Is it wrong to buy a house within the year you graduate from pharmacy school?

Jun 28, 2011
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I just graduated in May, passed the naplex and state law exam and will be starting to work at a retail chain this week. My wife works full time and makes approximately $42,000 a year. Combined we will have a pretty good income. I have zero credit card debt, but have a huge student loan debt (~150,000). My monthly payment on the loan will be around $1200. We have 1 car payment of $350. We currently rent in a really bad neighborhood that we are anxious to get out of. My question is should I buy a house? My wife wants to get a house ASAP. I think I could afford a $1800 a month mortgage. That plus my student loan would be only about $3000 a month. I have heard that now is a great time to buy with the interest rates being so low. There have been some married people in my class buy houses even before they have graduated. Any recent grads out there buying houses?
 

rx2010

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I graduated last year and purchased a house right before I graduated since I was moving out of state. I'd rather buy a house than rent a house or apartment. If I'm going to make large monthly payments, I would want to pay towards something I will own rather than make payments towards something I'll never own.
 

xiphoid2010

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I just graduated in May, passed the naplex and state law exam and will be starting to work at a retail chain this week. My wife works full time and makes approximately $42,000 a year. Combined we will have a pretty good income. I have zero credit card debt, but have a huge student loan debt (~150,000). My monthly payment on the loan will be around $1200. We have 1 car payment of $350. We currently rent in a really bad neighborhood that we are anxious to get out of. My question is should I buy a house? My wife wants to get a house ASAP. I think I could afford a $1800 a month mortgage. That plus my student loan would be only about $3000 a month. I have heard that now is a great time to buy with the interest rates being so low. There have been some married people in my class buy houses even before they have graduated. Any recent grads out there buying houses?
Do not buy a house unless you are pretty confident that you won't move for at least 5 years. Otherwise the realtor fee, closing cost, and other fees will likely cost you more than renting the house.

Since it's your new job, you don't know if it's for you in the long run, haven't saved up the 20% down payment, I would not recommend buying at this time. You need to build up some savings first, figure out the job and the housing market there before diving in. The interest rate and housing prices won't jump up anytime soon with the economy and job market still sluggish.
 
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Where are you planning to buy? How much money has your wife saved up? Buying a house is of course a huge investment. What if you or her wife have to move for a new job?
 
Jun 28, 2011
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Well we don't have much money saved. Definitely don't have 20% for a down payment. We were actually looking at building a new home as it seems to be as good a deal as buying a house of similar size/quality. Most of the people we have talked to only put down 5 or 10 percent.

I don't have to start paying on the student loan until November so now the next couple months will be a great time for us to save as we have no planned vacations, expenses, etc to spend money on. Hopefully we could save $20,000ish in 3-4 months if we try.

We plan to stay here for the rest of our lives and want to get our "permanent" home. I have heard that "starter" homes aren't such a good idea these days with the market being so bad and home value declining. Both my job and her job are pretty permanent. I have been with this retail chain for 3 years and like it compared to other chains I have been in during my rotations.
 

spacecowgirl

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I don't have to start paying on the student loan until November so now the next couple months will be a great time for us to save as we have no planned vacations, expenses, etc to spend money on. Hopefully we could save $20,000ish in 3-4 months if we try.
This right here says it all. You should not buy a house right now if you are using a grace period of one debt to help finance a second debt.

What no one wants to hear is that a house is a terrible "investment" unless you are staying there for a very long time. I don't think 5 years is a good cutoff mark, 10 years is probably even too short of a time period to break even. Remember with <20% down, you'll be paying PMI which is not a recoverable cost. You'll be paying taxes and insurance which are not recoverable costs at resale. You'll be paying interest which is front-loaded (not sure if that's the correct term) on even a very low rate, the amount you pay in principle for the first many years is paltry. Not to mention repairs. We have been putting in probably 2K year replacing major appliances, having HVAC repaired, plumbing, structural repairs, etc. Our HVAC system is about 12 years old so I wouldn't be surprised if we had to replace it in the next few years. Will you have cash for those types of repairs?
 

spacecowgirl

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I'm not anti-buying a house for homeownership's sake. I'm anti-buying a house because people told you it's a better investment.

