mortgages

PCN · Feb 2, 2005

Hi guys,

I wanted to find out your mortgage experiences and also get some advice.

It is possible that I will end up in michigan/ohio/illinois. I am looking to buy a house, more likely a condo, for ~$250k.

I have looked at a few mortgage companies including Tower (physician loans), Doctorsloans.com, Bank of America, and several local mortgage companies.

Both my wife and I have good credit 700-720. My wife is making $42K/year + overtime and I will be making $40K+-. I have no credit card debt at this point. But I have about $170K in student loans and my wife about $15K. I will defer my loans and we will pay hers.

I am looking for a mortgage that is 0 PMI, 0 Points, as minimal as possible of closing fees and as best as possible morgage interest rate and to pay interest only. I also need the lender to aprove my loan hopefully 30-60 days prior to me starting residency and not take my school loans (that will be deferred) into consideration. I have been running into the 5/ARM mortgages that seem to be good for my situation. Nobody yet has the perfect loan.

I am hoping that you guys would give me good advice on which companies I should check out and which companies you guys had good experience with.

Other questions;
1. have you guys seen any 3/ARM loans (I figure I will move at the end of residency and would get rid of the ARM). I am hoping that I can find a better rate with 3/ARM then 5/ARM.

2. What do you guys think about getting an 80/20 type of loan with HELOC (home equaty line of credit) as the other 20% for second mortgage versus the one mortgage of 100% if all other parameters were the same.

3. Is it risky to go with a broker/mortgage company that is out of state but claims that they can set up a morgage for you in the state you are interested in.

4. What is the deal with sellers conscessions. All the mortgage companies are telling me that I will be able to cover the closing costs with seller's conscessions. It seems to me that this is all dependent on the negotiations that I will have with the seller and this is not the thing I should rely on. Are there any ways that the mortgage lenders would be willing to pay the closing fees or part of them?

5. Am I looking to early for a mortgage at this point, since match is in march. I get a lot of "ohh it is possible that the interest rates may change by march and the loan might be a little different". I am a little worried that I will get excited about a deal but when the time comes to sign the paper I will get a big surprise.

Looking forward to your advice.

PCN

NinerNiner999 · Feb 2, 2005

I was in almost the identical situation. Our budget was $250k and we went with the BOA doctor's loan. Zero down, 1% origination fee (which could be considered one point) and no PMI. We chose the 5/1 ARM - not interest only and have been VERY happy with everything. BOA was kind of shady by sneaking the orignation fee into the deal, but overall we found a house 30k below its appraised value, and financed the full amount, leaving us with 30k to put into a new kitchen, hardwood floors, and a complete makeover with plasma TV. In all, we financed the appraised value of the home and have already seen comps in the neigborhood 30k more than our appraisal. I would stay clear of the interest-only loan for one reason - equity. If you run into a stale market, at least you are putting some payment into the home, which can be used to cover closing costs if you need to in 3-5 years. Where I live, housing prices will only continue to rise

timtye78 · Feb 3, 2005

Tower Mortgage (physicians loans)

also has 3/1 ARM options
I am in the process currently as well.
Thank God houses here are cheaper in Oklahoma!

PCN · Feb 4, 2005

If you are buying a new condo do you need a realistate agent? Do the developers allow you to negotiate or give you a better price when you don't have an agent (so that they don't have to pay commission). What benefits do I get in having an agent. Also, I am feeling that my agent may not show all of the new properties because apperently some of the developers will not pay commission.

NinerNiner999 said:
I was in almost the identical situation. Our budget was $250k and we went with the BOA doctor's loan. Zero down, 1% origination fee (which could be considered one point) and no PMI. We chose the 5/1 ARM - not interest only and have been VERY happy with everything. BOA was kind of shady by sneaking the orignation fee into the deal, but overall we found a house 30k below its appraised value, and financed the full amount, leaving us with 30k to put into a new kitchen, hardwood floors, and a complete makeover with plasma TV. In all, we financed the appraised value of the home and have already seen comps in the neigborhood 30k more than our appraisal. I would stay clear of the interest-only loan for one reason - equity. If you run into a stale market, at least you are putting some payment into the home, which can be used to cover closing costs if you need to in 3-5 years. Where I live, housing prices will only continue to rise

DocWagner · Feb 5, 2005

I have a 3 year ARM, at 3.75. My loan is for 138k through a local bank here in Ohio. No problems, i certainly WOULD hesitate getting a home worth 250k jesus that is alot even on two salaries. My question is why do you need such a big home (your business of course)? You may run into some resistance from lenders since your school debt is so high...

NinerNiner999 · Feb 5, 2005

DocWagner - $250k does not go far here, in fact it got us a 3 bedroom townhouse. For comparison, a lease on a 2 bedroom apartment will cost $1200-1300/month - the price of our home.

PCN - you do not NEED a real-estate agent to buy and yes, some agents will not disclose some properties due to their reduction in comission. You will, however, need a lawyer to prepare your paperwork. I will not try to be an expert in this field, but it is much cheaper if you go without an agent. Research the laws where you live and see what you need to do on your own if you want this route.

jonwilli · Feb 5, 2005

i have done a minimal amount of research on this---

AmSouth does a "professional loan" and will finance 100% without the PMI insurance. BOA will do the same. I think I will be looking at the 5/1 ARM just because what if I do not get out of the house in 3 years or decide to stay, then the rates could be much higher. BOA charges $713 origination fee from what they tell me plus all the other crap. AmSouth stated that closing costs would be around $2300. Just my 2 cents, but i will probably be loaning 200K. These two banks do not look at debt to income ratio either, shich will help b/c i have 120,000+ in loans as well.

