How much house should you buy?

[tartesos]

A question that pops up frequently lately I my life.
I have been having some differences with the wife as to how much house should we buy on our next move( first real job post fellowship) this coming June.
A financial advisor we talked to said for a salary of 380k a 600k mortgage is acceptable/top of limit and my wife grinned and gave that look( if you are married you know which one) and I felt like bitch slapping the guy.
Now I don't have any student loans and no debt( thanks mom!! ) and have been able to save around 40k in fellowship(s).
I have a 200k house now that I should be able to sell quick at no loss( 10-15 k gain) and I have 2 car leases, 3 school children.

I want a top ceiling of 300k, yet all the houses she likes are 450 ish. We would need a 4 br with a bonus room or basement and I've seen plenty that meet that budget where I will be going in the south.

I've been doing some research and ordered 2 financial books for doctors, the white coat investor guide and doctors eyes only through Amazon with a gift card I got from christmas... Will see how that helps.

Did you guys give in to your spouses wishes? Happy wife happy life!

Am I being unreasonable?
I know it's a little personal info but you don't have to Dwell into details!

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[BICpaid]

How is the property tax where you want to buy the house

 

[deleted480308]

First in defining "need". No one needs a 4 bedroom house with a finished basement. You would like that house. And you can afford that house on your stated salary. The conventional wisdom of "x"% of salary on housing doesn't apply once you get into upper echelons of income because you get into the "want" instead of "need" category. What you are facing is a value call. Does granting this to your wife justify the things you might not be able to give to her instead. An early year or so of you retiring, an extra vacation every year, that nicer model of car, the country club membership, etc......you just need to decide your values.

A cliche around here goes, "most doctors can afford anything they want, they can't afford EVERYTHING they want".

 

[CopaceticOne]

Another thing people forget is the expenses of furnishing a much larger house. Those can really add up! And if you are not in a temperate climate, the costs for heating/cooling can be large. And depending on the house, there can be more yard & landscaping to maintain. Are you going to have the free time to maintain it, or will you pay for a landscaping company? And of course, PROPERTY TAXES!

Include all of these expenses into the discussion of how much house to buy to help knock down the upper-limit of purchase price.

 

[deleted547339]

I think you and I probably think fairly similarly. That being said, listen to your wife. Conventional wisdom is (was) that you can buy a house for twice your income. This shouldn't apply to physicians for a variety of reasons (student loans, late start saving, late start home buying, higher taxes, etc). 600 on an income of 380 sounds pretty reasonable as an upper limit. You don't want to buy a house for 300 and quickly realize you can afford much more house and your wife get restless. Getting a house for 450 would put you in great financial position long-term and likely be "enough house" for y'all based on what you've said.

I found a table in the past that had a recommended ratio of house price to income ratio based on the age at which you purchased. I can't seem to find it right now but think it was WCI.

Mind you, I'm a resident. My only financial credentials are simply compulsive self-study and being really cheap.

 

[tartesos]

How is the property tax where you want to buy the house

Cheap, like 2-4 k a year( max) depending on area. And no state tax in Tn! 🙂

 

[tartesos]

Another thing people forget is the expenses of furnishing a much larger house. Those can really add up! And if you are not in a temperate climate, the costs for heating/cooling can be large. And depending on the house, there can be more yard & landscaping to maintain. Are you going to have the free time to maintain it, or will you pay for a landscaping company? And of course, PROPERTY TAXES!

Include all of these expenses into the discussion of how much house to buy to help knock down the upper-limit of purchase price.

Good points! Hadn't thought of putting those on the table. It hurts me plenty that we've lived frugal all these years and we feel in a good financial situation being in no debt, that my wife feels this is the light at the end of the tunnel, the payout of all our sacrifices... She does have a point there.

Darn southern living magazine!!
🙂

We came neighborhood browsing and saw a house in a neighborhood we both loved for 330.... That should hopefully satisfy that itch, and It has a man cave too! 20 mins to hospital and 15 to schools...

A small enough yard that I can mow in 20 mins in the sitting mower that I deserve, with a beer holder. I suck with the weed wacker so I may need a landscaper to touch it up once a month or so or get better at it.

As I project it I should be able to pay all my needs( even school for kids, with discount I get for being Catholic) with one 2 week salary and have some extra, with the rest I would max out my 401 k, invest in her Roth IRA until she goes back to work( hopefully never) and find some other investment opportunities after I increase my emergency fund. And pay Uncle Sam the ridiculous amount of taxes it wants from me.


Thank you all for your help and advise. I need one of you to buy a boat now and become my bff.