If you bought a 200K house right now at 5% interest, in 5 years you'd have paid 48K in interest and 17K in principle. That house would need to be worth 248K + 5K (PMI for 5 years) + 15K (taxes for 5 years) = 268K to break even (not counting any repairs) in 5 years.

Buy for the right reasons.
 
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awval999

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This right here says it all. You should not buy a house right now if you are using a grace period of one debt to help finance a second debt.

What no one wants to hear is that a house is a terrible "investment" unless you are staying there for a very long time. I don't think 5 years is a good cutoff mark, 10 years is probably even too short of a time period to break even. Remember with <20% down, you'll be paying PMI which is not a recoverable cost. You'll be paying taxes and insurance which are not recoverable costs at resale. You'll be paying interest which is front-loaded (not sure if that's the correct term) on even a very low rate, the amount you pay in principle for the first many years is paltry. Not to mention repairs. We have been putting in probably 2K year replacing major appliances, having HVAC repaired, plumbing, structural repairs, etc. Our HVAC system is about 12 years old so I wouldn't be surprised if we had to replace it in the next few years. Will you have cash for those types of repairs?
Yes a voice of reason! Please listen to this. As a pharmacist we have the ability to not be debt slave. How about you enjoy your first year of being a pharmacist in a nice, new apartment for a year or two. Save a little bit of money and then decide what you want to do. Please don't overextend yourself before you even see your first paycheck. It looks like you have a new car already. You have very large student loans. Pay off these things first, go on a vacation or two with your new wife. If need be you can rent a house if you desire that over an apartment.

Proverbs 22:7- Just as the rich rule over the poor, the borrower is slave to the lender
 

aabdraff57

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If your wife really wants to "own" a home at this time, I suggest get a condo or a town home in pretty decent neighborhood. No one ever really needs a big house. A friend of mine lived in an apartment for approximately 5 years with his wife and 2 kids and saved up enough money to buy his decent 3-bedroom 2-bath home CASH. At that time he was only 35 years old! Assuming he's retiring at 65, he has 30 more years to save up his cash. He was only earning around $45K/year.

I'd go for renting right now and save especially when you're in your 30's.
 

PumpkinSmasher

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I'm not anti-buying a house for homeownership's sake. I'm anti-buying a house because people told you it's a better investment.

If you bought a 200K house right now at 5% interest, in 5 years you'd have paid 48K in interest and 17K in principle. That house would need to be worth 248K + 5K (PMI for 5 years) + 15K (taxes for 5 years) = 268K to break even (not counting any repairs) in 5 years.

Buy for the right reasons.
You can use logic and math but many people have been brainwashed that owning a home is always better than renting. They just can not rap their heads around the idea that it is not always the case....but but "If I rent, I am just throwing my money away!";)

I am not anti home buying either but it is the biggest purchase most people will make in their lives and with the current economic climate, it is a time to not rush into these kind of things. Take the proper steps: emergency fund, 20% down payment, pay off student loan debt. Your student loan debt has a higher interest rate than a home mortgage, most pharmacists can not write off the interest, and you can not bankrupt student loan debt. Also, pay off the car if you can and buy a Dave Ramsey book.
 

spacecowgirl

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You can use logic and math but many people have been brainwashed that owning a home is always better than renting. They just can not rap their heads around the idea that it is not always the case....but but "If I rent, I am just throwing my money away!";)
I know. We can try though, right?

Again, buy a home (although not now because you have other things to work out) because you want to be a homeowner, not because you're "throwing money away" on rent.

We could have rented in my town for far less than half of our mortgage and we don't have any fancy McMansion or anything. I know there are areas of the country where that is not the case, but unless you buy a really cheap house it will take you a loooong time to come out ahead over renting.
 