PCN · Feb 6, 2005

One more question before the big game.

How do you guys feel about using mortgage brokers that are out of state, like tower. The only access you have to them is by phone, never getting to meet them. Is it ever an issue where you get screwed at closing?

beriberi · Feb 7, 2005

I tried to work with lending tree and hated the out of town, never available reps I was matched up with (bankers ought to keep bankers hours and be available during the normal business day--i.e. tuesday at 10:00).

In the end, this was one of the things I love about working with ING direct. I did not have a personal representative, so I could call at any time and talk to anyone about my account. There were not working on comission and were truly helpful. I highly recommend them to anyone (who can come up with 10% down--I think their loans are the lowest cost because they only lend to low risk customers).

SteadyEddy · Feb 7, 2005

Just to throw in my 2 cents...I would find the 250k to be a little high as well. I am planning on starting at Ohio State, and am obviously interested in the Columbus area housing market. My wife makes around 70k and I will make around 40k and we are looking for a house under 150k. I've been looking at FSBO sites to get a reasonable idea of what the market is like. I use these sites b/c owners tend to overshoot what they think their house is worth, thus putting me on the high end of what I should expect to pay. I appreciate this thread and will check back soon for any other advice given.

PCN said:
As far as the price of the house, $250K being high or low depends on where you live. I know in Ohio the realistate is very affordable. I think $250K is the upper max that I would consider. I think more realistically, I would like to be $180K-225K depending on a few factors.

In regards to having or not having a realistate agent: I am in a situation where my top three choices are in three different states. There is a possibility for me to end at any of these despite applying to IM. We started looking at places that are close to my number one choice. I like having a realistate agent to show us around and educate us. However, I am affraid that the agent may be trying to sell us something that we may not want (just to make a good commission). Plus the agent may not be showing us some of the new developments. Even bigger problem is that I might end up in my number 2 or 3 (hopefully not lower). If I do end up in number 2 or 3 I will probably strongly consider renting. I feel like I have a good idea of the mortgage situation, but the realistate agent situation I am not sure. I know that without the agent it will be cheaper, but it will be a lot harder to arrange to visit the old properties (considering my limited time). On the other hand, with an agent I am affraid that we will not see the new stuff. Also I don't know if I should start looking after I match. I am essentially going to have 2.5 month, but I don't know if thats enough.

Anyone have any coments on the seller's conscesions to avoid closing fees?

PCN · Feb 8, 2005

Just to do the calculations about being able to afford a house for you guys. I have been recently thinking deep and this is what I got.

if you get a 5/1 ARM mortgage with 100% financing (like an 80/20) with no PMI and no origination points with great credit, at this time, you could prob pull off 5.1-5.5% interest rate. Lets take a realistic 200K house. Your combined mortgage payment would be arond $1050-1200/mo on interest only mortgage (there are advantages and disadvantages to interest only. Advantage is that mortgage payments are less, 100-150/mo and the money that you would put for your principle on a principle + interest mortgage could be saved by yourself if you are disciplined. If you invest this money you will have a higher rate of return. The disadvantage of an interest only loan would be that the interest would usually go up by 0.125 and that would mean 20-50/month up for your mortgage), your taxes depending on where you buy could be 2K-3K (about $250/mo, a little on the high side), and your association fees would be $250-300/mo if you buy a condo. One should also not forget the closing fees. These fees are comprised of lender/broker fees (sometimes negotiable 600-1200), third party fees (title company... up to 1000) and gov fees (escrow... could be several thousend, I am still not totally clear on this), also second mortgage fees one time 300 if you go with 80/20 type of deal. Total closing could be 3K-6K. The lenders that I have been talking to are pushing this idea of sellers conscessions wher you negotiate with the seller to pay your closing fees. This essentially makes it a more difficult negotiation, and you will still pay the money although not upfront but when you sell the house. Basically, for a condo 200K one would pay about $1600-1800/mo and on a house it might be a little less without association fees although with higher taxes. Of course, with the house you will cut your own grass or get someone to do it, fix stuff outside (roof leaking...) so in the long run it might be very close b/w condo and house. I am kinda attracted to the new condos because the odds are that there will be the least amount of maintanance.

Now to do more global calculations.

over three years $1700/month would be 61,200 + 4.5K (closing fees) = 65.7K/3years

If you sell the place in three years and the place appreciates 5%/year (unfortunately the market for realistate is not looking great in the near future, so it could definately be lower, also depending on where you buy). This would look like making 30K. Unfortunately when you sell the property and that is if you sell it without any problems you will pay 6% realtor fees, so subtract 13K. You have left 17K profit in three years ideally when you move on to your fellowship.

Basically the total you have paid for three years would be 65K-17K=48K to live for three years.

