Dangerously falling in love with first potential home purchase.

[RadFamilyMan]

Wish I'd been reading WCI longer...

I would be lucky to have some advice from you fine folks. Hope the mods let this first post through as I'm in bit of a time crunch. Thank you mods!!

My situation:
In last few months of fellowship.
Home shopping in vicinity of first job.
33 years old, MD

Med school loans ~200k federal at 6.3 to 6.6%
Currently working towards loan forgiveness as income based repayer. But plan is not intentional enough. Will my income pay it off before 10 years thus making not refinancing through past years foolish?

Salary has been 70ish this year. Wife makes mid 50s as a visiting professor with a PhD and no other debt.
Two cars owned, disintegrating 2002 Accord and 2012 subcompact.
Married, 1 toddler, 1 bun in the oven due November. She wants to adopt a third.
Would like to buy a lightly used baller minivan soonish. I like to do things with cash.

65k cash
88k retirement funds in s&p indexes via Roth IRA and 403b plan during training.
Dad has kindly offered to help with home down payment loan but not sure if it's in his financial interest to do so.

Will probably need a financial planner but it's not sorted out yet.

Moving to the headquarters of a major academic medical system, unique in that its rural.
Sacrificing distance from family (2-3hrs my parents, 6 hrs her parents...sad) and civilization for employed high salary position - 480k offered but I asked for 3 weeks extra vacation so 450k.

I actually expect to love it there and make it my forever job. Wifey can't be 100% certain of her prospects but is somewhat happily going along with it, can likely get a gig at a local university or as a fancy schmancy online tutor.

Went house hunting again this weekend. Favorite house on the market is a gem, built 2005, on Nowhere Rd, Awesomeville and 850k at list price, maybe can get it for 800k. This is the very top of the range we've been considering. Could not build this house for less than 1.1 mill per my contractor father in law. Not much to the area so I feel like I've explored it well enough in my visits to know the area I want to live. No close community of neighbors unfortunately being on 20 acres and no friends in town yet but I can awkwardly make friends in time and the wife is a natural.

The issue is that I fell in love with the 850k house walking through it today. Awesome play palace, room for family to visit (4900 sq ft + finished basement), tons of land to romp on, comfortable space for visitors (multiple family members work from home and can stay with us for extended periods lessening the isolation). Would love to plop down and stay there forever but can't predict the definite wisdom of this given first time home buyer, first time attending physician. If I have the ability to work well with residents and referring docs I win.

Few other options include renting an $1800/mo home for a year while we save and settle versus buying a medium term home that doesn't excite me with little play area for mid 400k.

Side questions - 15 or 30 yr mortgage? Wiser to pay 15 yr and opportunity cost of not investing that short term mortgage money? Interest rates are low still. Cant I with small risk do better with investments than my 30 yr mortgage rate?

Should I cross post this to another WCI forum?

Side comment - I work with my mind, not my hands. Maintenance on this beast could get ugly if I can't man up to it.

I understand the caution of people advising to go small or rent. But I'm tempted WCI!!!

[The White Coat Investor]

No, don't cross post it.

This is classic physician behavior. Buying an $850K house when you've never had an income higher than $120K and you owe $200K in student loans sounds a little premature to me. Now 2 years from now when you have a $500K income (or whatever) and no student loans? Sure, go for it. But I've never owned an $850K house and certainly would not buy one before I even finished fellowship.

[wideopenspaces]

You're moving to a rural area in your first job out of fellowship. With little for your wife to do (being an online tutor after getting a PhD and working as a professor may leave something to be desired on her end). Please don't buy this house. Just rent for a year or two and give yourselves the gift of being able to easily up and run if this situation doesn't work well for both of you. I check our local real estate listings weekly. I just love looking at homes despite being super happy in our current house. Just ask my husband how many houses I've fallen in love with over the last two years. I drag him to open houses " just to look" on a regular basis. So believe me when I say that there are other houses you will love just as much as this one. Just give yourself and your family some time to take a breath and settle in. You'll also be in a much stronger financial position two years from now but honestly that isn't even the primary reason I'd hold off. This situation has me nervous for you guys and I am just a random internet stranger. Good luck with whatever you decide to do.

[ACN]

I'm in a very similar situation minus the kids. My wife has been looking at houses and found an absolute gem of a brand new starter home (I use the term starter loosely.) house is 4br3ba for 450k with my salary being 350k-450k.

I told her absolutely not as we don't know the area, not partner, etc.

What happens if you don't like the job? What happens when you don't like the area? What happens when 6 hours to her parents is too far?

We are renting for 2 years and will plan on starting looking for houses after year one if everything is going. I'd advise you to do the same.

[StarTrekDoc]

Danger Will Robinson, Danger.

Answer this simple question:  why is the seller taking such a haircut?

