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  • My house budget

    Hi guys,

    My wife and I are starting to look for a house in a HCOL area. I just wanted to get an idea of what my budget size should be to remain within reason. I am a 33 yo general dentist partner in a multi-dentist practice.

    Salary:~ 300k
    Retirement: ~100k 401k/roth IRA for spouse and I
    Downpayment: 120k saved so far
    Debt: none
    No kids yet

    Thanks!

  • #2
    by WCI recommendation; 300K x 2=600K but in HCOL you may not find something in that range so it may easily go up to 3-4 x of your salary

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    • #3
      The WCI ROT is mortgage no more than 2x salary. So 600 + your down payment of 120 = 720k

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      • #4
        Thanks, I was thinking of saving some more on my downpayment to 150k. I was looking to go somewhere between 700-800k.

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        • #5
          Originally posted by Tennis64364 View Post
          Thanks, I was thinking of saving some more on my downpayment to 150k. I was looking to go somewhere between 700-800k.
          Seems reasonable, not FIRE ideal but not crazy. See if you can pick a house that will last you ten years, into parenthood and so on.

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          • #6
            Whatever you decide tell your RE agent 100K less. Or better yet do not use an agent

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            • #7
              I think general rules are a great starting point, but I think about debt on your home a little differently, especially given how low rates are today.

              Cash flow is the biggest thing to focus on earlier in your career and not stretching it too thin based on your lifestyle, which a monthly mortgage payment is usually the biggest expense.

              I also think it’s helpful with any decisions to understand the full picture (saving for retirement, potentially a family, and future goals/expenses) and what you need to save toward those goals because that frees you up to feel “guilt free” with spending a little more in certain areas if you’re hitting those saving targets. Maybe you want a bigger house, but don’t care about cars. Or you like to travel and don’t care about your home as much. Everyone has their own preference of what they “splurge” on which is why I think focusing on cash flow is a better starting point.

              To your question on a reasonable mortgage, I’d look at what level of debt at the current interest rate you could get and feel comfortable with cash flow wise. For instance, even with an $800k mortgage at a 30 yr 3.25% rate, you’d have a $3,451/mo payment. Add that to RE taxes and insurance for a total home monthly cost. Once you know what total monthly payment you’re comfortable with cash flow wise, while still being able to hit all the other saving targets and not feeling stretched, you can add that mortgage size + a down payment and start to get an idea of what size house you’d be comfortable buying.
              Andrew Musbach, CFP® | Co-Founder & Financial Advisor at MD Wealth Management, LLC
              Financial Planning for Physicians | [email protected]

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              • #8
                In a HCOL, I'd set a hard budget at $1MM. Anything over will start to be a little uncomfortable though not unmanageable. You could always just save some more.

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                • #9
                  700-800K is perfectly reasonable. Just try to work out the numbers so that you end up with a 15 year mortgage that is no more then 25% of your take home pay per Dave Ramsey. I might be inclined to wait until you have kids before buying a house because you tend to look at everything differently when that occurs. There is a lot that you think you know but actually do not (ie childcare locations, family help, school, park locations, places for kids to go, etc).

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                  • #10
                    Originally posted by Tennis64364 View Post
                    Hi guys,

                    My wife and I are starting to look for a house in a HCOL area. I just wanted to get an idea of what my budget size should be to remain within reason. I am a 33 yo general dentist partner in a multi-dentist practice.

                    Salary:~ 300k
                    Retirement: ~100k 401k/roth IRA for spouse and I
                    Downpayment: 120k saved so far
                    Debt: none
                    No kids yet

                    Thanks!
                    Just a note about 2 rules of thumb:
                    •Retirement savings at 20% of gross. That’s 60k per year. Are you on track?
                    • mortgage < 2x gross.

                    HCOL areas can be a challenge. In you “house fund”, you will need downpayment and some “cushion” for closing costs, and anything else you plan on doing the first year. Things like redoing “only the kitchen, master bathroom, landscaping and furniture “ can really put you in a bind. The no kids leaves a variable that really makes a difference. Home needs and schools can change drastically. Make sure what you buy meets future needs.
                    As mentioned above, budgets can be flexible. Underestimating the additional costs of ownership (mortgage is only the base) can leave you much less flexibility than desired. Once you buy, the ownership cost will come. The point is underestimating is difficult to fix on a tight budget. Try to build in savings for additional needs. Vacations, car, college, and whatever else you plan. Don’t let the house become an anchor or a purchase you plan to change. Changing houses is expensive.

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