 

[tartesos]

I think you and I probably think fairly similarly. That being said, listen to your wife. Conventional wisdom is (was) that you can buy a house for twice your income. This shouldn't apply to physicians for a variety of reasons (student loans, late start saving, late start home buying, higher taxes, etc). 600 on an income of 380 sounds pretty reasonable as an upper limit. You don't want to buy a house for 300 and quickly realize you can afford much more house and your wife get restless. Getting a house for 450 would put you in great financial position long-term and likely be "enough house" for y'all based on what you've said.

I found a table in the past that had a recommended ratio of house price to income ratio based on the age at which you purchased. I can't seem to find it right now but think it was WCI.

Mind you, I'm a resident. My only financial credentials are simply compulsive self-study and being really cheap.

I'll look up for that table, thanks.

Living cheap now will pay off in a big way on the long run. Having cheap hobbies goes a long way too. I don't golf yet ( I know I'll love it) and my hobbies are relatively cheap ( fishing, hunting, hiking and bike cruising, still like video games once in a while).

We've been frugal with most things but vacations.... We blown away several moonlightning shifts 1-2 x a year to visit family and relax...
We are no saints now! 🙂

 

[jacksweeds]

A question that pops up frequently lately I my life.
I have been having some differences with the wife as to how much house should we buy on our next move( first real job post fellowship) this coming June.
A financial advisor we talked to said for a salary of 380k a 600k mortgage is acceptable/top of limit and my wife grinned and gave that look( if you are married you know which one) and I felt like bitch slapping the guy.
Now I don't have any student loans and no debt( thanks mom!! ) and have been able to save around 40k in fellowship(s).
I have a 200k house now that I should be able to sell quick at no loss( 10-15 k gain) and I have 2 car leases, 3 school children.

I want a top ceiling of 300k, yet all the houses she likes are 450 ish. We would need a 4 br with a bonus room or basement and I've seen plenty that meet that budget where I will be going in the south.

I've been doing some research and ordered 2 financial books for doctors, the white coat investor guide and doctors eyes only through Amazon with a gift card I got from christmas... Will see how that helps.

Did you guys give in to your spouses wishes? Happy wife happy life!

Am I being unreasonable?
I know it's a little personal info but you don't have to Dwell into details!

I agree you don't need a big house. Theres much joy to be found in simplicity.

That said, a million dollar home comes with a mortgate of roughly 5.1k/mo if you put down a meager 10%. On your salary, you should easily be able to afford this, much less a 600k home. I'm less experienced than I'm sure many of you in these things, so perhaps I'm missing something?

 

[tartesos]

I agree you don't need a big house. Theres much joy to be found in simplicity.

That said, a million dollar home comes with a mortgate of roughly 5.1k/mo if you put down a meager 10%. On your salary, you should easily be able to afford this, much less a 600k home. I'm less experienced than I'm sure many of you in these things, so perhaps I'm missing something?

The thing is, because one can one should?
I could definitely afford it but it would limit my options for some other things... Although I strive to make my wife happy and her happiness means a big deal to me, I don't feel I want to work to pay a mortgage and I want to invest in my retirement so I don't have to work until I drop dead.

I don't discard a bigger place in the future but by then, I hope to be more caught up with retirement savings and kids tuition etc.

My wife is so much smarter than me, yet I can't seem to make her see this( she's a woman! )

 

[Pemulis]

The thing is, because one can one should?
I could definitely afford it but it would limit my options for some other things... Although I strive to make my wife happy and her happiness means a big deal to me, I don't feel I want to work to pay a mortgage and I want to invest in my retirement so I don't have to work until I drop dead.

I don't discard a bigger place in the future but by then, I hope to be more caught up with retirement savings and kids tuition etc.

My wife is so much smarter than me, yet I can't seem to make her see this( she's a woman! )

Buy your wife a copy of "The Millionaire Next Door." If she hasn't read this book yet, it might get her to think a little differently about your household finances, and what it really means to be affluent.

 

[PlutoBoy]

I also want to buy a house. I'm with you, @tartesos. I want a nice home but I don't want to spend my career paying for it. I think my ceiling is $400,000. I have no debt pretty much and my wife is also a physician but we have agreed that we want to retire early or be able to work part time sooner rather than later. Well, if you buy expensive stuff you have to work for it! I don't want much. Just a regular home, cars, and being able to vacation 2-3 times per year. That's it! I don't need $500,000/year to make that work 🙂

 

[jacksweeds]

The thing is, because one can one should?
I could definitely afford it but it would limit my options for some other things... Although I strive to make my wife happy and her happiness means a big deal to me, I don't feel I want to work to pay a mortgage and I want to invest in my retirement so I don't have to work until I drop dead.

