A friend of a friend of a friend is working as a government lawyer .. He recently closed on a house for over $800K. I am still shivering in my boots thinking how in the hell can this person buy this? No matter how good of a credit he has how can he pay such a high monthly installment. Do they make so much money as a Fed lawyer ?
Federal govt lawyer buying $800K plus home..
By mnsweeps Follow Sat, 10 Apr 2010, 10:50pm 2,174 views 26 comments
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mnsweeps says
Someone you don't even know bought a house for a sum that you can't be sure of and you are all upset about it? Did it ever occur to you that he may have a wife who works too? That he may have many years of savings and investments? That he may have owned a starter home for years and be trading up? My advice is to quit worrying about distant strangers and their finances.
A common problem is that people compare how they feel on the inside to how other people appear on the outside. It's a recipe for unhappiness.
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Okay let me come out clean on this. He is a close friend of mine and I twisted this fact just in case he was reading this forum.
I know his wife doesnt work and has 2 kids. He doesnt have any property and has been renting so far.. I am not disclosing more facts though just not to embarass each other in case he knows that I am posting this online. Sorry about that.
He downpayment he mentioned is about 15% only..
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Alexandria, VA
Depends on what his grade is.
Younger lawyer in staff level (usually GS-12 or 13) gets arround 90~110K/yr. Max salary in GS level (GS-15 step 10) is currently about 155K/yr. Experienced lawyer in manager/executive level probabaly get 150~165K/yr. Can be more if he is in important position or doing special type of work.
800K home is not a problem if he made hefty downpayment, got gift from someone else, had another source of significant income, got rich parents or wife etc.
If his downpayment is 15% as you said, his monthly mortage alone would be arround $3800/mo. Add property tax and insurance on top of it. And add maintanance, utilities etc on that too. Now you got pretty good idea about his cost of living in there, and about his net income after tax too. Basically, what do you expect from a lawyer? LOL
He may have "Stay in Fed for a while, move to private sector for more income, then everything will be alright" kind of mentality. Who knows.
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I don't know where people got this idea about Fed workers got paid well, got free insurance, got enomous benefit etc. That's myth.
Those who's getting good benefit and competitive wage are those who work FOR Fed and Fed related institutions that are oftenly perceived as the government. Actual goverment workers who works in goverment building in goverment department are not getting that much, and they do pay health insurance, thrift saving, SS, medicare etc, just like you guys do. They are rarely getting bonus, and if they do get bonus, 35% goes to the tax. Actual paycheck is quite smaller than what people usually think.
Here's 2010 GS pay schedule for San Jose, SF area. It already is adjusted with 35% locality.
http://www.opm.gov/oca/10tables/pdf/SF.pdf
Earming 105K/yr as GS-9 means he is working FOR government in goverment related organization, not working IN government in government organization.
Anyway, if this goverment attoney guy earns 120K/yr, it is more like $6500/mo net rather than 7500/mo. So the guy paying $5000/mo PITI, $1500 for everything else... for the wife and 2kids, well...
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elliemae's website
But mnsweeps, do you have intimate knowledge of his personal finances? The guy bought a house - he can afford it (hopefully). The amount of money he makes depends upon where he works & what he does. The issue isn't how much he makes - it's how you view what he makes.
For example, an attorney in the federal prosecutor's office might not make as much as an attorney who works at the appeals level in HHS. Many people who are lifers make a shitload of money, but not compared to the amount they would make if they worked in the private sector.
There are many different jobs in the government. We could guess all we want, but at the end of the day it's still his personal business. As a friend you can either be supportive or not, but it's not your business to know his personal financial situation.
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It's really something the hoops folks in occupations like lawyer, doctor, "executive" go through to keep up appearances.