Now just to be very objective, where we are looking, we could get a townhouse apartment that is not as great as a 200K condo but close for say 1400/month. If you consider a security deposit at max 1400 then over three years that would be about 52K total. Now, compare the 52K for apartment to 48K for condo. Not that big of a difference. There is certainly less of a hassle in renting an appartment, and don't have to worry about selling it, and certainly don't have to worry about maintanance.

As far as being able to afford it on two incomes: if you and your wife make 40K each, that is roughly 1200-1300/2weeks x 2 people after taxes = 5000/month roghly for two people. I don't think this should be an issue in affording a place for 200K and most likey 250K. If you are a good saver and are cheap, you could even probably go for 300K if you are approved.

PCN · Feb 8, 2005

just to add a few good websites that I have been reading.

bankrate.com

hsh.com <== get a report on mortgage companies in your area. I have seen many recommendations of this website. The website looks kinda funky, but I called and ordered a report of mortgages in my area for $11, and got in next day by email in excel format

http://www.memag.com/memag/ <==go to personal finances, it has a lot of good info

http://www.mortgages-loans-calculators.com/calculator-adjustable-rate-mortgage.asp <== use this mortgage calculator

hope this helps someone, if you guys have any good suggestions of websites, post them here

jwolfe · Feb 8, 2005

The mortgage professor website has alot of great info, worth a bit of your time.
http://www.mtgprofessor.com
Also, I must say I had a very pleasant experience with ING last year when I went through this - not to mention their fantastic rates.

PCN · Feb 8, 2005

Dear beriberi and jwolfe,

Thanks so much for the advice about ING direct. I looked through the website, and they do indeed have very good rates and are upfront with their closing costs, which are relatively low. I will try and call them sometime this week. The only thing is that with their mortgage calculator it seems that they only process loans that are 20% down. I want no down payment and no PMI. Just curious how much did you guys end up putting down?

Also, since I will be starting my residency in about 5 month and will not have an income till then, I found out that some of the companies will not approve me until I have worked for atleast 30 days. I want to buy obviously before I start residency. Did you guys have any such issues with ING

bobbyseal · Feb 8, 2005

PCN said:
Your combined mortgage payment would be arond $1050-1200/mo on interest only mortgage (there are advantages and disadvantages to interest only. Advantage is that mortgage payments are less, 100-150/mo and the money that you would put for your principle on a principle + interest mortgage could be saved by yourself if you are disciplined. If you invest this money you will have a higher rate of return. The disadvantage of an interest only loan would be that the interest would usually go up by 0.125 and that would mean 20-50/month up for your mortgage), your taxes depending on where you buy could be 2K-3K (about $250/mo, a little on the high side), and your association fees would be $250-300/mo if you buy a condo.

A couple things here. You propose getting an interest only loan and using the money you would have paid into principle and investing it. If you do this, you'd have to earn more on that money than your current mortgage interest rate to make it worth it. Lately, a 5.5% gain per year in the stock market has been difficult. You take into account brokers fees, taxes, etc on money invested and it's going to be hard to beat the 5.5% interest rate.

Also, pay attention that buying a house allows you to deduct from your fed withholding taxes the money you pay in property tax and interest on the mortgage. So, for us in the early years of a mortgage, you're mostly paying interest. Add to that property taxes and you're deducting well over $10,000 a year in from your taxable income. This can yield over a $1000 in less taxes paid per year as compared to renting.

PCN · Feb 8, 2005

I won't argue about the deductions. So say over 3 years in residency you can save 3K. This is not significant enough by itself to make a decision to buy rather then rent. I disagree with what you say about paying interest and principle, at least in my situation. I guess, if you plan on living in the house for > 5 years then maybe. However, if you are like me and are thinking of buying a house for 200K, are going to live in it for ~3years, but decide to pay the principle, you will contribute between 8-9K/3years. How, much money will you be making on your 9K over 3 years at 5.5%? We are talking a few hundreds of dollars. On the other hand to reduce your mortgage payments over the three years by ~200/month may be more meaningful as you are going to be limited on cash during residency. I think it is better to look at the global picture rather than focus only on the interest rate percentages. Also the amount of money that you will be making on your principle, if I am not mistaken is more related to the appreciation of the house rather then the mortgage rate (I maybe wrong on this). The realistate market unfortunately is not predicted to be doing very well in the near future, and you might not even get a 5%/year appreciation for your house.

bobbyseal said:
A couple things here. You propose getting an interest only loan and using the money you would have paid into principle and investing it. If you do this, you'd have to earn more on that money than your current mortgage interest rate to make it worth it. Lately, a 5.5% gain per year in the stock market has been difficult. You take into account brokers fees, taxes, etc on money invested and it's going to be hard to beat the 5.5% interest rate.

