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  • Dream Home maybe a year early...

    So another.... "Am I nuts for wanting to buy this?" thread.

    I am blessed to work in a beautiful but rural area that brings in tourists from around the world.  Great for living; not so great for home prices.  I have no real desire to vacation living where we do.  Think skiing, boating, swimming, backpacking, etc....  We have been renting for the past 3-years and paying $2400 per month in rent, which has housed a family of 6 and at times 7 quite well.  My student loans are being taken care of by the NHSC (50k to go), and we have been saving for a home and have close to $100k.  The plan had been to continue renting until we had saved for a downpayment, and at that point, to purchase or buy land to build.  I have been for the hospital for 3-years and feel pretty comfortable where I'm at.  I love my colleagues, there is a shortage of physicians here, and it's a solid culture.  We've been forming roots in the community.

    Enter a major problem in the home where we've been renting that has resulted in some likely health issues with my family.  We are currently faced with leaving and trying to find a home in a scarce rental market or buy.  And then up pops a home in our dream location with million dollar mountain views on the lakefront with privacy in a beautiful setting with miles of national forest service land behind it.  There aren't too many homes or plots left on this side of the lake, as it is mostly national forest service land or completely inaccessible during the winter months (i.e., no one is plowing the roads), and most of the other homes on this stretch (fewer than 15) are valued at more than this one.

    Problem is that we have about $100k down for what will then be a $800k loan (i.e., 10% down).  Maxing ROTH and 401k.  Annual income is 350k.    That clearly breaks the 2x income for a mortgage, coming in at 2.29x.  The local bank will finance it a 3.375% on a 30-year, so my payments would come out to $3600 per month, or $4100 with property taxes and home owner's.  The interesting thing with my income is that probably 1/3 of my money comes in the form of bonus, so we have pretty much been used to living on about 200k per year and paying down debts or saving the rest.

    Am I nuts for wanting to jump on this opportunity/cost, yet also clenching my gut at the same time?  We are thinking about trying a lease-to-purchase agreement where my bonuses rolling in will allow us to get a conventional loan, but who knows with the buyer, who was using this as a vacation home.  The other issue is that my wife is having joint problems that have pretty much taken a skiing and a lot of hiking out of the picture for her.  Swimming and being on the water is the one area where she doesn't feel pain, so I'm more inclined to moving in this direction.

  • #2
    Normally I would steer people away from the concept of a "dream home" I generally feel that concept is what gets so many people in over their heads when it comes to mortgage debt. In your situation I am less inclined to be so harsh. It sounds like you are happy in your community and have solid employment. You are in a HCOL with high quality of life. And you have an immediate need to leave your apartment. I think it would be ok to go for it. Even though it is a very expensive house, if it ends up being where you stay for the long haul and you'll be truly happy there, then I can see it being ok.

    Comment


    • #3
      Well, you're not breaking the rule by much and you've saved enough downpayment for a doctor loan. Are you saying the bank will finance it with a 14% downpayment and no PMI? Also, how confident are you that your bonuses will continue at that level? How will you pay for the new furniture that you are sure to want? Those are my 3 concerns. Otherwise, this may be the time to tweak the rule and do it.

      This is, of course, assuming you have adequate life, disability, health, and umbrella insurance already in your budget and no other big dollar goals planned for the next 5 years.
      Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

      Comment


      • #4
        Sounds like you'll be fine.  Ask if the loan offers recasting.  If so, you could save bonuses for a few years and then pay down in a lump sum to get the benefit of lower payments if you decide it matters to you at that point.

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        • #5
          Also what will it cost to live there.  If it is as remote as it sounds be prepared for no internet, pizza delivery etc.  I know because I live part time on a remote lake.

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          • #6
            What would you be doing if your rental house wasn't having a problem?  Would you be buying land in similar location and building a lakefront million dollar home in a few years?

            Comment


            • #7
              I'm all about fulfilling your dreams but that's a lot of your income committed for family of seven and health issues, if I understood your post correctly. Forgive me, I'm on my phone.

              I think the house would likely appreciate and would be easy to get home equity line in a pinch? I don't love that you are dependent on bonus to make the numbers work, although I'm not turned off by the ratio of income to mortgage itself.

              I also find dream houses don't always stay dream houses as the years go bye. Lots of people eventually like to vacation elsewhere if just for a change. Having said that, my wife loves her dream house. Happy wife, happy life. But our dream house is a lot less than yours, and when we sell it, we will assuredly take a loss.

              Good luck!

              Comment


              • #8
                Yes, the bank will finance this with no PMI and keep it in house as a non-conforming loan.  Many of the local banks seem pretty driven to serve physicians here, so they do their own "doctor loans."  My goal would be to initially throw some money at the loan to get it into conforming territory, and then after that, it might be worth looking into recharacterizing/recasting it.  Thanks for the suggestion, Dr. Mom.  I like that idea.

                We actually had more than enough furniture to make this work, as we'd be downsizing, but most of the furniture is sadly being tossed from mold contamination from our last rental.  We will have a rental insurance payout coming which should adequately cover what we need.   We have life and individual disability.  No umbrella, yet, but honestly, we've not really had enough net worth to this point to consider it.

                As for my bonuses, I just renegotiated my contract with the hospital , and as long as I stay as productive as I have been, I see my income staying the same or increasing.

                Comment


                • #9




                  So another…. “Am I nuts for wanting to buy this?” thread.