Some good reads that encapsulate the notions in some case studies and also commentaries on the larger picture,
from the 1990's
The Millionaire Next Door by Thomas Stanley and William Danko
Credit Card Nation by Robert Manning
more recently
The Two-Income Trap by Elizabeth Warren
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Okay guys I got some more information. My wife went with his wife and kids to the local park...Casually she asked about their loan and she mentioned they got a loan where the rates reset after 5 years. She said the monthly loan amount is same as their rent .. so I am assuming he got the 5 yr ARM ? So the debt trap continues and after 5 yrs his monthly loan triples ? God I think they fell into a trap but we being very close cannot really openly say this to them ...
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Portland, OR
And doesn't it seem obvious that rates are going up? Wonder what he was thinking? Sell in 5 years?
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Alexandria, VA
This sounds like 5yr Interest only loan, if his current rent is less than $3000/month.
In that case, his monthly mortage in first 5 year is little less than $3000/mo, then it will shoot up to $4000 atfer that.
This can work IF, his intention is to sell the home in less than 5 years, the home price goes up at the time he want to sell, and he actually can do that.
It could be a smart move, or could be a death toll depending on where the future market and his carrior is heading to. I hope he already knew all that, and had calculated the risk before he pulled the trigger.
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elliemae's website
Well, it's his funeral.
About a year and a half ago a woman I work with bought a house with her husband, he was working and doing well financially at the time. small house, big yard, perfect for them... you know the drill. Until he got his hours cut, and property values dropped tremendously. Now they're struggling to make ends meet in a house that's too small.
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Teachers in California are obliged to report suspected child abuse. It is not supposed to be optional for the teacher to report it. Hypothetically, a teacher could be held accountable for not reporting a suspected case.
It was the same kind of thing when I worked in the defense industry during the Cold War. In the security orientation I attended when we were hired, it was made clear that we were obliged to report if we had knowledge of colleagues living beyond their means. It was a security concern. This was working at a defense contractor.
Actual government employees in sensitive jobs living large can do a lot more damage, whether they are attorneys prosecuting affluent defendants, or, like Robert Hanssen, involved in intelligence.
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seaside,
Prof's Stanley and Danko detail a few case studies about situations like that. It is interesting to put a poignant spin on it like that. Another spin would be the one of Prof's Stanley and Danko, you describe not a story of poignant self-sacrifice, but one of Entitlement. An Entitlement Ethic.
Stanley and Danko also give case studies about families that model a different set of values to their kids; kids who grow up to be more independent; better able to take care of themselves; better equipped to weather economic ups and downs.
In Credit Card Nation, Robert Manning illustrates in case studies how credit cards have played an important part of such an Entitlement Ethic that leads to family train wrecks.
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sybrib
Sorry, and thanks for the comment.
I deleted my post because it's little too scarstic. Even if I do feel that way when I see some people in life doing what they do. Well...they certainly don't want to hear anything like that. :)
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sybrib says
Yea - but who says this guy is living beyond his means? Everyone would have been reported a few years ago. We still don't know how much this guy makes - it's all pure conjecture at this point.
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Cupertino, CA
Government attorneys do not make much money, generally speaking, in comparison to attorneys in private practice either in a law firm, Big Law, or a boutique practice - Disclaimer - I am personal friends with U.S. Attorneys in two states (OK & TX).
Very generally speaking, annual salary ranges from about $50k to about $150k plus or minus in either direction, depending on the mission. A beginner prosecutor would start in the $50k range and a White House atty would start in the $150k range - with all of the clearances that entails.
Did your friend work for a private law firm prior to working as a fed government lawyer?
If so, salary and bonuses could be the source of your friend's wealth for a substantial down payment.
This is particularly true if your friend practiced law for a private firm in a major city such as NYC/Boston/L.A./SF. Bonuses can reach the 6-figures at many firms and 7-figures at top firms.
So an $800k+ home is not out-of-line for this attorney's income assuming one includes assets accrued from previous employment. Then, of course, there is the question as to whether or not a family contribution should enter into the equation.
In most cases, law firms in major cities will pay a new associate's student loans from law school, so these associates start out their professional life in a strong financial position.
