy only 1x your salary so this can be your starter home, then when you have kids, you can upgrade one more time for your forever home so you can be sure you love your job and that your house really reflects what you want.  I didn’t know I want a really huge mud room until I had kids!

Click to expand...

We had an attending give a "transition to private practice" talk to final-year residents.  He told us "RENT, DON'T BUY," followed by "let me repeat that, RENT, DON'T BUY" and then said it once more just for good measure.

After a few months of locums and a signed contract to return full time, we built our dream home on the water (yeah... I heard him but didn't listen).  After the local hospital went belly up a few years later, we were stuck with a high-end home in a low-end market.  Lost a ton of money when we were finally able to sell.  Our current home cost us less than half that first home and we paid cash. We are very happy in our current home.

[psych007]

Unfortunately, I live in NYC.  Even with such a salary, I would not be able to afford a conservative home in a nice neighborhood, with nice schools.  Most homes around here, crappy homes mind you,  are going for 700K+ Ridiculous...Guess I will be renting until the next real estate crash

[Slav4ikMD]

@Gas_doc:  a bit off topic, but a small warning for you re your partnership track.  One of my best friends was recently in the same position as you, also started with something like 250k on a 5 year track, partners there made ridiculous numbers, close to a mil.  Well guess what, 6 months before he was to become a partner, the main dude decided to close shop to cash in and sold the thing.  I guess my friend's contract wasn't well thought out.

 

So assume the worst.  I would plan for continuing to make say 250k, especially since anesthesia is not hot today unfortunately.  So much depends on your area, your needs and priorities.  So maybe consider a house either in the 700ish range, or a starter home at a lower price and then see how it goes.  Or rent.

 

We had a starter home for the first 5 years, financially could have rented, it was really a wash more or less, but I preferred owning and we loved our place and experience.

 

Once you truly make 1/2 mil and it's stable, buy what you want (within reason of course, but then you can push for a mansion dream house if you choose.)

[Slav4ikMD]

@psych007, if you want a decent house and good schools, you may want to consider moving to Long Island (or I guess NJ, which I know less about).  Yes, it is very pricey here, but you CAN find something nice for almost any budget.  I am in this area, so if you need any advice PM me.  If you are a PGY4 looking for work, you can also PM me.

[Raj]

Congratulations! You are way ahead of a lot of people your age.

If i may ask, as a fellow how did you manage to pay off your loans and have a decent amount in your retirement account. I could definitely learn a few things from you.

Regarding your question about house: if i were in your shoes i would be looking at $400k-600k.

[Gas_Doc]

Raj wrote:

Congratulations! You are way ahead of a lot of people your age.

If i may ask, as a fellow how did you manage to pay off your loans and have a decent amount in your retirement account. I could definitely learn a few things from you.

Regarding your question about house: if i were in your shoes i would be looking at $400k-600k.

Click to expand...

Having a wife who worked throughout Med school and residency (and no kids) really helps     I lived in a relatively low cost market during med school and went to a state school, so I only took out loans for tuition and we lived in my wife's salary. I stayed there for intern year as well, and 100% of my paycheck went toward loans.

 

We moved to a more expensive market for my anesthesia residency, but my wife also got a raise(s) so I was still able to contribute about 2/3 of my salary toward loans. We paid them off about half way through my PGY4 year. That monthly payment then went into a savings account toward a home down payment.