Nursing salary and buying a home?

MrChicagoRN, RN · Jul 7, 2014

Lots of really great advice here! :up:

Now my 2 cents...

Cash flow is everything, but pay yourself first!

If your employer has a 401k/403b matching plan, use it. Contribute at least the minimum needed to get the maximum match. If your boss is willing to put $3,000 to $6,000 in your pocket for retirement every year, why would you walk away from it? It comes out of your check every week, and if you start small you probably won't even feel it. Has some short term tax advantages too.

After that either invest more in your work IRA, or in a Roth IRA. The beauty of the Roth is that you pay taxes only on what you put in. You don't pay taxes on what accumulates or grows over the next 10-40 years.

And, if you need to take it out early, you can take out everything you actually put in, tax free. However, in most cases you do have to leave the earnings in till retirement.

MrChicagoRN, RN · Jul 7, 2014

Paying off your mortgage early?

It's nice to be debt free, if for nothing less than peace of mind. By paying off early, you save a ton of interest. While you will lose a tax deduction, the deduction is ALWAYS less than what you actually pay in interest.

but, what's the cost of the money? My mortgage interest rate is just over 4%, but my Roth is currently earning 17%, and averaging >7% over the past 10 years. I earn more by investing.

Plus, if an emergency comes up, and the mortgage isn't paid off, you don't have the cash on hand anymore. What if for some reason you need to walk away from the house? The bank won't give you the prepaid money back. A lot of people ran into problems during the Great Recession and everything was tied up in the house.

Plus, if you plan to sell and move before the mortgage is paid, you won't be paying that interest anyway.

KeepItRealRN, BSN, RN · Jul 7, 2014

To make it simple, you will need to put 20% down if you want to get a decent loan rate and avoid paying PMI (private mortgage insurance). So to put it simply for a $400,000 house you will need to come up with 80k for the down, plus probably another 10k for closing costs and other miscellaneous fees. Plus you don't want that to completely tap you out of cash. Putting 80k down on a 400k house would still leave you with a 320k mortgage. So with an interest rate of 4.35% (todays rate) would leave you with a $1593/month, not including taxes and homeowners insurance which could easily be another $600/month.

Why would you want to pay this off early? Well because over 30 years you will be paying $573,480 for that $320,000 mortgage. So your total tab for a $400,000 house will be $573,480 + the $80,000 down payment for a total of $653,480. And that does not include the closing costs etc. that raises the basis a bit. That loan cost you $253,480 in interest over 30 years. That's not chump change.

joanna73, BSN, RN · Jul 7, 2014

Your example above is precisely the reason that many homeowners buy conservatively. While the bank might lend X amount, consider how much you can comfortably afford and what the cost of borrowing is.

OP you have children so that in itself becomes a major expense in addition to all the other costs. Start by writing out a detailed budget of all your fixed and variable expenses to determine what you can afford to borrow.

Mspsychology · Jul 7, 2014

I'm always wanting to know the same thing.. Happy to find this thread

KeepItRealRN, BSN, RN · Jul 7, 2014

For example, my mortgage is $640/month for 15 years. Taxes are $450/month, insurance is $150/month. Total tab $1240/month. Very doable on one nurses salary if need be. I couldn't get a 1 bedroom apartment for that. What made that possible is saving, to be able to make a sizable down payment.

Wrench Party · Jul 7, 2014

What? $500,000 house? I hope that house comes with a farm! I don't think it would be very realistic to afford a half-mil house

on an average bedside nursing salary, fresh out of the gate. Think more like $100-200K, if you want to be able to afford anything else (retirement, vacation, emergencies, etc.)

(I'm also in the South making a comfortable living as a bedside nurse, and our house was $150Kish on a 30 year loan).

applesbananas · Jul 7, 2014

For example, my mortgage is $640/month for 15 years. Taxes are $450/month, insurance is $150/month. Total tab $1240/month. Very doable on one nurses salary if need be. I couldn't get a 1 bedroom apartment for that. What made that possible is saving, to be able to make a sizable down payment.

That's very doable. What was the price of the home itself? If you don't mind me asking.

toucheturtle · Jul 7, 2014

My husband and I found that we really like having a 15 year mortgage. It increases your payment a bit, but greatly reduces the amount of interest you pay over the life of the mortgage. Your house gets paid off before you know it.

We'll outright own the first house we purchased in a couple of years (we have renters living in it and their rent covers the mortgage). Our current residence will be paid off in about 12 years. We're now in our 40's, so we'll have paid off two houses while still in our 50's.

One thing to keep in mind, as others have said, is that houses are expensive. Just when you've dealt with one problem or expense, another rears it's head. We always have some project or repair that we're saving for or needing to work on. Some repairs can be hugely expensive, such as new roofs, plumbing, water heater/furnace/appliance replacement, etc. Also, be aware that homeowner's insurance usually covers after the first 20% of a major repair is paid for by the owner, should you have major damage to your house. For example, if you had storm damage/flooding/fire, and the damage was $100-200K, it could cost you $20-40K out of pocket before your insurance kicks in. You should make sure to save a nest egg just for home emergencies.

Good luck!

KeepItRealRN, BSN, RN · Jul 7, 2014

That's very doable. What was the price of the home itself? If you don't mind me asking.

340k. Again, but between the sale of our old house and savings we had a substantial down payment.

KRVRN, BSN, RN · Jul 7, 2014

My house was $450,000 and with $0 down, my fixed rate 30 yr mortgage was approx $3200. Not doable on one nursing income.

And oh, how I wish it was a big spiffy house. But alas, it's a 3 bedroom that needs a lot of love that we don't have the time or energy for.

EasterRN · Jul 7, 2014

This is tons of great advice. One thing I haven’t seen mentioned here is the fact that (IMO), just because the bank says you’re approved for x-amount doesn’t’ mean you should be looking at houses that are that amount! Those numbers are just numbers, calculations on debt-to-income ratios, etc. Nowhere in those numbers are things other posters have mentioned like monthly health insurance premiums (mine is $450 for a family of 4), crazy-expensive house repairs, a cars breaking down, an unexpected flight for your family to go visit a sick relative (could be a couple grand right there), in other words, LIFE. Way too many times I’ve seen people get preapproved for a certain dollar amount and immediately go out shopping for exactly that amount of house. Whatever the bank tells you you can afford is (again, IMO) never ever realistic. People hear that $ and visions of granite countertops and 24” travertine tile start dancing in their heads. When I was told what I “could afford” (really? Chase would be shocked at how often I eat out, and what I can spend at Sephora on a Saturday afternoon), I said “thanks for your confidence in me, now let’s look for houses at least a hundred-grand less than that”. Yet another stellar piece of advice from good old Dad :up: .