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Spacecowgirl's advice is very sound. Too many kids come right out of school and burden themselves with debt right away. You are just starting your career and life. Theres no way you can be 100% sure where you want to be with your career in 5-10 years. Unless you live in Las Vegas, get a medium sized apartment thats a reasonable price and work on getting rid of your loans with interest >7% if you have any or any CC debt. Save up a few months of income and then tackle those loans until you can get the monthly payment to <10% of your monthly income. After that, build up a down payment of 20% and THEN think about if a house is right for you. Renting is not throwing away money. You are paying for somewhere to live with the benefit of being able to move with a few months notice without a financial burden, not having to bear the cost of maintenance, not paying the sunk costs that are loan interest, mortgage insurance, home owners insurance, closing costs, agent fees, etc. I am not anti-home owning at all. I am just anti debt and anti-the idea that buying a home is always the right choice.
 
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You can use logic and math but many people have been brainwashed that owning a home is always better than renting. They just can not rap their heads around the idea that it is not always the case....but but "If I rent, I am just throwing my money away!";)
I felt the same way as the OP for a long time and was concerned that I'd be spending so much on rent over the next 4 years. However, after running the numbers it became really obvious just how much more I would have to pay to own a house or condo (even a really cheap one, less than 100k) instead of renting. It's surprisingly expensive!

Rent while you can, then put a nice down payment on a place you want to live in for a good long while (10 years is a minimum, from my calculations).
 
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The reason I want to buy a house is not because its a "good investment" or because i'm afraid of renting and "throwing away money". I realize that the "smart" thing to do would be to pay off my student loans first then save save save for a huge down payment. Yes, I realize debt is bad.

On the other hand, I have been in college for 8 years (4 undergrad, 4 pharmacy school). I have been married for 4 years. I have lived the "college student" life style for long enough. I have lived in apartments and rationed money for years now. The thing I can't swallow is that now that I am finally finished with school it seems the majority of the advice given under this thread is to continue that life style for 5 to 10 more years while I save money?

My loan payment set to 25 years is $1200. When its on the 10 year plan, its over $3000. Thats likely half or more of what I will bring home in a month. A lot of the older pharmacist don't understand coming out of school with the type of debt students today are. If my student loan was only $30,000, then sure, I could pay that off fast.

My question was really aimed at new pharmacist who have bought a house. Is the house worth being bogged down by a mortgage that early in your career. I understand that this might not be the "best" investment and that paying off debt would probably be the "smart" thing.
 

rph3664

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What do you mean, starter home vs. permanent home? I take it you do not have children; are you planning to? You'd be better off with a smaller house, and you can get a bigger one IF you need one.

One of my former co-workers took that "mortgage that's double your salary" thing a little too seriously, and bought a 5-BR 4-BA McMansion with her teacher husband, and they had no children at the time. They later had two, and are now getting divorced and it wouldn't surprise me if this is a major reason why - that they were living way beyond their means. In addition, what if you or your wife would die or become disabled, or one of you wants to be a stay-at-home parent? Both of you have salaries that can and do support a family; take this into account when planning your home purchase too.

I myself bought a house about a year after I graduated, and sold it two years later because I moved due to a downsize.
 

spacecowgirl

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Whoa. Defensive much? :laugh:

It's the American mindset that we deserve these things because you worked hard, you earned it, XYZ, I get that, I do that that too. It's also the American mindset that adults own and students rent. One thing I'm hoping comes out of this real estate crash is that (collective) we re-evaluate what has been sold to us for generations. Only you can decide if you personally want to be tied to a mortgage knowing that you WILL LOSE MONEY on it if you move in the next 10 years. We are very much stuck where we live now (thankfully we love it) because we bought right before the bubble burst. It doesn't keep me up at night, but knowing that if I lost my job we would be SOL isn't a fun feeling.

Check out http://www.apartmenttherapy.com/ for lots of awesome rental pics that are far from "college student life."
 
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What kind of interest are you paying to come out with $150,000 dollars of debt and a $3000 monthly payment? If these are federal loans at 6.8%, your monthly payment is not $3000 dollars a month. If they aren't, why do you have such a high interest rate when federal/grad plus loans are available?
I had ~$120,000 in loans, and my payment is around $1320.
 
