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  • Thoughts on a house

    My wife and I are considering buying a home and would like some financial/life input.

    About us: I'm in my second year of being an attending.  Wife stays home with two little ones.  I love my job and would like to be here for a long time (would love to have this be my only job, but I realize that it's relatively statistically unlikely).  We love the city where we live, specifically our neighborhood.  Although we are in a relatively low COL city, we live in a very affluent suburb.  It's the kind of place where you still see lemonade stands, kids leave their bikes on the front lawns unlocked and everyone knows everyone.  There are young families with kids everywhere.  We can walk to the elementary school, park, grocery store, library, fire station, etc.  I'm about 10 minutes from work and theres no traffic.  Women walk/run at night alone and feel safe.  I probably make slightly more than average for an academic physician in my specialty.  I really like my coworkers.  We have paid off all of my student loans and have no consumer debt.  We own two reliable cars - will probably upgrade the wife's car in the next couple year, but there's no rush.  We are currently saving a little over 20% of our gross income into tax preferred accounts plus a little over 10% employers contribution - this will probably go up during our next open enrollment as we plan on doing an HSA next year.

    We rented a home for my first year out and signed a lease through next May.  The neighborhood where we live is relatively small (+/-3 blocks by 6 blocks) for the immediate area that is walkable.  The surrounding area that is still in the school district is obviously large, but it's much hillier and separated by some busy roads.  Some houses are being sold as tear downs for 1.5x+ my annual salary - it's not uncommon to see homes of 6x my salary.  We planned on living here through the end of the lease and purchasing a home somewhere in the city, but realize it is relatively unlikely to find a home that meets our needs, is within our budget and is in this immediate area.  We're on pace to have about 1/2 of my annual income saved by the spring for down payment/emergency fund.

    Two weeks ago, a home came on the market that is one block from where we live.  It is on one of the nicest streets in the neighborhood.  Although it's expensive, it's not a McMansion - 2,500 sqft. We wouldn't have to spend much in additional furnishings.  Heating and cooling wouldn't be excessive given the size/layout.  The outside, kitchen, living and dining areas are ideal.  The yard is small and flat (I see this as a plus - I want a small yard so it's more manageable and kids play in the street/at the park) and I laid out well for play.  Theres a new roof, HVAC and water heater.  The only catch is that there are only 3 bedrooms.  We'd really like 4 in case our family expands (currently undecided) and/or to have a guest bedroom (family lives out of state).  It's big enough with respect to living space and is very well-laid out.  The house is currently listed such that we could pay list price with 10% down and have the mortgage be 2.35x my annual salary while still having a 3 mo emergency fund cash - we would have to eat the remaining time on the lease unless it gets rented out but have the cashflow to do it.

    We're considering putting in a low-ball offer since we have no hurry to move and heard through the grape vine that the sellers are under contract on another home.  If we put in an offer for 90ish% of asking, we could put 10% down, have the mortgage be 2.16x my annual salary and still have a healthy EF.  We'd eat about 15K in rent if not rented out, but figure that's not too terrible.

    Also, for the sake of calculations, I have only included my base pay for the numbers above.  I make about 5% extra pay in bonus/incentive pay and about 5-15% in moonlighting which is quite benign and I kind of enjoy.

    My question is this: those that have extra space/bedrooms, how much do you value it?  Those that don't, how much do you regret it?  How much does location go into your happiness vs. the house?

    Any input would be appreciated.  Thanks!

  • #2
    At 2500sqft, is there no opportunity to partition rooms to add a bedroom? 3br seems small for that sq footage.

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    • #3
      Sounds like you'll be stretching to buy a house that won't fit your long term needs.

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      • #4
        It doesn’t fit your future needs. I’d pass.

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        • #5
          The “need” for a 4th bedroom is a “desire”. There is no rule for separate rooms for each child. If you do have a third, stick them in the bedroom of the appropriate gender. Problem solved.
          Grandparents are welcome to stay, offer them the room with two beds. Or simply rent a hotel room.
          My concern is you found one that is acceptable, but it’s not quite what you want. That’s a huge concern.

          You seem to have the option of greatly improving your financial position and using time to find the right place even if it means renting another year.

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          • #6
            Congrats in getting through year 1.   Now here's the challenge --resist the temptation to buy on the first house bug.   Take a step back and check out zillow/redfin and look at the rest of the neighborhood to see if other homes fit better.  If so, get what you want to be in that's a bit future proof.  Otherwise you'll spend on additions/partitions and bunches more.   If you believe this is a great 5 year home, then by all means get it.   But there's already a but.   3 and 4 BR is a big difference.

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            • #7
              I don't know, I think I would maybe buy it. We live in a very similar situation that you describe and I can't tell you how much it contributes to my quality of life to have neighbors we love and to never know where exactly my 11 yo is, but to know he's safe roaming the neighborhood with friends.

              2500sf is a good size too. With 3 br, you could still have 2 more kids in the house pretty easily. I don't think kids need separate rooms. I definitely don't understand buying a home for guests that visit 5% of the year. Just pay for a hotel room for them or buy an air mattress.

              I think this house has enough going for it you could easily stay for 10 years, or longer and it would fit your needs well enough.

