How much house? first time home buyer

[higgins04]

My Wife and I have been looking at houses for the last 6 months and are looking for some advice. We are both MD, I'm 2 years out from residency, wife is 1 year out. Combined base income ~540,000 with probably 50-60k extra per year from RVU and performance incentives. I have ~250k in refinanced (now private) student loans at 2.8% minimum monthly of 1900, which I've been putting about 4k monthly towards. Wife has ~450k in federal student loans going the PSLF route and currently paying 0$ given the 0% no payment period. We currently have about 120k liquid in HYSA for down payment, maxing 403b and backdoor roth. Emergency funds of 30-40k each. We're wondering what would be a safe number to target for a house. We do have a baby on the way this summer. We were hoping to find something closer to 450-700k in our area but we seem to mostly be finding things on either end of the spectrum - nice, move in ready but 800k-950k or needing a lot of work but ~400k and less optimal property. We were thinking of extending closer to 800-900k for the house but were wondering if this would leave us house poor?

[CordMcNally]

How much do you spend and save per year?

[higgins04]

Saving about 200k/year at the moment. Spending about ~100k on global spending including all rent, utilities, insurance, etc. plus 50k towards students loans. 180k to taxes.

[bovie]

My Wife and I have been looking at houses for the last 6 months and are looking for some advice. We are both MD, I'm 2 years out from residency, wife is 1 year out. Combined base income ~540,000 with probably 50-60k extra per year from RVU and performance incentives. I have ~250k in refinanced (now private) student loans at 2.8% minimum monthly of 1900, which I've been putting about 4k monthly towards. Wife has ~450k in federal student loans going the PSLF route and currently paying 0$ given the 0% no payment period. We currently have about 120k liquid in HYSA for down payment, maxing 403b and backdoor roth. Emergency funds of 30-40k each. We're wondering what would be a safe number to target for a house. We do have a baby on the way this summer. We were hoping to find something closer to 450-700k in our area but we seem to mostly be finding things on either end of the spectrum - nice, move in ready but 800k-950k or needing a lot of work but ~400k and less optimal property. We were thinking of extending closer to 800-900k for the house but were wondering if this would leave us house poor?

Not what you're asking, but $30-40k each for emergency funds is way too much.

Also, you're married. What do you mean "each?"

And I would consider not paying extra to student loans with a 2.8% rate.

[CordMcNally]

Given your rough spending and saving, you can afford an $800k-$900k house. That’s with your current situation. The few caveats would be if one of you go part-time or stay at home at some point. With your wife’s student loan burden, it probably wouldn’t be a financially great idea to step off the PSLF track. I value flexibility so I’d probably try to buy less house to leave my options open.

[uksho]

If I were you and had decided to stay in that area , would buy the house in that range ( 850-900) .

[Midwestpeds]

Again one of those responses - "not what you asked for". But had some similarities to your situation, dual income combined about 300 - 400K, no loans and ultimately bought a house of about 680K in 2021. You seem to be doing well and have a lot of margin; but we were quite taken back on how much one ends up spending even after moving into a move-in ready home. Just many expenses that we did not account for. Ultimately we did fine, and on hindsight it was a good decision since our interest rate is low and our house appreciated.

Just wanted to say that your house comes with lots of expenses that you might not be able to foresee, so would keep that in mind as well. Would recommend in addition to the WCI books, to also look into "100 Questions Every First-Time Home Buyer Should Ask, Fourth Edition: With Answers from Top Brokers from Around the Country" by Illyce Glink before you buy, which i think does a decent job of going through lot of details on home buying.

[Tim]

Combined income: say $590
SL: his $250k hers $450k (PSLF)= $700k total.
Down payment: $120k
Kid on the way.

Max mortgage is 2x gross = $1,080k.
Less Down payment ($120k) leaves $960k.
The question is the debt and the coming child, basically the wife’s income will take a hit and her plan for PSLF is iffy, will you be saving a contingency fund, just in case?
If you deduct the total debt $700k) that leaves $260k for mortgage.
Add that to $120k down payment and that is $380k house.

Completely ignores your new cost of living, potential childcare and additional costs of ownership and are you saving 20% of gross for retirement and costs for moving in.
Unavoidable, you will spend some.

This is intentionally a conservative view, you asked if this could be a mistake going for an $800-$950k house.

Yes it sure could be a problem. A $500k mortgage problem.
I think you need to get a house after having the new addition and you both get one more year of job security.
That lets you absorb the income hit and adjust to a new spend rate as well as save more. You and your wife have significant life changes.

I think you can find a way to rationalize and afford it. But you really need to get a better picture of what your budget will be and the risks.
Best wishes about the new family addition.

[Tim]

Again one of those responses - "not what you asked for". But had some similarities to your situation, dual income combined about 300 - 400K, no loans and ultimately bought a house of about 680K in 2021. You seem to be doing well and have a lot of margin; but we were quite taken back on how much one ends up spending even after moving into a move-in ready home. Just many expenses that we did not account for. Ultimately we did fine, and on hindsight it was a good decision since our interest rate is low and our house appreciated.

Just wanted to say that your house comes with lots of expenses that you might not be able to foresee, so would keep that in mind as well. Would recommend in addition to the WCI books, to also look into "100 Questions Every First-Time Home Buyer Should Ask, Fourth Edition: With Answers from Top Brokers from Around the Country" by Illyce Glink before you buy, which i think does a decent job of going through lot of details on home buying.

The big difference is no SL’s. $700k and expecting a new child (primarily the loss of income).
Mortgage debt at 2x gross made your purchase affordable.

[99mkw]

What are your long-term goals? If you are looking to be FI in ten years, the answer is to rent someplace cheap or househack by buying a place that you live in part and rent part out. If you both plan to be working past 60 then you can give yourself permission to buy the doctor house before your "live like a resident" period is up. Just beware of lifestyle creep (cars that fit in the neighborhood, the country club that's cheaper if you join before 40, etc) and recognize that you've got some major childcare expenses on the horizon. You have to know yourself and be comfortable with the trade-offs. People (including my wife) often feel like they need to own a home when starting a family, but it's a want not a need.

If it were truly a dichotomous choice between 900k move-in ready and 400k needs-a-lot-of-work, just pony up the cash. Especially with a kid on the way you don't need the stress of home renovations layered on top. Also, if you are open to public schools choosing an area with viable options through high school is worth at least $100k/kid and probably twice that. Of course, the best scenario is to rent until you find something in the middle ground.

[GIMD]

If you plan to stay with your job for more than 5 years, I would buy the move-in ready home. I think you can afford it with your current income and great savings rate. Unless you are in a hurry for some reasons, I recommend waiting until the end of the year to start your search. You would know better by then how the baby will impact your household income and you may be in a more favorable buyer's market by the end of the year. You would also have more time to save and plan to set aside $20-40K for furnishing and renovations.