Oct 22, 2009
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And why are you putting "smart" into quotations? I imagine those of us trying to give you some advice either did what you are asking about or know people who did who are obviously suffering for it. All we are saying is that the numbers don't add up unless you are 100% certain, which I don't think anyone can be, that you won't need to or want to move or change jobs within 5-10 years depending on the housing market.
 
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I feel really bad for people who make decisions based on "what if this really bad thing happens". How do you live worrying about things like "how long is my marriage really going to last", "will I become disabled", "will i lose my job", etc. I have a "what if" for those people. What if you die young? What if you die while living in your apartment driving your crap car and never get to enjoy the fruits of the years of school/work you have put into your life? That's a real possibility too. These days it is as likely as any of the above.

I'm not saying anyone should go out and spend all your money NOW or not save for retirement or think about the future. I'm just saying living a conservative lifestyle might be the "smart" idea but not necessarily the most fulfilling.

I want to thank you all for your advice. If anything it has at least made me decide to wait a while longer to buy a house. However, I will still likely buy a house in a year or so, and definitely before I pay off my massive student loan.

Thanks again
 
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There's always a compromise in every decision. You can't have it all. But hopefully, you can have most of what you want. Good luck! :)
 

awval999

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I feel really bad for people who make decisions based on "what if this really bad thing happens". How do you live worrying about things like "how long is my marriage really going to last", "will I become disabled", "will i lose my job", etc. I have a "what if" for those people. What if you die young? What if you die while living in your apartment driving your crap car and never get to enjoy the fruits of the years of school/work you have put into your life? That's a real possibility too. These days it is as likely as any of the above.

I'm not saying anyone should go out and spend all your money NOW or not save for retirement or think about the future. I'm just saying living a conservative lifestyle might be the "smart" idea but not necessarily the most fulfilling.

I want to thank you all for your advice. If anything it has at least made me decide to wait a while longer to buy a house. However, I will still likely buy a house in a year or so, and definitely before I pay off my massive student loan.

Thanks again
I told you to not buy a huge house so you would have money to go on vacations with your wife. So you two can see the world and experience the world before children and a mortage. Look at it from that perspective. The newness of a house will wear off but you are still committed to 30 year payments. Most of us here haven't even been alive for 30 years.

To answer your question, why I didn't buy a huge house (I'm renting a nice one by the way) is because I didn't want to pay property taxes, PMI, have to worry if things break, have to have a downpayment, have to worry about the mortage crisis. My life has been fulfilling. If buying a house is your dream and you've thought about it non-stop since school and a house you own is more fullfilling than going to Hawaii with your young wife then by all means do it. Just don't think of it as an investment, it is not.
 
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Tyler Durden: "We are consumers. We're the by-products of a lifestyle obsession. It's all going down, man. So f' off with your sofa units and Strinne green stripe patterns. The things you own end up owning you."
 

xiphoid2010

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I feel really bad for people who make decisions based on "what if this really bad thing happens". How do you live worrying about things like "how long is my marriage really going to last", "will I become disabled", "will i lose my job", etc. I have a "what if" for those people. What if you die young? What if you die while living in your apartment driving your crap car and never get to enjoy the fruits of the years of school/work you have put into your life? That's a real possibility too. These days it is as likely as any of the above.

I'm not saying anyone should go out and spend all your money NOW or not save for retirement or think about the future. I'm just saying living a conservative lifestyle might be the "smart" idea but not necessarily the most fulfilling.

I want to thank you all for your advice. If anything it has at least made me decide to wait a while longer to buy a house. However, I will still likely buy a house in a year or so, and definitely before I pay off my massive student loan.

