Buying a house as a new grad

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Dofreshman

Dofreshman

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I am looking into buying a house in the next couple of months. As a new grad with salaries currently in the mid 400’s, how much should I spend on my purchase?
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Dofreshman said:
I am looking into buying a house in the next couple of months. As a new grad with salaries currently in the mid 400’s, how much should I spend on my purchase?
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Depends where you are living, might need to go higher in a high cost of living area. General rule of thumb I followed was less than 30% of take home goes to mortgage/property tax/HOA/insurance
 
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Agree that it's highly dependent on where you live. General advice that I have always seen is to rent for at least a year when starting a new job or the first year out of residency since you may change your mind about your job within that first year.
 
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Also depends greatly on how likely you are to stay in the area and not need to relocate, resalability of the house and how much you think the house will meet your long term needs and wishes.
 
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As a single person, I spent 6.5 (and I know a few colleagues who spent around the same ). Asked for 7 for the mortgage (likely could've been approved for more), which in my locale is more than enough for a decent sized home. Don't forget more home means more property tax and insurance, neither of which I want to pay more of than I have too,
 
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Agree. Rent for at least a year. You’ll learn pros/cons of different neighborhoods, ensure you like your job, build a down payment. Plus this gives you the option to house hunt in the “off season” and possibly get a lower price on a house. Interest rates are in the 5s for people with good credit, so I’d keep it under 1mil or you’re really gonna feel the pressure every month. There are many unexpected costs with a house, so stretching yourself thin on the mortgage alone is risky. But I also get it- renting with pets and/or a family can be challenging in a lot of cities…
 
Rents are crazy high in many area of the country. 3-4k easy for a small 2000 sq foot single family home that only cost 400k (the 1% rule of rents).

So if u can find something like that. Rent for one year. If u are married. The wives always want their own home and buy. But that’s a family decision to make.
 
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I would second the idea of renting for a while until you’re sure you like the city and the practice. Something like 50% of people switch jobs now within the first 3 years. If you have a mortgage, it really limits your options.
 
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0kazak1 said:
As a single person, I spent 6.5 (and I know a few colleagues who spent around the same ). Asked for 7 for the mortgage (likely could've been approved for more), which in my locale is more than enough for a decent sized home. Don't forget more home means more property tax and insurance, neither of which I want to pay more of than I have too,
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As in you spent 6.5x your salary? Like 2-3 million?
 
I didn't buy when I started and I regret it. Houses doubled in the last few years
 
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Currently in this predicament as well although I'll be moving to a new area for my new job next fall. Have been approved up to $900k but am trying hard to rent. Would like to spend around $3-3.5k per month in my area, and that gets you a nice 3500 sq ft 4br/3ba house +/- a pool.
 
I didn’t buy a home with my first job. I did look a bit and came close, but I got cold feet. It was the right choice - planning to change jobs soon at the 3 yr mark.

Take a look at the NYT rent vs buy calculator.
 
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Realgassy said:
I didn’t buy a home with my first job. I did look a bit and came close, but I got cold feet. It was the right choice - planning to change jobs soon at the 3 yr mark.

Take a look at the NYT rent vs buy calculator.
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Why?
 
I personally would not buy right now. In my area prices still exorbitant and overvalued. Mortgage rates are high. And you really want the luxury of not being tied down in case the job doesn’t work out. Put money into a high interest savings account or money market, buy in a year if the job works out.
 
dipriMAN said:
I personally would not buy right now. In my area prices still exorbitant and overvalued. Mortgage rates are high.
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I don't know which way mortgage rates are going, but I think it bears remembering that the current rates around 6% are historically still excellent. The last 20 years were an aberration. They could easily float up to 9% and stay there for a long time.

In fact, if you go back to a time when inflation was a concern the way it is today... mortgage rates were much higher and stayed much higher.

As a physician with a reliable, and high, income, I wouldn't hesitate to buy at 6%.

If rates drop you can always refinance.

Whether home prices are exorbitant or not is a philosophical question, kind of like the stock market. Who knows where prices will go. But I don't think we're in a 2006-ish housing bubble, for several reasons. (Chief differences being supply, and borrower creditworthiness.)

Buying a house is like planting a tree. The best time to do it was a decade or two ago, and the next best time to do it is now - if you're sure you'll stay there living in it or if you're sure you'd be OK with keeping it an extended period of time if it winds up underwater. Big ifs especially for new grads at their first jobs.
 
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pgg said:
I don't know which way mortgage rates are going, but I think it bears remembering that the current rates around 6% are historically still excellent. The last 20 years were an aberration. They could easily float up to 9% and stay there for a long time.

