How Do You Buy A House?

[breaker1919]

I'm a 4th year medical student, and I would like to buy a house after Match in March. I do not have a down payment. Does anyone know how loans work for medical students becoming residents? Any suggestions/tips? Do I even have a chance to buy a house without a down payment?

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[mshheaddoc]

Read the sticky on mortgages above, and search for "buy house" in this forum.

We've had multiple discussions on this.

Rent vs Buy
Getting a mortgage
Mortgage can only cost 3x your yearly income, max?
Regarding a house...
any huge mortgage mistake here?
Doctor loans - disadvantages?
Effect of Med School Loan on Credit/Buying Condo
"Doctor Loan/Physician Loan Programs"
Mortgages...
Question about home buying....
Mortgage types
4th years - Buying a home when starting residency?

If you have any other questions after you've read them, please post them here!! We could make this a sticky.

 

[bjackrian]

I was looking at the resident information section of a residency I'm planning to apply for next year, and one of things they say is that student loan deferments are only for one year at a time because they're based on income (and, presumably, salaries can change year to year). I know that most, or at least some, mortgage lenders will not consider student loan debt that is in deferment for at least one year. Has the fact that you can't have a deferment for longer than a year at a time created problems for anyone?

 

[mshheaddoc]

No it has not, although now many residents will not be eligible for deferment this year and will have to go into forbearance which I believe is the same deal with lenders.

 

[bjackrian]

Thanks for the reply. The finance/investment section has a ton of great information--I'm just sorry I didn't see it sooner!

Why is are fewer residents qualifying for deferment? Did the percentage of monthly income change? I'm just wondering because based on my rough estimate of my monthly payment and current resident stipends, I'd easily qualify for deferment this year.

 

[mshheaddoc]

there is announcement at the top of the medical student forums about recent changes in legislation, or in the financial forum (http://forums.studentdoctor.net/showthread.php?goto=newpost&t=448795)

 

[bjackrian]

Huh. I hadn't seen that--thanks for pointing it out.

While I realize that the change is stupid, is it possible that having an amount to pay back on student loans may actually open up more doors when it comes to applying for a mortgage? i.e., say an intern makes $45,000 (probably about the national average for 2009, which will be my first year of residency). That student will be paying about $350/month or $4200/year on loans under the income based repayment scheme. Using a 38% rule and assuming no other debt on cars or credit cards, that would leave $1075/month for a mortgage under a traditional loan.

In other words, wouldn't having an amount that you can show lenders you are paying each month make it easier to show that you can actually afford a mortgage?

Sorry for all the questions. My wife and I visited the city of a residency program I'm really interested in and drove through some neighborhoods we'd like to live in, so housing is on my mind at the moment.

 

[Anna Plastic]

If I can pass along the very hard earned wisdom from many residents and fellows I have seen: DON'T buy a house in residency. Just don't, especially right now. Homeownership is a big obligation in a lot of ways, and when you can't sell it when you want/need to, or when you lose thousands/tens-of-thousands of dollars on the sale because you got a fellowship/job across country...the pain is unbelievable (speaking from experience here). This isn't even mentioning the volatility in the real estate markets across the country right now.

Everyone may be pressuring you right now, saying "don't throw your money away on rent". But believe me, you will throw a hell of a lot more money away when you buy at the wrong time.

Wait until you get your first job. And be sure you will be staying in the job for a while. Focus on your residency. Save your money for a downpayment. And for god's sake, don't get yourself deeper in debt right now than you have to.

 

[mshheaddoc]

Huh. I hadn't seen that--thanks for pointing it out.

While I realize that the change is stupid, is it possible that having an amount to pay back on student loans may actually open up more doors when it comes to applying for a mortgage? i.e., say an intern makes $45,000 (probably about the national average for 2009, which will be my first year of residency). That student will be paying about $350/month or $4200/year on loans under the income based repayment scheme. Using a 38% rule and assuming no other debt on cars or credit cards, that would leave $1075/month for a mortgage under a traditional loan.

In other words, wouldn't having an amount that you can show lenders you are paying each month make it easier to show that you can actually afford a mortgage?

Sorry for all the questions. My wife and I visited the city of a residency program I'm really interested in and drove through some neighborhoods we'd like to live in, so housing is on my mind at the moment.

Not if your payment will reduce your monthly income (which it will). Usually residents have enough issues with making ends meet at times and in various locations.