Also, pay attention that buying a house allows you to deduct from your fed withholding taxes the money you pay in property tax and interest on the mortgage. So, for us in the early years of a mortgage, you're mostly paying interest. Add to that property taxes and you're deducting well over $10,000 a year in from your taxable income. This can yield over a $1000 in less taxes paid per year as compared to renting.

jwolfe · Feb 9, 2005

PCN-
I actually put down a little over 20% because I wanted the ING loan and the amount I was approved wasn't quite enough for the house I wanted. Many would say with such low interest rates that you should keep your $ working for you in some other way rather than putting the 20% down - it is a personal decision. In any event, I do not know what ING's policy is on 100% loans.
I will say that ING's rates are phenomenal and the closing costs are unbeatable -> No points and none of the typical bull$hit that mortgage broker's will add to cushion the deal for them.
As far as deducting interest, remember that if you decide to purchase a house and then itemize your deductions to include mortgage interest that you will not get the "standard deduction." You will likely still be better off (at least after the first year) but the marginal increase won't be quite as dramatic as stated above.
Finally, it is a bit early to actually apply for the loan. Keep on educating yourself and talking to a lot of people so you know what you want to do when the time comes. As I said earlier, spend some time on the mortgage professor website so that if you decide to use a broker you know the advantages and pitfalls. It definately saved me from making some bad decisions.

bobbyseal · Feb 9, 2005

PCN said:
However, if you are like me and are thinking of buying a house for 200K, are going to live in it for ~3years, but decide to pay the principle, you will contribute between 8-9K/3years. How, much money will you be making on your 9K over 3 years at 5.5%? We are talking a few hundreds of dollars. On the other hand to reduce your mortgage payments over the three years by ~200/month may be more meaningful as you are going to be limited on cash during residency.

PCN, good post. I think the interest only loan is a good option if you're trying to buy more house and need the extra money to pay for living expenses. I'd be somewhat reluctant to get an interest only loan for a home and then use the money to invest in a stock, pork bellies, junk bonds, etc. By not paying principle on your mortgage, you will continue to lose 5% or whatever your interest rate is on your mortgage principle. You'll never see this money again. However, if you pay principle on the mortgage, you'll be able to get that money back when you sell your house. If you put the money saved from an interest only loan in stock, you'd have to beat 5% or whatever your interest rate is to make it a valuable use.

Check out the mortgage professor link above. I think it describes the concept better.

http://www.mtgprofessor.com/Tutorials2/Interest_Only.htm

PCN · Feb 9, 2005

THaks for the advice. Unfortunately, I don't have 20% or anywhere close to it. I am trying to cut down my costs upfront as much as possible. Even more importantly the make it or break it issue for me is that I am trying to buy a house prior to having an income as I am still a 4th year. There are only a few mortgage lenders that are willing to offer a loan without two paystubs. I called ING direct today and they will not process my application unless I have a jobby job. I didn't even ask about 100% financing.

To "Dr. Banker" please state clearly that you are advertising your BOA program. This post and SDN in general is not meant for free advertisements. Most people reading these posts would rather see experiences that people have had with different mortgage lenders. If you are however trying to get a free plug, please specify clearly who you are and what you are offering. I also want to mension that BOA does offer good deals but they are not offered in the states I am looking at for residency unfortunately.

jwolfe said:
PCN-
I actually put down a little over 20% because I wanted the ING loan and the amount I was approved wasn't quite enough for the house I wanted. Many would say with such low interest rates that you should keep your $ working for you in some other way rather than putting the 20% down - it is a personal decision. In any event, I do not know what ING's policy is on 100% loans.
I will say that ING's rates are phenomenal and the closing costs are unbeatable -> No points and none of the typical bull$hit that mortgage broker's will add to cushion the deal for them.
As far as deducting interest, remember that if you decide to purchase a house and then itemize your deductions to include mortgage interest that you will not get the "standard deduction." You will likely still be better off (at least after the first year) but the marginal increase won't be quite as dramatic as stated above.
Finally, it is a bit early to actually apply for the loan. Keep on educating yourself and talking to a lot of people so you know what you want to do when the time comes. As I said earlier, spend some time on the mortgage professor website so that if you decide to use a broker you know the advantages and pitfalls. It definately saved me from making some bad decisions.

Finally M3 · Feb 9, 2005

Great thread, guys.

I too, am looking to drop a significant chunk o' change for a condo (and thanks for the info on ING).

Have y'all found any good websites/web resources on trying to ascertain historical home sale prices for a given area? I've been trying to compare prices of the condo I am looking at (brand spanking new) with older single homes of similar square footage (yes, I know it isn't comparing apples to apples). The possibility of buying at the wrong point in the housing market unnerves me :scared:

Personally, I'm leaning more towards a 5 year ARM, although it may restrict my fellowship opportunities if I lean in that direction

NinerNiner999 · Feb 10, 2005

Not to interject here, but these discussion about buying are worthless without researching resale trends in the area you want to buy in. Look up the tax records and see which areas have consistently risen over time and buy there. As for the market - the overall trend is still an incredible investment over 10-20 year intervals. Buy where it has been consistently appreciating and hold on to what you buy. If you can afford it through residency, you can easily afford it out of residency and the income you will generate will be comparable to if not better than the market...

JR · Feb 10, 2005

Just to add my 2 cents on B of A. As residents/interns we pretty much get paid the same (around $40-$44K, depending on the state). I just finished working with B of A on a pre-approval of a $250,000 Doctor's loan and the result was less than positive. They would not approve me for this much based on my income alone(my FICO score is around 800). They offered me $80,000 loan, which I can not use to buy a dog house where I am going.My SO is in medical school, so I could not use her income. I tried using my father as a co-signer, but this program does not allow a non-occupant borrower. So, unless you are moving to Idaho or you wife makes a good living, forget about B of A.

P.S. I am in the process with SunTrust right now; I'll let you guys know how that turns out.

