How much home should you buy

How Much Home Should You Buy

Physicians are in the fortunate circumstances that they can generally afford an expensive home as soon as you complete medical school. With your new found income sometimes upwards of $250,000 to $300,000 it can be tempting to buy the most expensive home the bank will lend. This is often a mistake and can lead to financial struggles down the road.

Ask yourself the following questions before deciding how much you want to borrow for a home.

What Do You Need Versus What Do You Want

The age old question of needs versus wants is very relevant when it comes to making a home purchase. While you might want a 5000 square foot home right away,  is that more than you need? With a larger home comes higher costs for furnishing the home, higher utility bills, possibly home owner’s association fees, country club fees and other expenses. When deciding how much you want to spend on your housing costs be sure to include all of these figures into the calculations. You might discover that buying a less expensive home is more prudent. It is very tempting to want to keep up with the Jones. Just remember, the Jones are not the ones paying your bills.

What Other Bills and Expenses Do You Have

These bills should take into account student loan payments, credit card bills, car loans and other traditional debt that the bank will consider when qualifying you for a loan. Also consider whether you intend to buy a newer car, or add more debt in the next few years. The home mortgage is a long term expense and any debt added after your home purchase will need to be worked into your budget. Better to do that sooner than later.

How Much Are You Putting Away For Retirement

This is the perfect time to establish a retirement plan, if you have not already done so. Your income has increased significantly and you can build it into your lifestyle. Max out your 401K contribution at work and look into whether you qualify for an IRA account as well. Whether your spouse works or not, there should be a retirement plan set up for them as well. This will help you make the most of your contributions. With so many years of schooling and residency you are getting a later start than many others who went to work after finishing their Bachelors or Master’s degrees. This means higher contributions are needed to get you on track.

Lifestyle Choices

Everyone has different financial goals. Some want a large family, while others want to travel. You might want to spend time volunteering or playing golf. There are no right or wrong answers about what you want to do with your free time. What is important is that you budget for those expenses before you buy a home. This step will provide you with the freedom to do those things you love the most.

Often physicians spend so much time at work that finances get neglected. If you spend a little time now, before making a large financial commitment, it will result in more financial freedom to do the things you enjoy.

There is nothing wrong with putting finances on autopilot. But in order for that to happen some forethought needs to be put into what that looks like. When you have done this you will find you are buying a home you can easily afford and also have the time and finances to pay for other parts of your life.


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