In fact, if you go back to a time when inflation was a concern the way it is today... mortgage rates were much higher and stayed much higher.

As a physician with a reliable, and high, income, I wouldn't hesitate to buy at 6%.

If rates drop you can always refinance.

Whether home prices are exorbitant or not is a philosophical question, kind of like the stock market. Who knows where prices will go. But I don't think we're in a 2006-ish housing bubble, for several reasons. (Chief differences being supply, and borrower creditworthiness.)

Buying a house is like planting a tree. The best time to do it was a decade or two ago, and the next best time to do it is now - if you're sure you'll stay there living in it or if you're sure you'd be OK with keeping it an extended period of time if it winds up underwater. Big ifs especially for new grads at their first jobs.
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My opinion is home prices have gone up way more than earnings and way more than people can afford, demand will fall and prices should come down. I agree that if your sure about the area, probably still financially makes sense to buy rather than rent in the long term.
 
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GassYous said:
Why?
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Well I got cold feet buying a place 1yr out because I was concerned about feeling trapped by my mortgage and job in a unique location. If I had purchased, I don’t think I would mentally be as inclined to change jobs, but it’s a better choice for me in the long run. If I were to sell what I had planned to purchase at 900k in a VHCOL environment, the real estate commission at 6% of 54k plus all the other fees would definitely make me pause.
 
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Realgassy said:
Well I got cold feet buying a place 1yr out because I was concerned about feeling trapped by my mortgage and job in a unique location. If I had purchased, I don’t think I would mentally be as inclined to change jobs, but it’s a better choice for me in the long run. If I were to sell what I had planned to purchase at 900k in a VHCOL environment, the real estate commission at 6% of 54k plus all the other fees would definitely make me pause.
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For sure, if there is any chance the OP isn’t going to stay in the immediate area for work then he or she should rent.
 
Realgassy said:
Well I got cold feet buying a place 1yr out because I was concerned about feeling trapped by my mortgage and job in a unique location. If I had purchased, I don’t think I would mentally be as inclined to change jobs, but it’s a better choice for me in the long run. If I were to sell what I had planned to purchase at 900k in a VHCOL environment, the real estate commission at 6% of 54k plus all the other fees would definitely make me pause.
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I mean why are you changing your job
 
0kazak1 said:
As a single person, I spent 6.5 (and I know a few colleagues who spent around the same ). Asked for 7 for the mortgage (likely could've been approved for more), which in my locale is more than enough for a decent sized home. Don't forget more home means more property tax and insurance, neither of which I want to pay more of than I have too,
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Just so you know, when people use the terms 6.5 and 7 in terms of figures it's generally in multiples or more commonly million. No one uses 6.5 as shorthand for 650,000.
 
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medicine2wallstreet said:
Just so you know, when people use the terms 6.5 and 7 in terms of figures it's generally in multiples or more commonly million. No one uses 6.5 as shorthand for 650,000.
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I thought he bought a 6.5 million dollar house …. Kind of just skipped over it and thought, eh he must be making 2 million dollars a year in the Midwest or Alaska or something.
 
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Dofreshman said:
I am looking into buying a house in the next couple of months. As a new grad with salaries currently in the mid 400’s, how much should I spend on my purchase?
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People change their jobs. I also feel prices will be going down as interest rates go up. What can you afford? The prevailing logic is 2.5-3x your gross salary. But obviously depends on property taxes and maintence costs.
 
0kazak1 said:
As a single person, I spent 6.5 (and I know a few colleagues who spent around the same ). Asked for 7 for the mortgage (likely could've been approved for more), which in my locale is more than enough for a decent sized home. Don't forget more home means more property tax and insurance, neither of which I want to pay more of than I have too,
Click to expand...


Higher energy bills, maintenance costs, everything. Bigger house=bigger problems.
 
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Don't go above 2x of your income even if you happen to be in a HCOL area

If you are in a LCOL area, buy something that 1x of your income.

I am in LCOL area and I bought a new built that cost 70% of my what I made last year.

We tend to buy more house than we need.
 
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OP just don't be this guy...from reddit anesthesia section
This isn’t something anyone is proud to write about but I am in need of some advice from folks in my field. I am a partner at a Midwestern practice, making close to $1mil/yr , and looking to take a break. I get around ~8 weeks of vacation every year but haven’t taken more than 2 in years. I am genuinely tired of working and need a reset, but I can’t afford it.

I am not even sure how anyone walks away from this type of money. I have kids and a wife that are expensive, take several international trips a year, and a house that feels far too big in hindsight. It’s been 8yrs since I finished my fellowship and started practicing, I didn’t have med school debt so I felt like I could buy a bigger house…a better car…never say no to a purchase.

