By Joel Chouinard, ChFC®
March 3rd, 2025
The last few years have been wild for the real estate market. From home prices skyrocketing during 2021 and 2022, to mortgage rates reaching 25-year highs, it has been a tough environment for home buyers, especially first-time buyers. For Big Law attorneys, the challenge is amplified. Demanding caseloads, long hours, and the pressure to bill leaves little time for navigating the complexities of a home purchase. This nine-step process will help you focus on what is within your control, so you are ready to make your first home purchase when the right opportunity presents itself.
1. Determine what you can afford
Before you even start looking at homes, it’s important to know how much house you can afford to buy and what your monthly payment would look like. A good rule of thumb is to spend no more than 28% of your pre-tax household income on housing expenses, which include mortgage, property taxes, insurance, and utilities. In addition, if you have other debts, such as student loans, your total debt payments shouldn’t exceed 36% of your pre-tax household income.
Although rules of thumb are a helpful measure, they are general rules for the average American. As a Big Law attorney, you are in a very unique situation where your starting first-year salary is often more than what most will earn in their peak earning years. And this salary could be significantly reduced one day if you choose to leave Big Law.
That’s why I prefer using the 28% rule, but based on a potential lower salary, such as the one you would be making in-house or working for the government. This ensures that you will never feel stuck in your Big Law position (a.k.a., golden handcuffs).
2. Establish a purchase price range
Once you know what monthly mortgage payment you can afford, you need to establish a purchase price range. You can use an online mortgage calculator to do this, such as this one. Simply enter a hypothetical purchase price and down payment, and you will see the breakdown of the total monthly payment. Most mortgage calculators should have good estimates of local property taxes, home insurance premiums, and mortgage interest rates. Adjust the home price and down payment as needed to fit within your monthly target budget from step 1.
3. Determine your downpayment
Part of establishing your price range will be determining how much you want to accumulate for a down payment. In an ideal world, you would put 20% down to avoid Private Mortgage Insurance (PMI). PMI is an insurance policy that some lenders require to protect themselves against borrowers defaulting on their loans. For example, a $750K house would require a $150K down payment to avoid PMI.
In reality, accumulating 20% of the home’s value can be a daunting task, especially with the surge in home prices in the past few years. Fortunately, putting 20% down is not your only option. Some lenders will accept down payments as low as 3% for borrowers with good credit if they purchase PMI. You may also be able to find an “attorney” or “professional” mortgage that allows you to avoid the PMI even with putting down less than 20%. Lastly, don’t forget to save for closing costs, which typically range between 3-5% of the total purchase price. Check out this great closing cost calculator.
4. Create a savings strategy
Once you know how much you need to save for your down payment and closing costs, it’s time to create your savings strategy. The first step is to determine how much you want to save each month. This number will vary from person to person and will depend on how quickly you want to buy your first home. For example, if your goal is to buy a $750K house in 12 months and accumulate 10% for the down payment, you will need to save $6,250/month, ignoring any interest and taxes ($75,000/12).
Once you figure out your savings number, schedule automatic transfers to a high-yield savings account each month. You can even ask your payroll department if they can split your paycheck into two separate accounts.
5. Improve your credit score
As you accumulate the money for the down payment, it’s a great time to improve your credit score to ensure you will get the best rate possible. According to the Fair Isaac Corporation (FICO), anything above 740 is considered very good and is likely to get you the highest rate possible*. If you want tips on how to improve your credit score, check out this blog post.
6. Find a local realtor
Although it might be attractive to represent yourself in the home buying process to save on realtor costs, I would think twice before doing so. Realtors (at least good ones) should know the different neighborhoods in your area very well, have a deep understanding of real estate contracts and help spot issues when touring houses. Additionally, they will know whether we are in a buyer’s market or a seller’s market, which might impact what you include in your offer. Let your realtor know your price range (see steps 1-3), and they will be able to point you in the right direction.
7. Get a pre-approval letter from a lender
When your credit score is in a good spot, and you’ve accumulated the money for a down payment and closing costs, you want to obtain a pre-approval letter from a lender. This letter will show sellers that you are a qualified buyer and are ready to buy. It’s important that you get this done early in the process, as you might fall in love with a house and need to quickly make an offer. When you first contact a lender, make sure to ask if they have special mortgage programs for lawyers. As noted above, this may allow you to avoid PMI even if you are not putting down the traditional 20%.
8. Make an offer and close on your home
Once you find your dream home, you will need to sit down with your realtor to go over your offer. Again, a good realtor will understand current market conditions and what makes up a strong offer that the seller will not want to turn down. At that point, if the seller accepts your offer, you will go through a series of due diligence steps to ensure the home you are buying is viable, such as home inspection, appraisal, and title search.
If everything checks out with the home and with your lender, you will likely close and gain possession of the home within 30-60 days of the seller accepting your offer. On closing day, you will need to wire the money for the down payment and closing costs.
9. Apply for the homestead exemption (post-closing)
After closing, the last step is to apply for the homestead exemption. Depending on the state in which you live, you may be able to reduce your property tax burden by applying for the homestead exemption. For example, if your home is appraised for $750K and you are able to remove $100K with the homestead exemption, property taxes would only be assessed at a $650K value.
Final Note
Buying your first home as a Big Law attorney requires a thoughtful process to ensure you don’t involuntarily put on the dreaded “golden handcuffs.” By carefully planning your purchase price, understanding the local market, and leveraging the expertise of a realtor, you can confidently navigate the home-buying process and achieve your dream of homeownership without the financial strain. This approach will allow you to build long-term wealth while gaining career flexibility.
Sources
* https://www.myfico.com/credit-education/credit-scores
SharpEdge Financial LLC is a registered investment adviser registered with the State of Texas. Registration does not imply a certain level of skill or training. The views and opinions expressed are as of the date of publication and are subject to change. The content of this publication is for informational or educational purposes only. This content is not intended as individualized investment advice, or as tax, accounting, or legal advice. Although we gather information from sources that we deem to be reliable, we cannot guarantee the accuracy, timeliness, or completeness of any information prepared by any unaffiliated third-party. When specific investments or types of investments are mentioned, such mention is not intended to be a recommendation or endorsement to buy or sell the specific investment. The author of this publication may hold positions in investments or types of investments mentioned. This information should not be relied upon as the sole factor in an investment-making decision. Readers are encouraged to consult with professional financial, accounting, tax, or legal advisers to address their specific needs and circumstances.