Thanks again
A former friend and co-worker of mine had your thinking. He thought he had met the perfect good looking girl, landed a good job, got married right out of undergrad, bought a nice house. We all thought he was ahead in the game and were a little jealous. 7 years into the marriage, was totally blind sided one day when he found out his wife had multiple affairs. He divorced her, but not before she took half on her way out. He had to sell his house, lose half of his 401k, give her the new car, pay the lawyers... We were shocked at how quickly his picture perfect life fell apart. He said he had a quarter of a million $ saved up, but had only $80k when the dust settled. Thank god he didn't have a kid with her and didn't have to pay alimony, or he would have been doomed.

dude, you are what 26? still got time to do every thing slowly but do it right. The saying goes, hope for the best but prepare for the worst. If Everything turns out right, stepping up into the high life is easy and it is never too late to enjoy. But if something bad happens, it's can possibly destroy your family, career, and life in general quite irreversibly even if it is not your fault.

So it is unwise to trying to climb without first securing your safety net.
 

Charlottefromca

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You also have to consider how long your marriage is gonna last in order for a house to be a worthwhile investment. Not trolling here, this has just become an issue to someone around me.
Some really sound advice in this thread (esp spacecowgirl!), but this one.. really?? I'm all for rationality but who the heck gets married while simultaneously thinking of an upcoming divorce.
 

xiphoid2010

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Some really sound advice in this thread (esp spacecowgirl!), but this one.. really?? I'm all for rationality but who the heck gets married while simultaneously thinking of an upcoming divorce.
I don't think he is saying that he should be thinking about about an upcoming divorce, but rather keep in mind that bad things happen to good people every day. Life isn't fair, don't it's not smart trying to take on life wearing rose colored glasses. If god only let bad things happen to bad people, most of us wouldn't need to buy all those insurance or build an emergency fund. :xf:
 

gmuskie

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What about moving into a better apt? My friends recently planned it out, lived one year in a small but nice 1 bedroom apt so they could save enough for the 20% downpayment. Its not ideal and its not owning a house right now..but financially it makes more sense if you are truly vested in being a homeowner.
 
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What about moving into a better apt? My friends recently planned it out, lived one year in a small but nice 1 bedroom apt so they could save enough for the 20% downpayment. Its not ideal and its not owning a house right now..but financially it makes more sense if you are truly vested in being a homeowner.
...plus housing values aren't going to jump up anytime soon, more than likely (so you're not missing much).
 

pezdispenser

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Well we don't have much money saved. Definitely don't have 20% for a down payment. We were actually looking at building a new home as it seems to be as good a deal as buying a house of similar size/quality. Most of the people we have talked to only put down 5 or 10 percent.

I don't have to start paying on the student loan until November so now the next couple months will be a great time for us to save as we have no planned vacations, expenses, etc to spend money on. Hopefully we could save $20,000ish in 3-4 months if we try.
Totally agree with what spacecowgirl said, so I won't repeat. I would like to ask is the $1,800 mortgage payment you budgeted inclusive of property taxes and insurance? Assuming it isn't, $1,800/month gets you a $360,000 mortgage these days... Are you looking at a $400k house? You probably need $400-600/month for property taxes and insurance.

It seems you also underestimate how much cash you need at closing. On top of your downpayment, you'll also need:
$9,000? closing costs
$900? partial month of interest
$1,000? first year of insurance
$500? insurance escrow
$2,500? property tax escrow
=====
$13,900

plus 2 months of mortgage, insurance and property taxes left in reserve in your bank account ($4,600).

So if you want the best mortgage rates by putting 20% down, you really need to wait until you've saved about $100,000 cash before you go shopping for a house...
 
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confettiflyer

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I have friends who bought houses before school finished and they were perfectly sound decisions, so the factors that bring one to a decision of buying vs. renting are independent of whether you are in school/fresh out of school/etc...

If you can afford it all (taxes, maintenance, HOA if applicable, etc...), the amount is comparable to rent, AND you see yourself staying for 7+ years, then dive in.
 

rph3664

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Some really sound advice in this thread (esp spacecowgirl!), but this one.. really?? I'm all for rationality but who the heck gets married while simultaneously thinking of an upcoming divorce.
There are women who get married because they want the guy to adopt her kids, so she can divorce him and get child support. There are also men who go into their marriages with the intention of treating their wives poorly after the kids arrive, so he will be a divorced dad (i.e. all the fun and none of the responsibility). :mad:

People marrying with the intention of divorcing is a LOT more common than many people realize.

