How are you M1's Shacking Up?

I've been looking into this as well. I know some schools (Penn, for example) help faculty and students with financing if/when they purchase a home. Granted, this is part of Penn's ongoing campaign to develop/renovate West Philly, but I'd suspect other schools have similar programs.

Severus said:

I've been looking into this as well. I know some schools (Penn, for example) help faculty and students with financing if/when they purchase a home. Granted, this is part of Penn's ongoing campaign to develop/renovate West Philly, but I'd suspect other schools have similar programs.

Click to expand...

Yeah but dont you have to be affiliated with the university for at least a year before you can do that?

I think if you're really considering buying a home, your first step should be to speak with a lending company such as HomeBanc. They would be a lot more qualified than anyone here to give you advice and tell you what to expect. They can also refer you to a realtor if and when you're ready to start looking.

So here's the thing... unless you're definitely going to stay in the same place at least through residency or unless you're MD/PhD... it won't really be that great of an idea financially.

First, you'll pay large closing costs... then there's new furniture, lawn mower, redecorating, etc. On top of all that, in the first 4 years, you're not really making a large dent in your mortgage, you'll mostly be paying off interest. Now, normally, that is great because its tax dectible... only thing is, students don't have any income! 4 years is a relatively quick time to turn around a house in most markets. Sure, the house could go up enough in market value to cover your closing costs and interest payments... but no guarantees.

And... houses are a HUGE time sink... really, do you want to spend your first 2 years of med school playing caretaker?

riceman04 said:

Yeah but dont you have to be affiliated with the university for at least a year before you can do that?

Click to expand...

Honestly, I cannot remember. They went over it during orientation, and I was pretty much like 😴 😴 😴 😳

I plan on living in a small apartment or dormitory, and eating at the school cafeteria. Who will have the time to spend at the place you sleep or have the time to cook daily meals during medical school? Hopefully I'll goto a medical school in Florida, and when I do have free time I plan on driving home for the weekend to see my boyfriend.

LifetimeDoc said:

I plan on living in a small apartment or dormitory, and eating at the school cafeteria. Who will have the time to spend at the place you sleep or have the time to cook daily meals during medical school? Hopefully I'll goto a medical school in Florida, and when I do have free time I plan on driving home for the weekend to see my boyfriend.

Click to expand...

😕

LifetimeDoc said:

I plan on living in a small apartment or dormitory, and eating at the school cafeteria. Who will have the time to spend at the place you sleep or have the time to cook daily meals during medical school? Hopefully I'll goto a medical school in Florida, and when I do have free time I plan on driving home for the weekend to see my boyfriend.

Click to expand...

I'm with lifetime doc...minus the boyfriend.

So lonely.....

Don't buy a house, just live in the library. It's what I plan to do.

But in all seriousness I think wrong_answer is...well right in this case. 4 years seems like a short time to invest in a home. Unless your fiance has it pretty made and can take care of a lot of the new-home issues that need to be dealt with, buying a home and starting medical school shouldn't be done together.

PugMD said:

Why not invest it in some property if possible?

Click to expand...

in the off chance that property values plummet in your particular city then you could be in trouble when you move

wrong_answer said:

First, you'll pay large closing costs... then there's new furniture, lawn mower, redecorating, etc. On top of all that, in the first 4 years, you're not really making a large dent in your mortgage, you'll mostly be paying off interest. Now, normally, that is great because its tax dectible... only thing is, students don't have any income! 4 years is a relatively quick time to turn around a house in most markets. Sure, the house could go up enough in market value to cover your closing costs and interest payments... but no guarantees.

Click to expand...

If you rent a place for 4 years, then you could "throw away" upwards of $40K. So why not put all that toward a mortgage. Let's say you break even, or even if you LOSE $10K, you're still $30K ahead of where you would have been had you just rented.

In response to the earlier question about getting a mortgage, my plan is have my parents get the mortgage for the place. They have perfect credit and a paid-off house, so people are very happy to give them money with a low interest rate. Then I'll pay the mortgage through med school with loan money. When I get out, sell it, come out with $30K-40K in cash to use as a down payment on a house/condo for residency, or if more financially reasonable, put it toward the most high-interest loan first, etc. There are several possibilities, all of which are good. Property prices would have to really drop for you to end up losing money overall. (And the deal REALLY sweetens if you get a roommate who pays part of your mortgage. Now THAT'S a good investment.)

