Home Price for Big Law Lawyer Forum

[Anonymous User]

I’m going to be a second year at a market-paying firm. I have $90,000 in student debt. Is a $500,000 house out of my league?

[Wanderingdrock]

No.

There are various schools of thought on how much debt you can or should healthily have compared to your income. Generally, though, it comes down to what you're comfortable paying to service your debt monthly vs. your monthly cash flow. This in turn relates to your interest rates, which are likely to be quite high compared to the last 15 years, but no matter how you slice it you're going to be in a fairly good spot with a second year's salary against that level of debt servicing. Remember also that a home can be quite a good long term investment (and look into whether you're eligible, through your firm or otherwise, for special mortgage terms, which can lower your down payment without PMI and/or give you a reduced interest rate).

Consider also how soon you're likely to leave the market-paying firm, and to go where, but for the most part those of us making market can easily afford $500,000 homes. Most are looking at much more expensive places in the big markets.

[The Lsat Airbender]

Total debt load of $590k is not "out of your league" on a biglaw associate salary, but that's also a poor guide for deciding how much house to buy

[Anonymous User]

When I bought mine I could have bought a $1.2m home but honestly so glad I didn’t. Bought a $700k home instead paying less than $3k per month and could easily afford it without biglaw. No golden handcuffs.

[Anonymous User]

When I bought mine I could have bought a $1.2m home but honestly so glad I didn’t. Bought a $700k home instead paying less than $3k per month and could easily afford it without biglaw. No golden handcuffs.

On the flip side, I bought a $1.2m home a couple years back and am incredibly happy I did. My plan is to stick in biglaw as long as they'll let me (already 7 years in) to ride the gravy train. If I can last another ~3 years, I'll have enough saved to transition to a ~$250k-$300k/yr in-house job (or less if my spouse goes back to work), make my max 401k contributions, and retire comfortably at ~65. It's been a slog for sure, but it's totally worth it to me to sprint to secure a higher standard of living. To be clear, if I was planning on leaving now (or left a couple years ago), I'd be REALLY stressed about finances.

Three additional datapoints: (1) I'm paying a <4% mortgage, so I couldn't afford $1.2m at today's rates, (2) I live relatively frugally (we don't eat at fancy restaurants, the combined purchase price of our two vehicles was $50k cash, and our vacation are normally at my in-laws or grandparents in FL), and (3) I had minimal loans due to a scholarship and my spouse had a job that enabled us to pay her loans off a few years ago.

[Anonymous User]

Just as another data point, I bought a home as a third year for around the same price as you're looking at (granted, with likely a much lower interest rate). Very grateful I did not go a ton higher. While I ended up staying in biglaw for a few more years, having the low monthly payment allowed me to save and invest a lot more than if I had spent $800k+ on a home at that time. All those investments gave me the confidence/financial stability to walk away from biglaw as a senior associate when a great inhouse opportunity came that required a >50% total pay cut. I can still easily pay my bills and put away a small amount for savings, but my long term financial situation is quite secure. I credit my home choice for a lot of this outcome.

[Anonymous User]

Update. We signed on the home. It’s going to be a $4,400 monthly payment, inclusive of property tax and insurance. I keep second guessing myself and wondering if we bit off more than we can chew. Can someone please assure us that we’ll still be able to manage??

[existentialcrisis]

Update. We signed on the home. It’s going to be a $4,400 monthly payment, inclusive of property tax and insurance. I keep second guessing myself and wondering if we bit off more than we can chew. Can someone please assure us that we’ll still be able to manage??

I mean, as a data point, my wife and I paid that much in rent for a not particularly nice one bedroom in Manhattan. I think with two salaries you'll be absolutely fine.

[Anonymous User]

Update. We signed on the home. It’s going to be a $4,400 monthly payment, inclusive of property tax and insurance. I keep second guessing myself and wondering if we bit off more than we can chew. Can someone please assure us that we’ll still be able to manage??

Assuming you are in a high-tax jurisdiction and taking the maximum pre-tax deductions (maxing out retirement, high premium medical plan, etc.), at a market-paying firm as a second-year you should be netting at least ~9k per month. If you are the sole earner for your family, this can definitely feel like a bit of a stretch, but if your spouse is contributing even a little bit then you'll definitely be able to manage. Even if not, you'll manage with some (relatively minor) lifestyle changes.

[Wanderingdrock]

Update. We signed on the home. It’s going to be a $4,400 monthly payment, inclusive of property tax and insurance. I keep second guessing myself and wondering if we bit off more than we can chew. Can someone please assure us that we’ll still be able to manage??

