How much house can I buy on my salary?

As a high-income earning physician, you deserve a McMansion, right? How much house can you buy on your income?

Suppose that you are the average physician that we discussed in an earlier post. You are making $200,000 annually. According to this example, you have approximately $131,000 for living expenses and miscellaneous expenses.

Unless you will be paying for a house entirely with cash, you will likely take out a mortgage. In standard home loan mortgages, a down payment of 20% will usually afford you the lowest interest rate. For a $200,000 home, you will need to scrounge up $40,000 for a down payment, plus a few extra thousand dollars for miscellaneous home expenses such as moving expenses, furniture, and additional taxes.

In our example, if our new physician rents an apartment for the first year and lives a moderately lavish lifestyle, she will have $51,000 left for savings. That leaves plenty to put towards the down payment for If that entire amount is directed towards the down payment on a home, you can purchase a $255,000 home. If our doctor wishes to have a larger home (loan of greater than $417,000), she could take out a jumbo loan.

Now, I know plenty of doctors who live in homes <$250,000, but I would venture a guess that the majority of doctors buy much larger and more expensive homes. How can this be manageable? The truth is that everyone is in a different scenario. Perhaps those with the larger home have a higher income. Perhaps they already have savings from prior jobs, the spouse, family…etc. Perhaps they’ve overextended their income. After all, a large percentage of physicians do not have much savings!

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