Dr. Banker said:
Bank of America does actually offer the zero down Physician loan in one of your states:Illinois along with 28 other states.
Someone earlier had requested good websites that address mortgages. Well www.mortgagesforphysicians.com is specifically designed to help answer many of the questions residents/phyicians/med. students have.

PCN · Feb 10, 2005

Great!

I think this is the exact type of info I need (and I am assuming many others who are reading this thread need).

if you guys can post quick three liners

1. Mortgage company, used/planning on using (experience), target loan amount, your credit score

2. Pertanent +/-, (interest rate, closing fees, +/-PMI, +/- origination points, 100% financing or 80/20, will they approve before having an income for the 4th years like me )

3. anything else

JR said:
Just to add my 2 cents on B of A. As residents/interns we pretty much get paid the same (around $40-$44K, depending on the state). I just finished working with B of A on a pre-approval of a $250,000 Doctor's loan and the result was less than positive. They would not approve me for this much based on my income alone(my FICO score is around 800). They offered me $80,000 loan, which I can not use to buy a dog house where I am going.My SO is in medical school, so I could not use her income. I tried using my father as a co-signer, but this program does not allow a non-occupant borrower. So, unless you are moving to Idaho or you wife makes a good living, forget about B of A.

P.S. I am in the process with SunTrust right now; I'll let you guys know how that turns out.

jeff2005 · Feb 10, 2005

PCN said:
Great!

I think this is the exact type of info I need (and I am assuming many others who are reading this thread need).

if you guys can post quick three liners

1. Mortgage company, used/planning on using (experience), target loan amount, your credit score

2. Pertanent +/-, (interest rate, closing fees, +/-PMI, +/- origination points, 100% financing or 80/20, will they approve before having an income for the 4th years like me )

3. anything else

First quote:

Tower
State: Iowa (hopefully)
target loan: $175k
credit score: 752
5 ARM 80/20 (5.5%/6.375) Interest only increases rate 1/8 point.
1% origination fee
They will approve before I have an income.

jeff2005 · Feb 10, 2005

So, I've noticed that my rate is higher than those posted on bankrate.com. Am I getting quoted a higher rate because it's a 100% loan? And what makes these loans special? Is it that we get a bigger loan for our meager incomes?

Keep posting your experiences guys!

bobbyseal · Feb 10, 2005

jeff2005 said:
So, I've noticed that my rate is higher than those posted on bankrate.com. Am I getting quoted a higher rate because it's a 100% loan? And what makes these loans special? Is it that we get a bigger loan for our meager incomes?

Keep posting your experiences guys!

So, I spoke with a rep from Bank of America today. He told me that they can't offer the 100% physician loan to residents in states where there are no Bank of America locations. So, even with all the mergers and acquisitions that BOA has done recently, I'm still left in the cold.

On the bright side, they do offer an 80/20 loan to cover it.

I'm probably going to maximize my student loans to use as a down payment and look at ING direct.

JR · Feb 10, 2005

Well, the state I am looking at has plenty of B of A locations. I was turned down for other reasons. And, of btw, they were quick to offer a 80/20 option as well

jeff2005 · Feb 10, 2005

What rates are you being quoted on the 80/20's? How much higher is the 20% part?

It looks like all lenders but 1 (maybe 2) offer physician loans in Iowa, so my choices are limited. I wonder if I shouldn't just rent until I can qualify for a regular loan.

JR · Feb 10, 2005

It is actually not too bad (? I think):

Wells Fargo
80/15/5
$250K
5 ARM
$12.5K down
$20,900 due at closing (incl down, closing costs, county tx, insurance, etc.)

If regular- interest 4.8% ($1520 per month)
If interest only option- 5.1% ($1319 per month)

What do you guys think of this? Is this a reasonable offer? This is my first real estate purchase and I am kind of nervous about this whole thing...

jeff2005 · Feb 10, 2005

JR said:
It is actually not too bad (? I think):

Wells Fargo
80/15/15
$250K
5 ARM
$12.5K down
$20,900 due at closing (incl down, closing costs, county tx, insurance, etc.)

If regular- interest 4.8% ($1520 per month)
If interest only option- 5.1% ($1319 per month)

I don't get it. What's a 80/15/15? They are going to give you 110%? Is the down payment you are talking about from the loan money or your money? The rate is fantastic.

JR · Feb 10, 2005

jeff2005 said:
I don't get it. What's a 80/15/15? They are going to give you 110%? Is the down payment you are talking about from the loan money or your money? The rate is fantastic.

Oops, that was 80/15/5. 80% loan, 15% credit line, 5% down. That way you avoid PMI, but your overall payment is lower. Down and closing is my cash.

JR · Feb 11, 2005

So, why did they offer me a $80,000 loan? I have no other debts except for a leased car. I have excellent credit. Is this BOA agent's fault? Did he present my info incorrectly to underwriter? Should I try someone else with BOA?

guttata · Feb 11, 2005

JR said:
Just to add my 2 cents on B of A. As residents/interns we pretty much get paid the same (around $40-$44K, depending on the state). I just finished working with B of A on a pre-approval of a $250,000 Doctor's loan and the result was less than positive. They would not approve me for this much based on my income alone(my FICO score is around 800). They offered me $80,000 loan, which I can not use to buy a dog house where I am going.My SO is in medical school, so I could not use her income. I tried using my father as a co-signer, but this program does not allow a non-occupant borrower. So, unless you are moving to Idaho or you wife makes a good living, forget about B of A.