Assuming you are in a high-tax jurisdiction and taking the maximum pre-tax deductions (maxing out retirement, high premium medical plan, etc.), at a market-paying firm as a second-year you should be netting at least ~9k per month. If you are the sole earner for your family, this can definitely feel like a bit of a stretch, but if your spouse is contributing even a little bit then you'll definitely be able to manage. Even if not, you'll manage with some (relatively minor) lifestyle changes.

I'm the sole income in my family. I would not have felt comfortable paying that much as a second year for a mortgage.

I'd have been objectively wrong. Also, I'd have been making less than a current second year.

[Wanderingdrock]

Update. We signed on the home. It’s going to be a $4,400 monthly payment, inclusive of property tax and insurance. I keep second guessing myself and wondering if we bit off more than we can chew. Can someone please assure us that we’ll still be able to manage??

Congrats! Nobody can know the future of the neighborhood where you bought, we don't know where you'll be working in 5 years, we don't know when you plan to next move, and we don't know your own psychological level of comfort with debt. But statistically speaking, yeah, you made the right call. You'll be more than fine. Best of luck and congratulations on being a home-owner with your budding family .

[nealric]

Update. We signed on the home. It’s going to be a $4,400 monthly payment, inclusive of property tax and insurance. I keep second guessing myself and wondering if we bit off more than we can chew. Can someone please assure us that we’ll still be able to manage??

The math works. The only real downside is you signed away the leeway to take a government (or other less high paying) job in the future assuming your spouse doesn't make enough to swing the payment.

[TigerIsBack]

Also keep in mind that if rates inevitably drop even to something in the range of 5% in a handful of years or whenever, you can always refinance and that will lower your payment.

Personally, I was a mid level when rates were crazy low a few years back and we paid $1.4m for our home and couldn't be happier. To me paying the mortgage every month, even though it's a very large payment, is quite satisfying because I see a few thousand dollars going to the principal balance every month so it's increasing our net worth slowly but surely (plus even more so if the house appreciates). I find that shift in mindset to be quite helpful (whereas rent does nothing to contribute to your net worth). Eventually once you make the payment for a few years, it just becomes part of your life and your lifestyle adjusts to your spending levels and so it becomes less sticker shock down the road.

We also prioritized getting rid of debt after buying a home to give us a little more cushion each month (i.e., paying off cars, student loans, etc.), and ideally soon our mortgage will be our only debt obligation.

EDIT: One other item I'd note, is I believe most law firm loans (like the special mortgages through Citi) allow you to recast the loan for like no cost or minimal cost, so basically if you stick it out in biglaw for awhile, as you become more senior and get large bonuses, you can pay those toward your mortgage principal and recast the loan to lower your payment based on the new reduced total balance.

[Anonymous User]

Also keep in mind that if rates inevitably drop even to something in the range of 5% in a handful of years or whenever, you can always refinance and that will lower your payment.

Personally, I was a mid level when rates were crazy low a few years back and we paid $1.4m for our home and couldn't be happier. To me paying the mortgage every month, even though it's a very large payment, is quite satisfying because I see a few thousand dollars going to the principal balance every month so it's increasing our net worth slowly but surely (plus even more so if the house appreciates). I find that shift in mindset to be quite helpful (whereas rent does nothing to contribute to your net worth). Eventually once you make the payment for a few years, it just becomes part of your life and your lifestyle adjusts to your spending levels and so it becomes less sticker shock down the road.

We also prioritized getting rid of debt after buying a home to give us a little more cushion each month (i.e., paying off cars, student loans, etc.), and ideally soon our mortgage will be our only debt obligation.

EDIT: One other item I'd note, is I believe most law firm loans (like the special mortgages through Citi) allow you to recast the loan for like no cost or minimal cost, so basically if you stick it out in biglaw for awhile, as you become more senior and get large bonuses, you can pay those toward your mortgage principal and recast the loan to lower your payment based on the new reduced total balance.

"inevitably" is probably a bit strong. Rates are just back to where they were pre-GFC. Not saying they can't come down, but the 2009-2023 period was unique (so far) and need not happen again.

[Wanderingdrock]

Also keep in mind that if rates inevitably drop even to something in the range of 5% in a handful of years or whenever, you can always refinance and that will lower your payment.

Personally, I was a mid level when rates were crazy low a few years back and we paid $1.4m for our home and couldn't be happier. To me paying the mortgage every month, even though it's a very large payment, is quite satisfying because I see a few thousand dollars going to the principal balance every month so it's increasing our net worth slowly but surely (plus even more so if the house appreciates). I find that shift in mindset to be quite helpful (whereas rent does nothing to contribute to your net worth). Eventually once you make the payment for a few years, it just becomes part of your life and your lifestyle adjusts to your spending levels and so it becomes less sticker shock down the road.