On a better note, since the OP doesn't have to start paying off his loans until November, he should live as frugally as possible anyway, save up as much as he can in the meantime, and make a big lump sum payment come November. This will substantially reduce the principal. JMHO, of course.
 
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There is a huge difference between owning your own home and renting. There are pros and cons to both choices and you need to make the right decision for you. There have been some straw man arguments in this thread that are incredibly off base.

The you might get divorced idea is anecdotal and just plain silly. I'm especially surprised since xiphoid2010 is usually pretty thoughtful. You also might get hit by a truck, but you cross the street anyway. I have been happily married to the same woman for almost 30 years so what. That has no bearing on whether the OP should or should not get married and buy a house.

The debt is bad argument is also just plain stupid. Debt is neutral. It's the type of debt, the rate you have to pay and what you get for it. Rates have never been lower so assuming you can afford at less than 4% is not such a bad idea. Also, home prices have never been lower so bargains are out there.

The your not counting expenses is also off base, because you are also not calculating the savings. The tax deductibility of mortgage interest and the ability to itemize deductions results in thousands of dollars in savings.


So the answer is, it depends on what you financial situations is. When you plan to have kids, how long you plan to stay at this location. Factor it in and come up with the best decision for you and your fiance. It's not a slam dunk in either direction.
 

xiphoid2010

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The you might get divorced idea is anecdotal and just plain silly. I'm especially surprised since xiphoid2010 is usually pretty thoughtful. You also might get hit by a truck, but you cross the street anyway. I have been happily married to the same woman for almost 30 years so what. That has no bearing on whether the OP should or should not get married and buy a house..
you missed my point, which is in my very first post. My advice has been that a safety net should be built before tying up a huge amount of cash flow in a non-liquid asset. Also the op needs to know how he handles the real job and real money, which cause many changes, before deciding on buying a house.

The consideration for divorce when getting married or when buying a new house was a separate topic someone else brought up. When comes to major decisions, I believe people should evaluate the potential upside vs. the max they can afford to lose. I am also happily married, but before I proposed, i took some time out to look at our relationship objectively. Hopefully prudence will prevent a replay of my unfortunate friend.
 
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Honestly, some of the posts on this thread really scare me (on both sides of the argument).
 

Dr Wario

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I'm not anti-buying a house for homeownership's sake. I'm anti-buying a house because people told you it's a better investment.

If you bought a 200K house right now at 5% interest, in 5 years you'd have paid 48K in interest and 17K in principle. That house would need to be worth 248K + 5K (PMI for 5 years) + 15K (taxes for 5 years) = 268K to break even (not counting any repairs) in 5 years.

Buy for the right reasons.
That break even analysis would only be correct on the assumption that otherwise housing costs would be zero, ie living with parents or the like for free.
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As mentioned, there are many considerations on if/when to buy a house, but ultimately it all comes down to the math. It is generally correct to state that the real breakeven point for home ownership vs renting a house of the same value is approx 5 years, thus only the individual can determine if their future projections mitigate this risk sufficiently to buy.

As for the responses indicating that you should limit lifestyle inflation, again this is something only you can determine but the math will help you. Know exactly what it will cost you to have your ideal home now, vs five years from now, vs 10 years from now in both present and future value. Educate yourself on the time value of money, but also understand your time value of time (ie time earlier in your life is more valuable than time later in your life). Having a 200k home now may cost you 500k present value in 20 years, but having it now may be worth the 300k to you and is something only you can determine.

In any case, it is a complex decision and obviously not one to be taken lightly, yet do not dwell too much on what-ifs and let life pass you by.
 

spacecowgirl

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That break even analysis would only be correct on the assumption that otherwise housing costs would be zero, ie living with parents or the like for free.
Valid point. My example was only meant to demonstrate that if you buy a house for 200K and in 5 years you sell it for 220K, you didn't "make" 20K; you only "lost" 48K. I live and breathe HGTV, but I feel like those shows have given us a false idea of how much of an investment a house is. It bugs when they talk about how this and that is an "investment" for resale - if you keep the house long enough to make money selling it, chances those new appliances will need to be replaced, the HVAC will need updating, and those nice new cabinets will be out of style.