2 years into the area, sure with friends? sure.  .  Suburban are?  sure.   Moving back to family town?  sure.    You don't check anything that would keep you grounded there if things don't go right.  2hr/6hr can be an easy weekender drive.....or a bridge too far.

Don't take on a potential albatross willingly.

[caprivenky]

Dear Radman

its very nice of you to discuss openly and ask for advice .

I wish if I had known about this forum when started .

My advice

1. Dont buy this house - too expensive for your starting career .you are falling into the classic Doctor Trap .dont fall into the trap of buying big doctor house and fancy doctor German cars

The bankers, real estate guys , car dealers - all are salivating to lend you tons of money . Then you will be enslaved and become House Rich and cash poor

This is your first job and who knows what will happen.

if your wife insists buy a starter home in 200000$ range

Look at the income and demographics of the area

if you wanted to sell this house how many buyers will you find .

2 Try to be debt free - big take home message from this forum .

Pay off your student loan

3 I am a big proponent of 15 year mortgage -look at the numbers below

Mortgage Comparison
15 year mortgage       30 year mortgage

Loan amount                     $650,000        $650,000
Interest rate                            3%                4.5%
Monthly payment                   $4,488.78       $3,293.45

Total interest                            $157,980       $535,645
Total payments                      $807,980          $1,185,645
Interest and Income Taxes*

Good  luck

[RadFamilyMan]

Appreciate everyone's sensible advice and caution and trying to talk me down.

But...

Home would theoretically be resellable as it's in an area with many other physicians albeit in the boonies. Agreed this is a classic early attending physician behavior but tempted to finally live a little after restricting myself for years.

What happened to the WCI rule about home buying less than 2x salary? There are more expensive houses out there. What about the idea of how hard it is to lose weight when youre making yourself hungry or to save money when you are austerely restricting yourself? I dont have very many expensive habits.

I really doubt I will hate the job. It seems ideal for me. Top starting salary, benefits, good people in the dept, residents i.e. outlet for teaching.

Seller is taking a haircut after a divorce. Agreed relatively sparse area doesnt support expensive houses well but Id be getting it on the relative cheap compared to prior original owners.

Granted, the key is if my wife will be happy as she has been uprooted. Far from family with young children could be tough. A nanny would be in order. She has a phone interview for visiting professor role at nearby college so fingers crossed.

[gap55u]

As per others above I would rent not buy. When I moved from a large urban center to a smaller city I was an attending with several years experience. But not a high income specialty.

I bought more house than I should have. And have felt constrained. And what seemed our forever house has warts we didn’t initially recognize. We don’t want to move but have toyed with it. (We would leave awesome neighbors and a school our kids have friends at)

I really wish I had rented coming to a new area. This was pre-wci for me. And when I bought, wish I had held firm on 15 year mortgage.

[jfoxcpacfp]

There are too many if’s for me to feel comfortable here. And if only one if falls through, you’re stuck finding someone else to fall madly in love. At that point, experience tells me lightning doesn’t strike twice and you’ll be the sucker selling at a loss. (Putting your wife and those babies 6 hours away from grandma and grandpa in a place you have NO connections is highly risky.) Do you love it enough to chance losing $100k - $200k in a couple of years?

As with all things emotional, the glow will soon wear off and reality will set in after you’re committed. Let it be a fond memory of the one that got away.

[hightower]

Agree with others...timing is not right for this purchase.  I feel like a broken record saying this all the time, but pay off the student loans first, save up a proper 20% down payment, then purchase a house.

I agree it should be a 15 year mortgage too.  Mortgage should be no bigger than 2X your gross salary.  The example above should be convincing when you look at how much interest you'd pay for a 30 year mortgage vs 15 year.  It's sickening really to think you'll be paying nearly 100% the purchase price of the home in just interest with a 30 year.

My advice to you and your wife would be to slow down, rent an affordable place for now, make sure your first job is actually a keeper and that your wife and kids are happy in this town, start paying off student loans aggressively, learn how to properly manage your own finances (you don't need a "financial planner"), then SAVE, SAVE, SAVE.  After 3-4 years you'll be able to shop for the house of your dreams the right way.  Your kid/kids are young and don't need to live in an 850k behemoth of a house yet

For the record, this statement about your wife "somewhat happily going along with it" is a MAJOR RED FLAG.  You probably haven't yet learned the true meaning of happy wife, happy life.  Take it from me man, you want to make sure you wife is happy as a clam first and foremost

[hightower]

RadFamilyMan wrote:

Agreed this is a classic early attending physician behavior but tempted to finally live a little after restricting myself for years...Granted, the key is if my wife will be happy as she has been uprooted. Far from family with young children could be tough.

You're answering your own questions here.  This isn't "finally living a little."  This is MTV cribs behavior.  Letting yourself live a little after residency would involve taking vacation, maybe renting a slightly nicer place then you have now, upgrading your car situation, etc.  NOT buying a massive doctor house.  Yes, technically your eventual salary will be enough to justify a house of this price using the 2x rule, but you don't have the salary YET and you don't have the cash for a proper down payment.  You're talking about borrowing from family!  BAD idea!  Resist the temptation.  It's not the right time for this.