~Misstrial
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seaside says
With 15% DP, I kindna agree with the mortgage payment amount. Tax, util, insurance, & repair will likely add $2400, if no major capital work (eg. roof) needs to be done before next reset (5y).
sybrib says
It is true that it is possible get to $1M in a very long time, if you don't get laid off along the way. But to get there fast requires "appearances" no doubt. Suppose there is a promising start-up, you won't get invited to invest if you don't appear to have money. The lawyer might have motives other than affordability.
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@ SF ace,
I couldn't agree more with your last sentence.
Just for the heck of it, I went through the math. For a 5/1 ARM at 4% interest rate, $680k fully amortized loan, here are the numbers. Yes, it is 4% for a 5/1 ARM if you got it done more than 2 weeks ago. Rate is now 4.125% at Wells Fargo bank for a 5/1 ARM.
Mortgage Payment = $3,246/mo ($2267 Interest + $979 Principle)
Property Tax = $833/mo
Insurance = $100/mo.
Therefore, his total monthly expense is $4,179. If he makes $144k/year, his take home would be $7,800/mo after tax (assume 35% tax bracket). That leaves about $3,600 for food, utilties and other stuff. Affordable or not, you make the call. Personally, I think his family should be fine. I wish him and his family well.
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I'm joining SFace in this one.
No real facts, no numbers, just bashing on him for buying.
If he put down 15%, that is a decent chunk of change. He's probably got his act together.
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I forgot to add. With 35% tax bracket, his tax refund would be about $13k/year. Therefore, his carrying cost, excluding forced saving of $979/mo, should be $2,100/mo. Including the forced saving, his monthly mortgage expenses should be $3,100.
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mnsweeps says
Sorry, but I find this situation disturbing.
Your spouse went out and in the scenario of a childrens' playground, misrepresented the nature of her inquiry which is now the subject of examination and debate on a public message board.
Bear in mind that is isn't just any neighbor, but a federal attorney who in many cases, if she or he is a prosecutor, MUST live in a safe neighborhood due to threats and other attempts on their life from a few criminal defendants, particularly those prosecuted for possession/sales of illegal substances or firearms, for homicide, or under RICO .
I am finding this entire debate tiresome and intrusive of this attorney's privacy.
Who are you and what does it matter to you whether or not this attorney can afford this house or not?
If you are that curious about your neighbor's financial position, why don't you contact the listing agent and ask for the property profile instead of enlisting your spouse in a private investigation?
Very rarely do I contest someone's post, however, in this case I must make an exception.
~Misstrial
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Government attorneys do not make much money, generally speaking, in comparison to attorneys in private practice either in a law firm, Big Law, or a boutique practice - Disclaimer - I am personal friends with U.S. Attorneys in two states (OK & TX).
Very generally speaking, annual salary ranges from about $50k to about $150k plus or minus in either direction, depending on the mission. A beginner prosecutor would start in the $50k range and a White House atty would start in the $150k range - with all of the clearances that entails.
Yes, at $150K salary we are talking most likely a director level, which took many years to achieve that promotion. While the director is no more than manager of staff, and there is only 1 director level attorney.
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Misstrial says
Yea. It's his life and his business - all of this speculation as to affordability is pure conjecture. Again, he can work in any area of gob'mint, can make a lot or a little. We all can compare our lives to someone else and come up short.
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SF ace says
Completely agree with your statements.
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This is a weird thread.
Warren Buffett bought a 40-acre tenant farm at the age of 14 with money he saved from doing a paper route.
People who save money can buy things.
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Misstrial says
The problem with attorneys is that 99% of them give the other 1% a bad name. You know, the ones who say they deserve a Malibu beach house and blame an entire generation for their inability to afford one.
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Nomograph says
In link provided, paragraph 3:
http://www.nytimes.com/ref/realestate/greathomes/GH-SoCal.html
~Misstrial