P.S. I am in the process with SunTrust right now; I'll let you guys know how that turns out.

As someone already mentioned, you should qualify for more than $80k based on your salary alone. I am working on the pre-approval process with B of A in another state and was told that I qualify for $180-200k based on my resident's salary of $40-41k (at the current interest rates). I'd contact a different B of A office if you are looking for a no down payment, no pmi loan.

beriberi · Feb 11, 2005

I ran into the same problem with B of A--I wasns't moving to a state with a doctor loan, but they were happy to set me up with a high interest 80/20 plan. (for around 80k--since my husband did not have a job in the new city).

ING made our loan before I started residency--they were happy to take my contract as proof of employment. They do an 80% loan, with a 10% home equity and 10% down, but you can't beat their rates and service.

As niner-nine(nineninenine) pointed out, and I would like to concur, the real estate market is very complex. There will be no list of areas likely to go up and areas likely to go down. A good real estate agent should be able to provide you with comps to any house/condo you are buying (and don't compare condos with houses, the markets are very different). A comp would include what very similar properties in nearly the exact same area have sold for over the past few years.

However, asking someone to predict the real estate market is like asking someone to predict the stock market. I would put your money in Apple, Fed Ex and anything Pharma. You would do best to not take advice from some strager on the internet, and realize that no one can predict with any certainty which way the market will go (though over the long term, most stocks go up and so does most real estate). Fortunes are made and lost in both markets, and if there is no certainty in either.

Anyone on this forum looking to buy a house needs to have a good reference other than the people purusing sdn (Did you know doctors are infamous for mismanaging our personal assets?). Though this forum is great to let you know which lenders will work best with you, how they will treat you loans, etc, but you should buy Real Estate for Dummies, Home Buying for idiots, The Incompetent Person's First House or something and read it carefully. The 19.95 investment will serve you well.

PCN · Feb 11, 2005

Great point beriberi!!

serveral points.

1. I called ING Direct and they told me that they would not be able to offer me a lone without 2 paystubs. In addition they don't have 100% financing nor 80/20. So you have to put money down. For people like me who have no money now to put down, are trying to find the cheapest out of pocket purchase and are comparing buying a condo w/ renting a nice appartment these 20% down loans won't do.

2. Just so that the BofA guy doesn't confuse you 80/20 loans are not that bad. Take Tower for example, 80% loan at 5.5% and 20% loan at 6.325%, do weighted averages and you get 5.625% overall. Also I think tower offerest a 5/1 ARM on 20% mortgage. Moreover, don't let interest rates totally confuse. Interest rates are not the thing that necessarily makes money for the broker/lender. Use the mortgage calculator and you'll find out that difference in monthly payments between 5.5% and 6.5% interest rate is only like 100-150/month, not to mension comparing something like 5.1% and 5.5%. The downside of an 80/20 deal is that you have to pay like $500 to set up a second mortgage and you will pay two mortgage payments. For those who don't want to spend lots of money upfront the thing you have to look at is the closing fees. You need to get a good faith estimate of all closing fees BEFORE YOU APPLY FOR THE LOAN. Remeber 1% origination point on a 200K house is going to cost you 2K upfront in addition with other 3-4K for closing fees.

3. Finally, I am in a situation where I am no longer am sure if this is all worth it. Don't get me wrong I really want to buy a condo. But as beriberi explained it, you just can't know where the market is going to go. Moreover, is it worth going into all this trouble, if I only may live in the condo for 3 years and then have to sell it because I will do a fellowship somewhere else. I guess if you know you are matching into a 5 year program you know you will keep your place long enough to realistically expect a reasonable profit. For three years, I don't know.

beriberi said:
I ran into the same problem with B of A--I wasns't moving to a state with a doctor loan, but they were happy to set me up with a high interest 80/20 plan. (for around 80k--since my husband did not have a job in the new city).

ING made our loan before I started residency--they were happy to take my contract as proof of employment. They do an 80% loan, with a 10% home equity and 10% down, but you can't beat their rates and service.

As niner-nine(nineninenine) pointed out, and I would like to concur, the real estate market is very complex. There will be no list of areas likely to go up and areas likely to go down. A good real estate agent should be able to provide you with comps to any house/condo you are buying (and don't compare condos with houses, the markets are very different). A comp would include what very similar properties in nearly the exact same area have sold for over the past few years.

However, asking someone to predict the real estate market is like asking someone to predict the stock market. I would put your money in Apple, Fed Ex and anything Pharma. You would do best to not take advice from some strager on the internet, and realize that no one can predict with any certainty which way the market will go (though over the long term, most stocks go up and so does most real estate). Fortunes are made and lost in both markets, and if there is no certainty in either.

Anyone on this forum looking to buy a house needs to have a good reference other than the people purusing sdn (Did you know doctors are infamous for mismanaging our personal assets?). Though this forum is great to let you know which lenders will work best with you, how they will treat you loans, etc, but you should buy Real Estate for Dummies, Home Buying for idiots, The Incompetent Person's First House or something and read it carefully. The 19.95 investment will serve you well.