I know we spend a lot on maintaining the outside of our house (lawnmower and snowblower and associated repairs, lots and lots of weed killer) and the cost difference in utilities between a house and apartment or duplex.
 
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I feel really bad for people who make decisions based on "what if this really bad thing happens". How do you live worrying about things like "how long is my marriage really going to last", "will I become disabled", "will i lose my job", etc. I have a "what if" for those people.
We don't worry about those things because we did make decisions that would prevent us from becoming incapacitated should any of those things occur...

It's the American mindset that we deserve these things because you worked hard, you earned it, XYZ, I get that, I do that that too. It's also the American mindset that adults own and students rent.
qft. The level of entitlement from some people with doctoral degrees is pretty shocking actually.

No one made us go to professional school... was it not enjoyable at all? Or did we just force ourselves through all this misery because we thought we could afford a drastically different lifestyle the moment we walk into our first career.

A former friend and co-worker of mine had your thinking. He thought he had met the perfect good looking girl, landed a good job, got married right out of undergrad, bought a nice house. We all thought he was ahead in the game and were a little jealous. 7 years into the marriage, was totally blind sided one day when he found out his wife had multiple affairs. He divorced her, but not before she took half on her way out. He had to sell his house, lose half of his 401k, give her the new car, pay the lawyers... We were shocked at how quickly his picture perfect life fell apart.

dude, you are what 26? still got time to do every thing slowly but do it right. The saying goes, hope for the best but prepare for the worst.
this...

and this.
 

WVUPharm2007

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The things you own end up owning you."
Good advice. I follow it myself. Marx called it commodity fetishism and its one of the most valid criticisms of American culture. The obsession with objects perceived to give you status.

I don't plan on buying unless the housing market tanks even further and I can almost pay cash for a place. Then it would make sense. And it will probably happen. If you study the bubble created between 1999-2006 and compare it to historical housing price inflation, it is rather clear that housing is still overpriced from historical standards. I still see people on zillow.com that bought for like $175k in 2001 asking $270k for the home today. People aren't willing to let go of the fake value created by the idiotic "housing as an investment" paradigm of the early 2000s...but the market will continue to correct, IMO.

I rather enjoy the fact that I can pack my **** up and leave the country without any loss if I wanted to, too. Owning a home is an anchor to your life.
 

Hpower12

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I'm not anti-buying a house for homeownership's sake. I'm anti-buying a house because people told you it's a better investment.

If you bought a 200K house right now at 5% interest, in 5 years you'd have paid 48K in interest and 17K in principle. That house would need to be worth 248K + 5K (PMI for 5 years) + 15K (taxes for 5 years) = 268K to break even (not counting any repairs) in 5 years.

Buy for the right reasons.


Except for the fact that mortgage interest is tax deductible so you will get a portion of that back, and in your example you did not include the opposite example of renting. Say you rent a place for 1k/month, 12K for 5 years is 60k that is gone and you get nothing back. The house is a better investment; you would get a portion of the money back. Don't let all this tea party (forgive me is this is the wrong affiliation, I just view them as very fiscally conservative) anti-house buying group give you bad advice, weigh your options and crunch the numbers.

I bought the biggest most expensive house I could afford; I did this because I was planning for the long term. I did not want to buy a house that did not have everything I wanted and I would have to move eventually, say when I had children. Not to mention, wages adjust for inflation, a mortgage does not, so over time the mortgage becomes cheaper, and if you think high inflation is in the future it could be even better. Also consider the very low interest rates. I will also say, I had no debt and no car payment(drive an 11 year old car and plan to drive it for another 4) and consider myself pretty strict when it comes to finances and was planning to stay in my house for at least 10 years, hopefully longer. Also consider the deal you can get, the neighbors on both sides of me have sold their house for more than I bought mine in this past year, if you can find a great deal it might make it even more worth it.