                  I am blessed to work in a beautiful but rural area that brings in tourists from around the world.  Great for living; not so great for home prices.  I have no real desire to vacation living where we do.  Think skiing, boating, swimming, backpacking, etc….  We have been renting for the past 3-years and paying $2400 per month in rent, which has housed a family of 6 and at times 7 quite well.  My student loans are being taken care of by the NHSC (50k to go), and we have been saving for a home and have close to $100k.  The plan had been to continue renting until we had saved for a downpayment, and at that point, to purchase or buy land to build.  I have been for the hospital for 3-years and feel pretty comfortable where I’m at.  I love my colleagues, there is a shortage of physicians here, and it’s a solid culture.  We’ve been forming roots in the community.

                  Enter a major problem in the home where we’ve been renting that has resulted in some likely health issues with my family.  We are currently faced with leaving and trying to find a home in a scarce rental market or buy.  And then up pops a home in our dream location with million dollar mountain views on the lakefront with privacy in a beautiful setting with miles of national forest service land behind it.  There aren’t too many homes or plots left on this side of the lake, as it is mostly national forest service land or completely inaccessible during the winter months (i.e., no one is plowing the roads), and most of the other homes on this stretch (fewer than 15) are valued at more than this one.

                  Problem is that we have about $100k down for what will then be a $800k loan (i.e., 10% down).  Maxing ROTH and 401k.  Annual income is 350k.    That clearly breaks the 2x income for a mortgage, coming in at 2.29x.  The local bank will finance it a 3.375% on a 30-year, so my payments would come out to $3600 per month, or $4100 with property taxes and home owner’s.  The interesting thing with my income is that probably 1/3 of my money comes in the form of bonus, so we have pretty much been used to living on about 200k per year and paying down debts or saving the rest.

                  Am I nuts for wanting to jump on this opportunity/cost, yet also clenching my gut at the same time?  We are thinking about trying a lease-to-purchase agreement where my bonuses rolling in will allow us to get a conventional loan, but who knows with the buyer, who was using this as a vacation home.  The other issue is that my wife is having joint problems that have pretty much taken a skiing and a lot of hiking out of the picture for her.  Swimming and being on the water is the one area where she doesn’t feel pain, so I’m more inclined to moving in this direction.
                  Click to expand...


                  I thought the rule was a mortgage 2x your salary which youre right at, and that it was slightly adjusted for higher cost areas, with the caveat it obviously dips into other financial areas.

                  Comment


                  • #10
                    What are the terms of your contract bonus? That is my main question. Sounds like you can get a loan with good terms for the property, so don't have questions there. I would argue, though, that's it difficult to say what your real debt to income ratio would be without being able to estimate the certainty of your bonus.

                    Personally, I don't think I would commit that much of my money to a home, regardless of my salary. My wife does call me "my cheap husband" occasionally, so keep that in mind. Just my bent. I would be interested to hear about how your bonus is structured, though, to better answer the question.

                    Comment


                    • #11




                      I’m all about fulfilling your dreams but that’s a lot of your income committed for family of seven and health issues, if I understood your post correctly. Forgive me, I’m on my phone.

                      I think the house would likely appreciate and would be easy to get home equity line in a pinch? I don’t love that you are dependent on bonus to make the numbers work, although I’m not turned off by the ratio of income to mortgage itself.

                      I also find dream houses don’t always stay dream houses as the years go bye. Lots of people eventually like to vacation elsewhere if just for a change. Having said that, my wife loves her dream house. Happy wife, happy life. But our dream house is a lot less than yours, and when we sell it, we will assuredly take a loss.

                      Good luck!
                      Click to expand...


                      agree with that.

                      you're pushing 2x which usually isn't the end of the world, but with 7 people on the ticket i would want more flexibility.

                      what is that home going to do to the rest of your plan? is it going to limit college savings for some of those kids?

                      also in any part of the country except crazy HCOLA $850k is going to be a ************************ of a lot of house. i live on the north side of the city of Chicago and $850k would still get you a beautiful place. would have to imagine you could get something really great for much less.

                      another thing to think about: is this basically a vacation property that you are going to use as a primary residence? if so you may be sitting on sort of a bubble. remember if the economy or market tanks those are the houses that it's going to be the hardest to offload. how many other people in your community are buying in that price range?

                      for me it comes down to the large family, given that i probably wouldn't do it.

                      Comment


                      • #12
                        My bonus is straight up $/RVU with a low threshold to end up in bonus land.

                        I'm giving away a bit here, but this is a community near a top 10ish national park. There are a suprising number of amenities here, but a great deal of the land is protected. My family situation is a bit different, as well, as I am a few years into my career but have one stepkiddo working and one in college. So really only 2 kids in the home now. The 7th member was another family member who is now independent, as well. In the urban locations where I have lived, I wouldn't see a point in paying this much. It is less about the big fancy box called home but more about location in this case. The potential for a bubble is real, though home prices here are still well below 2009 levels (where there was a huge bubble) here despite growth in the area.

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                        • #13


                          dream location with million dollar mountain views on the lakefront with privacy in a beautiful setting with miles of national forest service land behind it.
                          Click to expand...


                          Personal finance opinions aside, I could not be more jealous

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                          • #14
                            A house on the lake for 850k with protection. I would jump on that in a heartbeat. I would feel fine with the numbers personally...

                            Comment


                            • #15
                              850k?  Lol.  Not sure where you live, but that is definitely not a lot of money for a house.  You can easily afford it.

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