I don't discard a bigger place in the future but by then, I hope to be more caught up with retirement savings and kids tuition etc.

My wife is so much smarter than me, yet I can't seem to make her see this( she's a woman! )

Absolutely not. My mother was an orthodontist, my father was a day trader...combined my parents probably made neurosurg money. But you know what, we lived WAY WAY WAY below our means. Townhouse, used Honda civics, etc. We were all very happy and they really taught me much about life.

The immaterial things, i.e. vacations, meals, etc. were the things they valued...and in the end I think thats what really brings true happiness.

I definitely do NOT advocate getting the bigger house!

 

[The White Coat Investor]

A question that pops up frequently lately I my life.
I have been having some differences with the wife as to how much house should we buy on our next move( first real job post fellowship) this coming June.
A financial advisor we talked to said for a salary of 380k a 600k mortgage is acceptable/top of limit and my wife grinned and gave that look( if you are married you know which one) and I felt like bitch slapping the guy.
Now I don't have any student loans and no debt( thanks mom!! ) and have been able to save around 40k in fellowship(s).
I have a 200k house now that I should be able to sell quick at no loss( 10-15 k gain) and I have 2 car leases, 3 school children.

I want a top ceiling of 300k, yet all the houses she likes are 450 ish. We would need a 4 br with a bonus room or basement and I've seen plenty that meet that budget where I will be going in the south.

I've been doing some research and ordered 2 financial books for doctors, the white coat investor guide and doctors eyes only through Amazon with a gift card I got from christmas... Will see how that helps.

Did you guys give in to your spouses wishes? Happy wife happy life!

Am I being unreasonable?
I know it's a little personal info but you don't have to Dwell into details!

Don't be a cheapskate. 450ish is totally reasonable on a salary of $380K especially with some equity/down payment and no other debt.

My general rule is that you should not have a mortgage more than 2X your gross income. So in your case, that's a mortgage of $760K, so with a reasonable downpayment, perhaps a $900K house. $600K would be fine. $450K would be more than fine.

My first house out of residency had a 1X mortgage. I almost had it paid off in 4 years. My current big fancy doctor house (6 bedrooms, 4400 sq ft, 100 mile view, top 3 elementary school in the state) was $500K, with a $400K mortgage, about 2X my prepartner salary and about 1X a partner salary. The mortgage is now about 0.3X. Extremely affordable. I could have it paid off this year (6 years into it) but am probably going to be investing that money instead given the very low interest rate.

P.S. Quit leasing cars. Poor people do that. 🙂

 

[Aralc]

Overall I don't think anyone has given you really bad advice, you just have to decide what matters most to you.

We lived in a house about 1x salary for 10 years but were able to pay it off before we moved - I (the wife) hated it but it is such an amazing feeling not to have to pay a mortgage.

We upgraded and live in a house that is about 2x salary (our salaries have obviously increased during this time) - it was a little stretch when we first moved in but we are close to paying it off again and will probably do so before the 10 year mark.

What swayed me was working through the numbers with my husband, short and long term. You can make sacrifices but you need to know why. And there needs to be some reward- I am saving this money so I can spend it on X.

We spent a heck of a lot on our children's education.

Don't just have her look at the monthly budget, look at the amortization tables for the mortgages you are looking at. Making a nicer house more affordable but paying out oodles in interest just wasn't what I wanted.

OTOH, I have finally convinced my husband that if we don't spend some money, we are going to die with all of it in a retirement account.

 

[flipmd]

You are not "splurging" by buying a 600K house on a 380K salary (seems like your wife who you say is an MD too adds to that 380K, but even without it you're more than fine). That is called enjoying life. You'll comfortably pay it off easy.

 

[buonassezia]

.

 

[Cirrus83]

It really is very dependent on your student loans, property taxes, etc. but there's no way 450K is the max that someone making 380K a year can afford and I think a lot of people are not recognizing the large tax savings from buying a house as the property taxes and the mortgage interest are deductible and that comes off your marginal rate. I live in a high tax state so for every dollar I spend on property taxes or mortgage I'm getting 40 cents back. So buying a 500,000 house actually costs me about the same as renting a 1 bedroom apartment in the area which is actually somewhat ridiculous (rents are high because of high property taxes here and demand).

I haven't bought yet but doing the math I'm basically way better off buying a house. You should honestly have your financial advisor figure out the tax savings and see how that affects your income.