Sounds like you've really thought this through. It is actually a pretty a sweet plan that, if works as planned, will leave you with a lesser debt and less money lost. Best of luck to ya.

PugMD said:

So your parents are willing to have the property on their credit with no strings attached?

Click to expand...

Yeah, of course. Why not? It's four years' time, and it will help me out a great deal.

I'm not saying it CAN't work... I'm just saying it generally isn't a good idea for a new med-student to own a home. Not just for monetary reasons, but for other reasons too...

At the bottom, I've pasted the monthly amortization schedule on mortgage payments of a $200,000 house (sorry about alignment...), which are $1073.64 monthly, at 5% (generous). Why $200,000? Well, assuming (s)he was willing to spend $15000/yr on rent initially, then we can assume that the property values in the area of his med school will be in the $200,000 on the low-end.

So, lets look at money. As we can see, the principal paid after 4 years is ~$13K... GREAT! if after 4 years, he sells at the same price, he can be expected to collect ~$13000 back, right? Oh, wait, what about the any points he paid up front when buying the house (1% = $2000) or the 7% realtor fee from selling the house ($14000)? And the 1-2% annual property tax ($2-4000/yr) + sewage fees + garbage collection fees + mortgage insurance (which you must pay unless you put > 20% downpayment). ... and that is if you don't have any problems with your house. Lets say the roof leaks ($10000) or the driveway needs to be repaved ($5000) or a pipe bursts in the winter and needs to be replaced ($1000) or the water heater goes out ($600). In addition, you have to pay ALL your utilities, whereas some times you'll get free heat or water if you rent. All the little things add up quickly. And that is just money!

Lets look at the time commitment. Ok, big anatomy summative coming up in 2 weeks... you could be studying, or you could... mow the lawn/shovel sidewalk & driveway/trim the hedges/fix the garage door/wait around for the plumber to fix leaky toilet/fix the sticky window wife is nagging you about/rake leaves/re-wallpaper over the "chicken" motif in the kitchen.

I'm not saying it can't be done... but there is a reason most students don't buy houses. For me, the house would have to appreciate >$15000/yr before I would feel like it would be "worth it". And if the property value drops (or if it takes you 12 months to sell), you're screwed...

Pmt Principal Interest Cum Prin Cum Int Prin Bal
1 240.31 833.33 240.31 833.33 199759.69
2 241.31 832.33 481.62 1665.66 199518.38
3 242.31 831.33 723.93 2496.99 199276.07
4 243.32 830.32 967.25 3327.31 199032.75
5 244.34 829.30 1211.59 4156.61 198788.41
6 245.35 828.29 1456.94 4984.90 198543.06
7 246.38 827.26 1703.32 5812.16 198296.68
8 247.40 826.24 1950.72 6638.40 198049.28
9 248.43 825.21 2199.15 7463.61 197800.85
10 249.47 824.17 2448.62 8287.78 197551.38
11 250.51 823.13 2699.13 9110.91 197300.87
12 251.55 822.09 2950.68 9933.00 197049.32
13 252.60 821.04 3203.28 10754.04 196796.72
14 253.65 819.99 3456.93 11574.03 196543.07
15 254.71 818.93 3711.64 12392.96 196288.36
16 255.77 817.87 3967.41 13210.83 196032.59
17 256.84 816.80 4224.25 14027.63 195775.75
18 257.91 815.73 4482.16 14843.36 195517.84
19 258.98 814.66 4741.14 15658.02 195258.86
20 260.06 813.58 5001.20 16471.60 194998.80
21 261.14 812.50 5262.34 17284.10 194737.66
22 262.23 811.41 5524.57 18095.51 194475.43
23 263.33 810.31 5787.90 18905.82 194212.10
24 264.42 809.22 6052.32 19715.04 193947.68
25 265.52 808.12 6317.84 20523.16 193682.16
26 266.63 807.01 6584.47 21330.17 193415.53
27 267.74 805.90 6852.21 22136.07 193147.79
28 268.86 804.78 7121.07 22940.85 192878.93
29 269.98 803.66 7391.05 23744.51 192608.95
30 271.10 802.54 7662.15 24547.05 192337.85
31 272.23 801.41 7934.38 25348.46 192065.62
32 273.37 800.27 8207.75 26148.73 191792.25
33 274.51 799.13 8482.26 26947.86 191517.74
34 275.65 797.99 8757.91 27745.85 191242.09
35 276.80 796.84 9034.71 28542.69 190965.29
36 277.95 795.69 9312.66 29338.38 190687.34
37 279.11 794.53 9591.77 30132.91 190408.23
38 280.27 793.37 9872.04 30926.28 190127.96
39 281.44 792.20 10153.48 31718.48 189846.52
40 282.61 791.03 10436.09 32509.51 189563.91
41 283.79 789.85 10719.88 33299.36 189280.12
42 284.97 788.67 11004.85 34088.03 188995.15
43 286.16 787.48 11291.01 34875.51 188708.99
44 287.35 786.29 11578.36 35661.80 188421.64
45 288.55 785.09 11866.91 36446.89 188133.09
46 289.75 783.89 12156.66 37230.78 187843.34
47 290.96 782.68 12447.62 38013.46 187552.38
48 292.17 781.47 12739.79 38794.93 187260.21