Now I am sitting and calculating my expenses and realizing there is no way we could survive 6 months of me not working much less a year. I used to love medicine and now I dread my mornings because I don’t remember the last time I woke up genuinely rested and rejuvenated.

I am posting partially to vent, and also to seek some guidance on what moves I could make to work 40hrs/wk and maybe make 300-400k. For reference, I work close to 80 now, and occasionally a little over that. I know I can’t survive on 0 income for a year but I am considering a shift down so I can at least see my kids grow up. Anyone approached this with their partner?

Edit: Appreciate all the wake up calls. Definitely in need of a big conversation with the wife and downsizing just about everything. Hope everyone has a wonderful rest of their week
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nimbus said:
How can he take “several international trips” every year while only taking 2weeks off? Weekends in Acapulco and Vancouver?
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Maybe the spouse and kids go without him...

I know a neurosurgeon with similar dynamics

Rich people do crazy [insert].
 
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It seems that not much time has passed, but using the price tracking service Priceva I can already see how housing prices have risen in my city. Buying a house is my dream, but for now I have to be content with renting. Fortunately, I don’t have children. :rofl:
 
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HemeOncHopeful19 said:
That was a pager-turner but the tldr: give Alaska a shot
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That was one of those “holy ****ing ****” level situations.

$15k/month mortgage, wife blows $6-7k a month on “inessentials”, he has a $7k/month boat payment, pays $5600 a month in car payments, $4500 a month in food and eating out, $1800 a month in maid and “language tutoring”, and more.

You can always figure out how to spend more than you make. If you don’t believe me, ask Johnny Depp, 50 Cent, Allen Iverson, and all sorts of other folks who got paid ****loads of money yet still found a way to blow all of it.

(Unfortunately I have encountered waaay too many doctors who live like this. Most docs out there who look like they’re “living large” are also in ****loads of debt and miserable.)
 
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dozitgetchahi said:
That was one of those “holy ****ing ****” level situations.

$15k/month mortgage, wife blows $6-7k a month on “inessentials”, he has a $7k/month boat payment, pays $5600 a month in car payments, $4500 a month in food and eating out, $1800 a month in maid and “language tutoring”, and more.

You can always figure out how to spend more than you make. If you don’t believe me, ask Johnny Depp, 50 Cent, Allen Iverson, and all sorts of other folks who got paid ****loads of money yet still found a way to blow all of it.

(Unfortunately I have encountered waaay too many doctors who live like this. Most docs out there who look like they’re “living large” are also in ****loads of debt and miserable.)
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I have been a doctor for 5+ years (residency included) right now and a lot of my colleagues are very conscious when it comes to finance... Again, my colleagues are not neuro, ortho, spine surgeons.
 
BillAlfonso said:
It seems that not much time has passed, but I can already see how housing prices have risen in my city. Buying a house is my dream, but for now I have to be content with renting. Fortunately, I don’t have children. :rofl:
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What will you say 10+ years from now? Take a look at the market for 1-2 yrs and pull the trigger. Unlikely price will ever go down more than 10%.
 
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Splenda88 said:
I have been a doctor for 5+ years (residency included) right now and a lot of my colleagues are very conscious when it comes to finance... Again, my colleagues are not neuro, ortho, spine surgeons.
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I know some doctors who are financially reasonable, yes, but I also know quite a few who have had horrible spending habits that started all the way back in residency. I knew quite a few co-residents and co-fellows who started taking gloriously expensive vacations even while still in training…not sure who was paying for that (mommy and daddy?), but dropping $10k on a vacation when you make $50k a year doesn’t make any kind of sense no matter how you look at it.

If I check Instagram, most of these same people are trying really hard to have that “baller” lifestyle now - huge massive house, expensive cars, designer clothes out the wazoo. A lot of these folks live in high COL areas where having a house that big must be stupendously expensive.

Doctors as a group are well-known for not managing finances well, and have been for some time. Fortunately the rise of White Coat Investor etc has helped change that to some extent, but to this day there are absolutely quite a few docs who have huge student loan payments as well as huge debts from “living large”, and they feel squeezed each month despite objectively making lots of money.
 
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dozitgetchahi said:
I know some doctors who are financially reasonable, yes, but I also know quite a few who have had horrible spending habits that started all the way back in residency. I knew quite a few co-residents and co-fellows who started taking gloriously expensive vacations even while still in training…not sure who was paying for that (mommy and daddy?), but dropping $10k on a vacation when you make $50k a year doesn’t make any kind of sense no matter how you look at it.