Homunculus · Feb 12, 2005

JR said:
So, why did they offer me a $80,000 loan? I have no other debts except for a leased car. I have excellent credit. Is this BOA agent's fault? Did he present my info incorrectly to underwriter? Should I try someone else with BOA?

we tried BofA as well-- but they wouldn't budge on their requirement of a 720 credit score. Even though we've banked with them for years, and intended to for a long time. We went to suntrust and were given the exact same deal (no money down, no PMI, 5 year ARM), not to mention great service. i'm military with dependents and make around 60k a year and qualified for 250k no problem. We probably could have gotten more but we didn't need it-- we found a suitable place for around 195k.

good luck

--your friendly neighborhood homeowning caveman

joedogma · Feb 12, 2005

JR said:
So, why did they offer me a $80,000 loan? I have no other debts except for a leased car. I have excellent credit. Is this BOA agent's fault? Did he present my info incorrectly to underwriter? Should I try someone else with BOA?

I am guessing that having a significant other in med school may have been a problem. This is what I got from BofA:

5/1ARM @ 5%
Nothing down, No PMI
1% Origination Fee (Seems a little steep?)

I have no other loans (besides med school loans), middle credit score of 755, and on a 41K/year salary, approved for 180K mortgage. My biggest problem is that where I will be for residency (Upstate NY), the houses are cheap but the property taxes are through the roof! Otherwise I could have gotten more. If I add my wife to the equation, assuming she make at least 40K, ceiling goes up to about 240K. This seems to be the best deal so far. Would like to find a similar deal with less in orig. fees...5% is a pretty good rate imho considering the circumstances...

monstermatch · Feb 12, 2005

Great thread - thanks so much for contributing to this. I'm an M4, about to graduate from med school, I've already matched to a program at my home school - I was hoping to buy a house right away since I matched here at home and I'm trying to find a bank that will loan me the dough before I actually start working. While my wife makes a good salary 45k, our combined ed debt is about 200k, plus we're paying on 2 cars (could probably pay one off if we had too). Despite our good credit & savings BOA wouldn't give us the Dr. Loan until I started residency - so I'm looking for alternatives. Looks like Suntrust and ING may be more receptive, been talking with a guy at Welles Fargo, maybe a local bank will help us out. I thought BOA would be satisfied with a letter showing I was accepted but they gave me the big no. darn bureaucrats.

NinerNiner999 · Feb 12, 2005

BOA will give you the loan before you start residency - you just need to give them a copy of the signed contract before you close (you will sign your contract about 3-4 weeks after match day).

JR · Feb 12, 2005

I have a different sort of question for you guys.

Since this is my 1st home purchase, I am not that up to speed on what exactly constitutes "closing costs". I found what I think is a good deal, but they are charging me $6000 in "closing costs". This includes all the lawer fees, transfer fees, bla, bla,bla. On a $250,000 loan $6000 is about 2.5%; I think that's kind of steep. When I went back to talk to the banker about this, he said that these are costs through many 3rd parties who are doing the appraisal, inspection, conteract, etc. and there is nothing he can do about this. He honestly told me that his cut is $800. Do you guys think he is being truthful or is this just a bunch of BS in order to justify overcharging me?

This loan has no origination fees, no PMI.

Any input is appreciated.

NinerNiner999 · Feb 12, 2005

JR - make sure your banker provides you with a good faith estimate of costs (which break down everything from points, to origination fees, to titles, transfer stamps, tax, legal fees, filing fees, first years insurance, first year's HOA fees, processing and copying fees, etc). Then take this list to your realtor and see what their comission will be. Expect 3-4% of the cost of the home for comission (which is usually either paid by the seller or split to reduce closing costs). If your banker won't give you an itemized good faith estimate - ask for a signed copy of one. If he won't give you one, find a new banker. There will also be a few "surprise" costs when you close, such as title fee, inspection fee, etc which you should be prepared for up front. Some of these cannot be financed and must be paid before closing. Also - make sure your banker knows that all closing costs are to be financed (unless you plan to pay at closing).

JR said:
I have a different sort of question for you guys.

Since this is my 1st home purchase, I am not that up to speed on what exactly constitutes "closing costs". I found what I think is a good deal, but they are charging me $6000 in "closing costs". This includes all the lawer fees, transfer fees, bla, bla,bla. On a $250,000 loan $6000 is about 2.5%; I think that's kind of steep. When I went back to talk to the banker about this, he said that these are costs through many 3rd parties who are doing the appraisal, inspection, conteract, etc. and there is nothing he can do about this. He honestly told me that his cut is $800. Do you guys think he is being truthful or is this just a bunch of BS in order to justify overcharging me?

This loan has no origination fees, no PMI.

Any input is appreciated.

AznTrojan · Feb 12, 2005

i'm an M4 also looking to purchase my first piece of real estate.. and i'm probably as confused if not more confused than everyone else on this thread..

thankfully.. i'm reading personal finances for dummies and real estate for dummies.. it's been pretty helpful thus far..

anyone else got a book they can suggest??