Again, happy wife, happy life.  Make sure she LOVES it there FIRST.  Then, shop for a house.  An 850k house is not going to keep her happy if she otherwise hates being out there.  You'll end up being like the current seller trying to sell at a loss due to divorce and switching jobs

[janettebournes]

RadFamilyMan wrote:

Appreciate everyone’s sensible advice and caution and trying to talk me down.

But…

Home would theoretically be resellable as it’s in an area with many other physicians albeit in the boonies. Agreed this is a classic early attending physician behavior but tempted to finally live a little after restricting myself for years.

What happened to the WCI rule about home buying less than 2x salary? There are more expensive houses out there. What about the idea of how hard it is to lose weight when youre making yourself hungry or to save money when you are austerely restricting yourself? I dont have very many expensive habits.

I really doubt I will hate the job. It seems ideal for me. Top starting salary, benefits, good people in the dept, residents i.e. outlet for teaching.

Seller is taking a haircut after a divorce. Agreed relatively sparse area doesnt support expensive houses well but Id be getting it on the relative cheap compared to prior original owners.

Granted, the key is if my wife will be happy as she has been uprooted. Far from family with young children could be tough. A nanny would be in order. She has a phone interview for visiting professor role at nearby college so fingers crossed.

Click to expand...

The bolded portions concern me.

Sounds like you are going to have to learn the hard way. (That being said, if that's the only financial mistake you make in your lifetime, it's not terrible.)

The WCI rule about taking out a mortgage less than 2x/salary is ideally meant for people who have paid off a significant chunk of their student loans, have 20% saved up for down payment, and have a stable work situation. You are looking at this without having worked yet as an attending and needing to uproot your wife from her family.

I also look at this as voluntarily removing leverage on your end in terms of work negotations. Many of my colleagues renegotiate their deals within 1 - 2 years of practice (more money, more vacation, less hours, less non-clinical responsibilities, more protected research time, whatever the case may be). I've been a part of multiple private practices that prey on young attendings who bought a house too early. Those who aren't chained down by a house have the option to leave or at least provide a credible threat to their employer that they can leave. Those with a young family and lots of expenses, a large mortgage, and a strong restrictive covenant are left to suffer whatever their employer will give them (if anything).

I'll agree with everyone else, this is a mistake. But it doesn't sound like we will get through...

[Donnie]

RadFamilyMan wrote:

Appreciate everyone’s sensible advice and caution and trying to talk me down.

But…

Home would theoretically be resellable as it’s in an area with many other physicians albeit in the boonies. Agreed this is a classic early attending physician behavior but tempted to finally live a little after restricting myself for years.

What happened to the WCI rule about home buying less than 2x salary? There are more expensive houses out there. What about the idea of how hard it is to lose weight when youre making yourself hungry or to save money when you are austerely restricting yourself? I dont have very many expensive habits.

I really doubt I will hate the job. It seems ideal for me. Top starting salary, benefits, good people in the dept, residents i.e. outlet for teaching.

Seller is taking a haircut after a divorce. Agreed relatively sparse area doesnt support expensive houses well but Id be getting it on the relative cheap compared to prior original owners.

Granted, the key is if my wife will be happy as she has been uprooted. Far from family with young children could be tough. A nanny would be in order. She has a phone interview for visiting professor role at nearby college so fingers crossed.

Click to expand...

Sad, but kind of funny post.  You recognize this is “classic attending behavior” but still want to live a little after restricting yourself for years.  You’ve had to restrict yourself because you haven’t been making any money and have negative net worth. Buying a house now is a bad idea as everyone has mentioned.  Your counterpoints are some variation of what every high income professional uses to justify spending too much money.  You even need to borrow from your dad to make a down payment.  Some folks borrow from family in an absolute emergency, others borrow from family to buy an $850k house.

Clearly you have made up your mind, so go ahead.  It might work out, but it’s likely to be an expensive learning lesson for you.  Will it crush your ability to accumulate wealth?  Probably not on it’s own, but continuing to make mistakes like these will.

[Parasternal]

You have to decide what’s most important to you. Personally, I cannot imagine having over a million dollars worth of debt (school loans, mortgage) before working a single day as an attending physician, and you haven’t even factored in the maintenance costs of taking care of this property.

Everyone on this site has taken a different path, but what makes this site so helpful is that we all share a similar opinion in retrospect. The thing we have all come to realize is that security, especially financial security, is what is most valuable.

[VagabondMD]

I love your youthful optimism, but here is a dose of reality. You might love the house now, but you will grow to dislike it over time, and possibly even hate it. Don’t fall in love with a house, or any other item that can be bought or sold.