If I check Instagram, most of these same people are trying really hard to have that “baller” lifestyle now - huge massive house, expensive cars, designer clothes out the wazoo. A lot of these folks live in high COL areas where having a house that big must be stupendously expensive.

Doctors as a group are well-known for not managing finances well, and have been for some time. Fortunately the rise of White Coat Investor etc has helped change that to some extent, but to this day there are absolutely quite a few docs who have huge student loan payments as well as huge debts from “living large”, and they feel squeezed each month despite objectively making lots of money.
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“We might make a lot of money but, we also spend a lot of money.”​

— Patrick Ewing
 
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If it were me I would rent in your position; too many unknown variables present. Will you want to stay at your job long-term? If not, will you want to move? I believe that major considerations should be the availability of 30%+ downpayment in cash or liquid assets and a plan on living in that home for 10 years or more (variable based on market location) because there are many phantom costs associated with homeownership (especially first-time home ownership) and transactional costs of home purchase need time to average out in order to make the long term math favorable. Many argue that paying rent is wasteful, but an alternate consideration is that everyone needs to pay housing costs (rent); some people pay a landlord and some people pay a mortgage bank. Many people don't truly understand the financial vehicle of a mortgage when in early stage consideration of home purchase; that is % paid in principal, interest, tax etc. Starting out, rent is the maximum you will pay per month for housing costs, while a mortgage payment is the minimum you will pay per month. The following might be helpful:

Money Waterfalls for New Residents & Attendings | White Coat Investor

Rich Dad Scam #6: Your House is an Asset

There are limitations present in both of those references. Just my 2 cents. Good luck.
JM
 
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JM11 said:
If it were me I would rent in your position; too many unknown variables present. Will you want to stay at your job long-term? If not, will you want to move? I believe that major considerations should be the availability of 30%+ downpayment in cash or liquid assets and a plan on living in that home for 10 years or more (variable based on market location) because there are many phantom costs associated with homeownership (especially first-time home ownership) and transactional costs of home purchase need time to average out in order to make the long term math favorable. Many argue that paying rent is wasteful, but an alternate consideration is that everyone needs to pay housing costs (rent); some people pay a landlord and some people pay a mortgage bank. Many people don't truly understand the financial vehicle of a mortgage when in early stage consideration of home purchase; that is % paid in principal, interest, tax etc. Starting out, rent is the maximum you will pay per month for housing costs, while a mortgage payment is the minimum you will pay per month. The following might be helpful:

Money Waterfalls for New Residents & Attendings | White Coat Investor

Rich Dad Scam #6: Your House is an Asset

There are limitations present in both of those references. Just my 2 cents. Good luck.
JM
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Agreed. Rents are high and the housing market is starting to slow down., so some price relief is on the horizon, imo, maybe next year. Also, there is a new mortgage called a Physicians Mortgage no money down. Never heard of this before, but I know someone who did this.
 
Angus Avagadro said:
Agreed. Rents are high and the housing market is starting to slow down., so some price relief is on the horizon, imo, maybe next year. Also, there is a new mortgage called a Physicians Mortgage no money down. Never heard of this before, but I know someone who did this.
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That’s been around for decades. You probably have a higher rate but no PMI.
 
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BillAlfonso said:
It seems that not much time has passed, but I can already see how housing prices have risen in my city. Buying a house is my dream, but for now I have to be content with renting. Fortunately, I don’t have children. :rofl:
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i can totally relate i used to think that way also, now i consider it just a constant PIA and I cant wait until I can downsize

landscaping, updates, things that go wrong, get a low maintenance house below your budget..
 
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Hoya11 said:
i can totally relate i used to think that way also, now i consider it just a constant PIA and I cant wait until I can downsize

landscaping, updates, things that go wrong, get a low maintenance house below your budget..
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I think renting is best. When you buy most people want their dream house so they spend a fortune. Sure renting can (maybe?) cost more long term than a comparable purchase, but you can easily rent a less nice house for cheap and feel good about it since it isn’t ‘forever’. It’s likely that you will make more investing the extra money you save with a modest rental that you will in home appreciation (after maintenance, opportunity cost of equity, renovations, etc) with a purchase.
 
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Hoya11 said:
i can totally relate i used to think that way also, now i consider it just a constant PIA and I cant wait until I can downsize

landscaping, updates, things that go wrong, get a low maintenance house below your budget..
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Truer words have never been spoken... Lol

People say you can buy a house that is 3X of your income without stretching your budget. I would not recommend that for physicians who live in low-to-medium cost of living areas. In my opinion, anything > 2X of your income is stretch.

I live in a low cost of living area and my primary residence is ~0.65X of my total income. I sometimes even forget if I have a mortgage.
 
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