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              • #8
                Caveat: I do not own my own home. I’m holding out because my rent is cheap and have no need to move but we look at real estate daily. I’ve avoided the bug so far

                As someone who comes from a family that always lived in apartments with children always sharing room, without tons of privacy, and a SO who grew up on the same way, I think the extra BR is not needed but that is a lifestyle/values choice. I think your kids and family dynamic may be stronger for having less space (building character lol). You can still keep one as a guest room—and what about the basement? If that’s the only catch and it otherwise fits your needs and is a chance to get inside this neighborhood where supply is otherwise low and sellers may not be as motivated...it seems reasonable. If you sat it out it wouldn’t be the end of the world — sounds like your not likely to get anything cheaper where you are so you’d be holding out to pay more for an extra bedroom?
                It sounds like your really planning on staying which again is a check in the buy column. If you guys are going to be constantly checking and stressing about rising prices or low inventory this is a way to just bite the bullet knowing you can always upgrade 5-10 years later if that extra br us actually mandatory.

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                • #9
                  Don't have super strong feelings about this case. I def understand really liking and area rather than going farther out for more space. For me walkability is a huge factor.

                  OTOH I do think a guest room is a really nice feature. It can increase joy in some pretty tangible ways. We have a little guest suite in our current place and it has been great, esp since it's off the main floor and both you and the guests can get away from each other for a bit.

                  We are strongly prioritizing a guest room in our next place as well for the above reasons. It's just been great to have parents, sibs, friends etc over, stay up late talking and having drinks, and then just wander off to bed that is 30 ft away.

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                  • #10
                    Sounds like you guys have done everything right so far with regards to saving, paying off loans, renting your first year, etc.
                    Personally, I wouldn't be in a hurry to buy.  There's a good chance something else will pop up for sale around the time your lease is up anyway.  Fall is a busy time for real estate.  See what comes on the market in the next couple of months at least.  You might find something you like more.

                    It's hard to resist though and the temptation to buy and nest is strong.  I get that.  Either way (buy now or not) you guys are in great shape.

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                    • #11
                      There’s no basement and it would be difficult to partition something off. There is a good sized laundry room that could potentially be expanded to a 4th BR if we moved a wall out into the yard at a later date and got a stack laundry that we put in a closet. I think the actual square footage would work. We would probably just have kids share a room if we had more, then make one of the kiddos sleep on the couch when guests came to town.

                      As above, I don’t think we could find a cheaper 3 BR in the area - this is a question of either 1) valuing location over a 4th bed/guest bed or 2) waiting to spend more for a 4 BR. Most of the 4 BRs are an additional 0.5x my salary or more.

                      Also, since it’s a very family friendly area, the fall and winter are pretty quiet for real estate around here since people all settle I before the school year, for the most part. There tend to be bidding wars in the spring.

                      As far as stretching goes, it seems like 2x mortgage is not stretching - we’d be at 2x if we got them down a little, including bonus and still low 2’s if we didn’t. Plus we’re saving 30+ gross and would still have an EF - how is this stretching. Waiting until the end of the year, or next year and getting a 4, we may be stretching. If we saved for another year, we could probably get a 4 that would end up being 2..0-2.5x plus a much bigger down payment. Also, that would be more space to furnish and heat and cool.

                      My thinking is that financially, this makes sense. It’s close enough to 2x, is small enough that upkeep/heating/cooling/maintenance wouldn’t be huge, furnishing wouldn’t be too much. The only scenario I see it really hurting is a prolonged real estate depression (which this area was fairly resistant to previously) and we go stir crazy with more kids in <5y.

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                      • #12
                        Also, I would say we haven’t been in a hurry to buy. We tried when we first moved here and it thankfully fell through. We looked at the end of our first lease and didn’t find anything that was reasonable and close to filling all of our wants and needs.

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                        • #13
                          "My thinking is that financially, this makes sense."

                          -- Famous last words of those falling in love with an area/house.

                          "There is a good sized laundry room that could potentially be expanded to a 4th BR if we moved a wall out into the yard at a later date and got a stack laundry that we put in a closet."

                          -- Yeah, definitely not stretching if you're considering moving a wall out into the yard to make a tiny 4th bedroom and putting a washer and dryer in a closet. Not stretching at all...

                          "Also, that would be more space to furnish and heat and cool."

                          -- Yep, if the marginal cost of heating and cooling a slightly larger space is truly a budget consideration, definitely not stretching at all.

                          "The house is currently listed such that we could pay list price with 10% down and have the mortgage be 2.35x my annual salary while still having a 3 mo emergency fund cash"

                          -- So, you're only putting 10% down but that pretty much wipes out your cash on hand? Then you're presumably getting a 30 year mortgage and that'll be for 2.35x your salary. Hopefully you're including property taxes and insurance in that, both of which will likely go up as I suspect the new assessment after you buy will be higher than the old assessment.

                          If you want to buy the house, it sounds like you can swing it. It's not going to be the best financial move you make, but if that's what you want to spend your money on, that's a choice you can make.

                           

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                          • #14
                            So ZZZ thinks it’s a bad idea, lol.

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                            • #15
                              We are a family of 4 and we live in a 4,745 squ foot house.    The biggest advantage to having a larger house is storage, nice to have room for things you get at Costco/buying in bulk when things are on sale.    Our commute is 30-45 minutes for myself and my wife, we work in different directions, but even if we could shorten our commutes, the school districts close to the hospitals that we work in are not good so we'd be looking at private school costs if we lived too close.   I like the Dave Ramsey rules on housebuying - 15 year mortgage, 10-20% down, no more then 25% of your take home pay on your monthly payment.  With your scenario of being locked into a rental until next year, I'd probably advise keeping the rental until next year and saving up that down payment.  I know you aren't supposed to time these things but I don't predict interest rates changing much in the next year and the housing market may be weaker next year so you maybe able to get a better deal.   These things are hard to predict though, I would just keep shopping and looking, maybe throwing a low ball offer every now and then if you really think that it is a good deal in the meantime.

                               

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