What kind of position am I in for buying a home?

[Baltimore0924]

Looking for some good advice. Won't be purchasing until I'm finished with school. Currently a law student and about to complete my first year. Won't have any debt after graduation and my gf doesn't have any either. Proposing soon and luckily her dad and my family will be paying for the wedding so finances are taken care of. Both of our cars are paid off and she'll make about 40k as a teacher. I'll probably start off with a 55k salary upon graduation. Hopefully will make more as the years progress. Luckily I will also have about half a million in savings account from inheritance. How good of a position will we be in after I graduate in 2 years and maybe buy a home a year or two after that? Any information would be great. Thanks.

[disneysteve]

Welcome to the site.

There are some general rules that you should look at.

1. Have a 6-month emergency fund in place.
2. Have a 20% down payment.
3. Buy a home that doesn't cost more than 2.5-3 times your annual income with a monthly payment (PITI) not exceeding 28% of your monthly income.

So if you are making 55K and your wife (don't buy until you are married) is making 40K, that's 95K. That puts you in a house costing between 237K and 285K with a down payment between 47K and 57K. Obviously, the less you spend the better. I don't know how much your EF needs to be as I don't know your monthly expenses.

Thanks largely to your inheritance, you've probably got all of this covered. Of course, you also want to make sure that you are both contributing to your retirement accounts also.

[TBH]

Buy a home that doesn't cost more than 2.5-3 times your annual income with a monthly payment (PITI) not exceeding 28% of your monthly income.

I should know this, but is that 28% of take-home pay or gross income?

I think our payments are at about 28% of our take-home pay, but that's after taxes, health insurance and savings are taken out.

[Baltimore0924]

Thanks for all of the advice! I'd like to make the most of my inheritance and help finance my kids education in the future. Is it possible to turn my half a million into a million with 22 years by getting involved with investments? Thanks

[autoxer]

Thanks for all of the advice! I'd like to make the most of my inheritance and help finance my kids education in the future. Is it possible to turn my half a million into a million with 22 years by getting involved with investments? Thanks

To double an investment in 22 years you would need a 3.2% annual return, but that doesn't include inflation. That should be achievable without too much risk in an equity portfolio. There are lots of other ways you can invest, but make sure it is something you completely understand. I prefer index funds, but other members of this forum prefer rental real estate. Don't consider your primary residence an investment.

I think you should worry about securing your own financial future, before worrying about your future childrens financial future. Start by maxing out the retirement accounts as soon as they are available to you. Don't rush into anything with the inheritance money, sit on it for a while so you don't do something you regret.