Also Anna Plastic makes a good point in the current housing market. If you aren't planning on staying there, I suggest renting unless you're in an upturn market. Do your research.

 

[MDInvestor]

I would SERIOUSLY think twice about buying a house in this economy.

Here are some links that should give you an idea of how much money you might lose over the short term.

Definately watch the first one.. EVERY future home buyer should watch this:

http://www.youtube.com/watch?v=QVFBojFJTZM

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This site will give you current trends in MLS (for the last 6 months) so basically.. if it said -6% .. You would have lost 6% of the value of your home in just a couple months. On a 300K home, that's 18K.
http://www.housingwatch.com/home.aspx?d=180

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This site can track affordibility for your city. When mortgage/rent is above 1.0, then Mortgage > Rent for comparable homes. In this case, you should look into just renting the home from the silly owner. If your city is below 1.0, it's cheaper to buy than to rent. However, I would still wait at least a year for the markets to cool down. You'll get in at a better price point.
www.housingtracker.net

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This site picks up the latest housing news. It should help you figure out when things are starting to get better.

www.patrick.net
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If you decide to be silly and buy in the current market, buy 2-3 x Family Income. Don't be one of those dopes in the first link that bought a 500K home only for their neighbors to buy their home at 290K.

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Lastly, I check up on how the general market and economy is doing using:

www.marketwatch.com

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And remember, real estate doesn't have to go up. And with 1million homes added even in 07.. There is too much inventory for prices to go up. They will only go down.

P.S. The Northwest of the US is lagging the rest of the US by about 3-5 months. They are headed down too.

 

[MDInvestor]

Feel free to share that with your friends who are graduating too! Check out some of the other clips on YouTube too. It's happening all around the US.

 

[bjackrian]

Thanks for the links. For what it's worth, I'm currently an MS3, so we have ~18 months still before we'd even consider buying. And we're definitely looking at a fairly cheap house in a not terribly expensive part of the country. Here's hoping for housing prices to tank in about 15 months. No offense to all those who've already bought. =)

 

[Tenesma]

ONLY buy a house if you are going to do your residency in a cheap part of the country

in order for it to make ANY sense to buy you have to compare:

1) monthly rent

2) monthly mortgage payment, PMI, condo fees, upkeep, renovations, appliances, landscaping, property taxes, homeowners insurance

if 2<1 then you would be stupid not to buy --- and with the low salaries of a resident the tax-deduction of mortgage interest has only a very small impact.

so for example, if your residency is in San Francisco or Boston you would be a fool to buy --- if your residency is in Oklahoma City you'd be a fool to rent

 

[Doctor Bagel]

so for example, if your residency is in San Francisco or Boston you would be a fool to buy --- if your residency is in Oklahoma City you'd be a fool to rent

Even though one problem with a bad market (like say Oklahoma City ) is that houses are hard to unload. If you're doing a 3 year residency and buy, it might take a year or more to sell your house once you leave. If you're staying after residency, it's a non-issue, but I'd still not recommend buying here unless you can deal with your house sitting on the market for a long time. Of course, you can rent it out, but lots of people seem pretty uncomfortable with that move.

 

[mshheaddoc]

Even though one problem with a bad market (like say Oklahoma City ) is that houses are hard to unload. If you're doing a 3 year residency and buy, it might take a year or more to sell your house once you leave. If you're staying after residency, it's a non-issue, but I'd still not recommend buying here unless you can deal with your house sitting on the market for a long time. Of course, you can rent it out, but lots of people seem pretty uncomfortable with that move.

have to agree, market research is really important. The area we purchased our last house wasn't the "best" area but it close to the downtown area and value was increasing as the downtown area was expanding. We sold our house in 2 weeks and without much help from our relator (I'm not bitter, really!). Homes in the area we've currently moved to are selling within a month or so. I've done my research carefully on areas of where to move that if we had to sell after my husbands residency we shouldn't have an issue . We're also going to be putting some money into the house as well.

There are many factors into purchasing a house so really think long and hard if its for you. Home ownership is also a pain in the butt for upkeep. My husband doesn't have alot of time for housework so cutting the lawn, fixing things around the house, etc are throw to the wayside. Remember time is money as well. My husband probably wouldn't have bought a house if he wasn't married, even if it was about the same or cheaper.