I will also note that your student loan interest is not tax deductible but if you put money into a house you can borrow it back out as a HELOC that IS tax deductible. However this does tie your debt to your home and you will no longer qualify for the student debt forgiveness programs but it can lower your interest rate a lot after the tax savings which is huge if you want to carry the debt for a long time. But I wouldn't do any of this without talking to a good accountant. Many financial advisors btw are complete *****s so honestly I would talk with an experienced accountant that deals with similar clients as yourself. A lot of financial advisors mostly work to make commission on your investments with them so the less money you tie up in a mortgage the better it is for them so there is a huge conflict of interest here because they'll never recommend that you invest your money in stuff that doesn't make them money. Do your own reading and calculations and talk to a good accountant!!!

 

[jdh71]

A question that pops up frequently lately I my life.
I have been having some differences with the wife as to how much house should we buy on our next move( first real job post fellowship) this coming June.
A financial advisor we talked to said for a salary of 380k a 600k mortgage is acceptable/top of limit and my wife grinned and gave that look( if you are married you know which one) and I felt like bitch slapping the guy.
Now I don't have any student loans and no debt( thanks mom!! ) and have been able to save around 40k in fellowship(s).
I have a 200k house now that I should be able to sell quick at no loss( 10-15 k gain) and I have 2 car leases, 3 school children.

I want a top ceiling of 300k, yet all the houses she likes are 450 ish. We would need a 4 br with a bonus room or basement and I've seen plenty that meet that budget where I will be going in the south.

I've been doing some research and ordered 2 financial books for doctors, the white coat investor guide and doctors eyes only through Amazon with a gift card I got from christmas... Will see how that helps.

Did you guys give in to your spouses wishes? Happy wife happy life!

Am I being unreasonable?
I know it's a little personal info but you don't have to Dwell into details!

If you think you can unload the houses at 450ish in your market (if in the unfortunate event you needed to leave) then I suggest making wife happy. In some markets houses at 450 just don't move unless a doctor buys them, in other markets 450 will come and go pretty easy. 450k loan with 10% down on a salary of 380k? You'll have plenty of money and won't really notice the mortgage. Your wife has been following your happy ass around for a long time, throw her a bone.

 

[tartesos]

If you think you can unload the houses at 450ish in your market (if in the unfortunate event you needed to leave) then I suggest making wife happy. In some markets houses at 450 just don't move unless a doctor buys them, in other markets 450 will come and go pretty easy. 450k loan with 10% down on a salary of 380k? You'll have plenty of money and won't really notice the mortgage. Your wife has been following your happy ass around for a long time, throw her a bone.

Did she call you?
🙂

It makes sense!

 

[deleted547339]

Your wife has been following your happy ass around for a long time, throw her a bone.

I try to remind myself of this frequently. Any spouse that can stick with someone through med school and residency is a star in my book.

 

[visari]

Seriously though how were you able to save 40K during fellowship with a wife and 3 kids?
I'm a 2nd year fellow (married with no kids) in tne Midwest and I would feel lucky if I save half of that by the end of fellowship

 

[tartesos]

Seriously though how were you able to save 40K during fellowship with a wife and 3 kids?
I'm a 2nd year fellow (married with no kids) in tne Midwest and I would feel lucky if I save half of that by the end of fellowship

I said fellowships as in this is my 5th year of them, and I have been making at least 3 1500$ shifts a month since August 2011( sometimes more than that on easy months but never less) I could have more saved but I have no regrets and invested some of it.

You all bring great points that I'm considering strongly.
We will go house/ neighborhood hunting with a realtor next month and we have increased our ceiling( realtor sounded as excited as my wife).

I love her to death, she has been the wind beneath my wings throughout my training and she left a good job and her family in the city to come with me, so I will get whatever makes her happy ( and hope I get a man cave).

 

[tartesos]

So an update and much thanks to you all for your input!
Got a 395k 3700 sq ft home that we all love( man cave!!) and my baby is happy, and a happy wife is a happy life!!

I did get this fixed loan for 5 years( 30 y) then variable that I intend to refinance in 3-4years. At 3.1 rate, 100%.

Posted this in the wrong place yday.

Thanks guys!





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[Tri2Fly]

So an update and much thanks to you all for your input!
Got a 395k 3700 sq ft home that we all love( man cave!!) and my baby is happy, and a happy wife is a happy life!!

I did get this fixed loan for 5 years( 30 y) then variable that I intend to refinance in 3-4years. At 3.1 rate, 100%.

Posted this in the wrong place yday.

Thanks guys!





Sent from my iPhone using SDN mobile app

What do you mean "At 3.1 rate, 100%."? You received 100% financing with no down payment with a rate of 3.1%? If so, would you mind sending me a PM with your lender and more details.

 

[tartesos]

What do you mean "At 3.1 rate, 100%."? You received 100% financing with no down payment with a rate of 3.1%? If so, would you mind sending me a PM with your lender and more details.

No prob!


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