I will say if you can rent for very cheap, dirt cheap and stock pile money away that may be better. Just run the numbers and consider all factors.
 

Niosh

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It seems you also underestimate how much cash you need at closing. On top of your downpayment, you'll also need:
$9,000? closing costs
$900? partial month of interest
$1,000? first year of insurance
$500? insurance escrow
$2,500? property tax escrow
=====
$13,900
9K in closings? When the wife and I bought a house the closing costs were under 1k and the sellers paid them. Under 2k if you include things we paid for such as inspections.
My example was only meant to demonstrate that if you buy a house for 200K and in 5 years you sell it for 220K, you didn't &quot;make&quot; 20K; you only &quot;lost&quot; 48K.
<font color=&quot;black&quot;>Except for the fact that mortgage interest is tax deductible so you will get a portion of that back, and in your example you did not include the opposite example of renting. Say you rent a place for 1k/month, 12K for 5 years is 60k that is gone and you get nothing back. The house is a better investment; you would get a portion of the money back. Don't let all this tea party (forgive me is this is the wrong affiliation, I just view them as very fiscally conservative) anti-house buying group give you bad advice, weigh your options and crunch the numbers.
Just wanted to bring these two examples together. They're highly dependent on their numbers, so for the OP you really just need to run the numbers for renting vs owning in your area.
 
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pezdispenser

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9K in closings? When the wife and I bought a house the closing costs were under 1k and the sellers paid them. Under 2k if you include things we paid for such as inspections.
Indeed it varies greatly depending on the title insurance requirements and the state/county/city taxes. I don't even know where the original poster is, or the price of the house, so I just guessed based on a $400k house in one of the higher cost of living areas of the US.
 

CUpharmD2013

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I'm not sure if it was already mentioned in this thread, but one thing to consider is how much in property taxes and monthly interest you would be paying (including PMI) on your house purchase. This is money that you are technically "wasting" if it can't be claimed on a pharmacist's salary (I'm not sure if it can be claimed or not). For instance, if your property tax, loan interest, and PMI total to about $1500/month, that's money that you can spend on rent. Look into nice options in your area that may run at $1000-$1200/month and then you can put the extra $600-$800 per month (based on your $1800/month example) towards paying down your student loan debt.

As others have said, you really want to have at least 20% down to avoid PMI in addition to having your 3-6 months of emergency reserve. You also want to make sure that you're maxing out your 401k contribution prior to developing any kind of budget.

Buying a house isn't what it used to be anymore. Home values are rising very slowly, if rising at all, and you probably want to plan on being in a house for at least 10 years. I was lucky enough recently to sell a house for a 5% gain after two years of ownership (during the buyer's incentive years) but ended up losing money on closing costs, realtor fees, etc.
 

WVUPharm2007

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My friends crack me up...buying $400k houses...3500 sq ft houses...

When I buy a house, I'm looking at like 1200 sq ft...maybe $180k...

Buying a big house is stupid...such a waste of money...almost as stupid as buying a $35k car...at least the house won't lose all of its value in 10 years...
 

sakigt

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I bought a house in school for a couple reasons:

1) I wanted to live in a VERY specific neighborhood. When one came up in my price range I decided to jump on it.
2) I had cash. After the deal was done we still had 10% of the home's value in cash in our house fund to use for stuff that would need fixing (and omg, everything needs fixing).

Thats about it. Its nice to have the yard, garagae and space NOW but we were planning on waiting until school was out. Its easier to wait to buy your dream home. Dont settle just to "buy."
 

confettiflyer

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My friends crack me up...buying $400k houses...3500 sq ft houses...

When I buy a house, I'm looking at like 1200 sq ft...maybe $180k...

Buying a big house is stupid...such a waste of money...almost as stupid as buying a $35k car...at least the house won't lose all of its value in 10 years...
i need room to roam. i lived in a 1200 sq ft. condo, that is freakin' tiny...unless you had a giant yard and no kids (and maybe a chihuahua as a pet), then mmmaaaybe.

granted i think 1200 was the norm in the 70's...i don't wanna live in the 70's.
 
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