We also prioritized getting rid of debt after buying a home to give us a little more cushion each month (i.e., paying off cars, student loans, etc.), and ideally soon our mortgage will be our only debt obligation.

EDIT: One other item I'd note, is I believe most law firm loans (like the special mortgages through Citi) allow you to recast the loan for like no cost or minimal cost, so basically if you stick it out in biglaw for awhile, as you become more senior and get large bonuses, you can pay those toward your mortgage principal and recast the loan to lower your payment based on the new reduced total balance.

To be clear, paying funds from your bank account into your home equity does not increase your net worth. Renting does DECREASE your net worth, so your point stands, just sort of as an inversion of how you said it.

[Anonymous User]

Update. We signed on the home. It’s going to be a $4,400 monthly payment, inclusive of property tax and insurance. I keep second guessing myself and wondering if we bit off more than we can chew. Can someone please assure us that we’ll still be able to manage??

I can comfortably assure you that this is an extremely manageable situation. I purchased a $1.6MM house as a fifth year (blessed in that my wife and I had no student loan debt). The mortgage is $5,859/mo. Property tax, home and flood insurance are roughly $35k annually. The trick to personal finances is a written budget and a fully-funded 3-6 month emergency fund. So long as you have both in place, you’ll always make your payments on time, and, if there is a black swan event and you lose your job, you have sufficient cushion to take time off, find a new job and, in a total collapse, sell your house if need be.

[TigerIsBack]

Also keep in mind that if rates inevitably drop even to something in the range of 5% in a handful of years or whenever, you can always refinance and that will lower your payment.

Personally, I was a mid level when rates were crazy low a few years back and we paid $1.4m for our home and couldn't be happier. To me paying the mortgage every month, even though it's a very large payment, is quite satisfying because I see a few thousand dollars going to the principal balance every month so it's increasing our net worth slowly but surely (plus even more so if the house appreciates). I find that shift in mindset to be quite helpful (whereas rent does nothing to contribute to your net worth). Eventually once you make the payment for a few years, it just becomes part of your life and your lifestyle adjusts to your spending levels and so it becomes less sticker shock down the road.

We also prioritized getting rid of debt after buying a home to give us a little more cushion each month (i.e., paying off cars, student loans, etc.), and ideally soon our mortgage will be our only debt obligation.

EDIT: One other item I'd note, is I believe most law firm loans (like the special mortgages through Citi) allow you to recast the loan for like no cost or minimal cost, so basically if you stick it out in biglaw for awhile, as you become more senior and get large bonuses, you can pay those toward your mortgage principal and recast the loan to lower your payment based on the new reduced total balance.

To be clear, paying funds from your bank account into your home equity does not increase your net worth. Renting does DECREASE your net worth, so your point stands, just sort of as an inversion of how you said it.

You're right that my point stands.

[Wanderingdrock]

Also keep in mind that if rates inevitably drop even to something in the range of 5% in a handful of years or whenever, you can always refinance and that will lower your payment.

Personally, I was a mid level when rates were crazy low a few years back and we paid $1.4m for our home and couldn't be happier. To me paying the mortgage every month, even though it's a very large payment, is quite satisfying because I see a few thousand dollars going to the principal balance every month so it's increasing our net worth slowly but surely (plus even more so if the house appreciates). I find that shift in mindset to be quite helpful (whereas rent does nothing to contribute to your net worth). Eventually once you make the payment for a few years, it just becomes part of your life and your lifestyle adjusts to your spending levels and so it becomes less sticker shock down the road.

We also prioritized getting rid of debt after buying a home to give us a little more cushion each month (i.e., paying off cars, student loans, etc.), and ideally soon our mortgage will be our only debt obligation.

EDIT: One other item I'd note, is I believe most law firm loans (like the special mortgages through Citi) allow you to recast the loan for like no cost or minimal cost, so basically if you stick it out in biglaw for awhile, as you become more senior and get large bonuses, you can pay those toward your mortgage principal and recast the loan to lower your payment based on the new reduced total balance.

To be clear, paying funds from your bank account into your home equity does not increase your net worth. Renting does DECREASE your net worth, so your point stands, just sort of as an inversion of how you said it.

You're right that my point stands.

Fair enough, sorry for the pedantry. In a forum full of lawyers, sometimes I lose myself.