PCN · Feb 13, 2005

i am reading realistate 4 dummies. its ok, but i am returning the book soon b/c its not a keeper

i have also decided to drop my realistate agent. i am now planing to limit my search to only new condos for several reasons:
1. to limit my search, since there appears to be too many options otherwise.
2. my realistate agent is interested in getting commission and not the best value for me
3. the odds of having fix up problems (that will take up time and get on my nerves) are a lot smaller w/ new condos.
4. i also found out that like a car which depreciates in value the most in 1st two years, the condo appreciates in value the most in the first two years. on a short term investment a new condo is probably the best investment for me withot going crazy to find an underprised old condo.

AznTrojan-MS said:
i'm an M4 also looking to purchase my first piece of real estate.. and i'm probably as confused if not more confused than everyone else on this thread..

thankfully.. i'm reading personal finances for dummies and real estate for dummies.. it's been pretty helpful thus far..

anyone else got a book they can suggest??

JR · Feb 13, 2005

Thanks for the reply. The figures are from the GFE; I had no problems getting one. I guess maybe I am not getting screwed; maybe this is just the way it is. I really like the % and monthly from these people, I just want to make sure I am not getting overcharged on closing. I went through the itemized closing cost list once again; it looks legit: transfer tax, lawer fees, filing fees... I guess, however, there is no way of knowing if legal fees are lets say $400, but you are getting charged $1800.

NinerNiner999 said:
JR - make sure your banker provides you with a good faith estimate of costs (which break down everything from points, to origination fees, to titles, transfer stamps, tax, legal fees, filing fees, first years insurance, first year's HOA fees, processing and copying fees, etc). Then take this list to your realtor and see what their comission will be. Expect 3-4% of the cost of the home for comission (which is usually either paid by the seller or split to reduce closing costs). If your banker won't give you an itemized good faith estimate - ask for a signed copy of one. If he won't give you one, find a new banker. There will also be a few "surprise" costs when you close, such as title fee, inspection fee, etc which you should be prepared for up front. Some of these cannot be financed and must be paid before closing. Also - make sure your banker knows that all closing costs are to be financed (unless you plan to pay at closing).

jwolfe · Feb 14, 2005

JR-
You are right, it will be difficult to tell what is reasonable since this is not something you do regularly, or have ever done. As a point of reference I paid approximately $2400 (actually $400 after sellers contribution) for all of the closing costs and fees on a $220k loan. I would just call him back and ask him if he can do better. ninerniner seems to have closed in the baltimore area recently, so maybe he will compare notes with you. Perhaps closing costs are higher in baltimore than atlanta.
-JDW

bobbyseal · Feb 15, 2005

So my saga with mortgages continues...

To recap...BOA won't offer me a physician loan in Wisconsin because they don't have a physical bank located there. They did offer me an 80/20 loan, but also informed me that they had to take into account my student loan debt. Not sure why.

I spoke with USAA. The lady there says that I need a notification from my student loan lender that I have a 3 year deferment on my payments. As far as I know, deferments/forbearances, etc are only offered on a yearly basis. How can I get a 3 year one?

Has anyone else who is not using the BOA 100% physician loan where they automatically do not look at your student loans have similar problems with this?

Thanks.

DrSmiles · Feb 15, 2005

You might just want to try contacting a mortgage broker who will go out and shop for the best rates. As long as you have good credit you shouldn't have any trouble getting a loan. Banks are notorious for scrutinizing your profile, including debt and they don't have as much leeway in bending to give you a better rate. Your mortgage broker will be the one who will go out and shop for the best loan. You could also do a no doc loan and just use your credit history to get the loan, this way you don't have to provide them with an income. Your interest rate will be a little bit higher, but you always have the option to refi once you actually start working.

ptolemy · Feb 15, 2005

Dr. Banker said:
He may have been unfamilar with the Zero Down Physician program BofA offers. I would factor in the leased car into the ratio which would affect how much you could borrow but it would be more than 80K.
Regarding the credit score required:
720: score is required
700: if you have medical student loans(who doesn't)
680: if you have a jumbo loan and student loans.
This is why it is important to make sure you are talking to someone at BofA that is familar with this program.

not sure I understand these #'s. what you're saying is that if you have debt, then you qualify for a lower credit score, and if you're taking out a larger loan, then you qualify with an even lower credit score. can you explain the reasoning behind this?

NinerNiner999 · Feb 16, 2005

ptolemy said:
not sure I understand these #'s. what you're saying is that if you have debt, then you qualify for a lower credit score, and if you're taking out a larger loan, then you qualify with an even lower credit score. can you explain the reasoning behind this?

I think BOA is trying to GIVE us these loans, or at least make them more accessible to us because they understand our debt and consider it to be a decent risk considering our future income. In other words, they make it easier for those of us with debt to get their loans and give them our future business...

drgirlnyu · Feb 16, 2005

bobbyseal said:
So, I spoke with a rep from Bank of America today. He told me that they can't offer the 100% physician loan to residents in states where there are no Bank of America locations. So, even with all the mergers and acquisitions that BOA has done recently, I'm still left in the cold.

On the bright side, they do offer an 80/20 loan to cover it.

I'm probably going to maximize my student loans to use as a down payment and look at ING direct.

What do you mean maximize your student loans... as far as I know, I think I've taken out what I'm allowed to this year. already took out 12k for the residency and relocation loan, took out the max for my unsub stafford and my school "doesn't deal with the med excel loan" whatever that means.

are there other options out there that i'm not aware of?

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