forgot to mention (since I don't just want to sound like a wet-blanket):

If you're doing it to save a little bit of money, don't... your time in med school is more valuable.

If, however, you want to own a home because it is your American dream/you want the independence and privacy/you need a pimp pad (doesn't sound like our case)/you want to have space to play bocce ball and grow a koi pond, then by all means: do it. It can be a very rewarding experience as well.

good luck 🙂

wrong_answer, no doubt, you make some really good points. For me, I'm really looking at buying a condo so that avoids the majority of the lawn mowing, sidewalk shoveling duties. Plus, I have a relative who is willing to be my realtor and will give me back the real estate fees. But you're right, insurance and taxes will definitely eat into the profit or could prevent you from breaking even. Also, I was planning on dropping a decent down payment on the condo, too, so that would help with the monthly payments. What down payment did you use for the amortization schedule above?

MilkofAmnesia said:

wrong_answer, no doubt, you make some really good points. For me, I'm really looking at buying a condo so that avoids the majority of the lawn mowing, sidewalk shoveling duties. Plus, I have a relative who is willing to be my realtor and will give me back the real estate fees. But you're right, insurance and taxes will definitely eat into the profit or could prevent you from breaking even. Also, I was planning on dropping a decent down payment on the condo, too, so that would help with the monthly payments. What down payment did you use for the amortization schedule above?

Click to expand...

Used 0 down for the calculation. Usually, you can get away with as little as 5% down. If you put less than 20%, you need mortgage insurance... which is an added cost. If your parents can get low interest loan, better for you, but they lose the tax break since it isn't their first house... and may have to pay extra capital gains tax if/when you sell... not sure how that works exactly.

Should also be careful with getting a "refund" on the realtor fees. Generally, the 7% is split 4 ways. 1/4 seller's agent (your relative), 1/4 goes to buyer's agent, 1/4 goes to seller's agent's company, and last 1/4 goes to buyer's agent's company... so you may not end up getting it all back unless your relative is an independent agent and represents the buyers as well as you.

Condos are nice in that there is much less maintainence... but don't forget the assessment fee when you're working out your budget. As Bucsfan mentions... condos turn over quicker (easier to sell), but they also appreciate less.

There are banks that work directly with schools that specifically try to sign up med students. They are an investment and banks try to woo future doctors.

My school had a social event sponsored by a bank during my first week on campus. The bank had a two people dedicated to working with professional school students and residents to open accounts/handle all other needs. They consider us a "special client group."

I have had nothing but success using the bank, and they understand the financial situation that I am in. They have been willing to help me get a loan for a car & house.

The bank that I use is Bank Plus (bankplus.net). I don't know if they have branches everywhere, but if they don't, I am sure that your school has the same type of banking situation.

BucsFan813 said:

Also, when you rent, water/heat are included in the cost. However, you have less liability over the short term if you have a month of extremely high utilities.

Click to expand...

Are you talking about renting a house or an apartment or what? Of all of my friends, I have never met anyone who has included water or heat in their rent. They have to pay electric, water, and gas separately. I know of no apartment complex that offers included water or heat in the bill. However, I do have one friend who got a condo for undergrad, and he has included cable in his condo membership fee, but that's all I know of.

To all reading this, PLEASE, PLEASE, PLEASE do your own research for your own area. Almost all of what wrong_answer writes below is just, flat-out wrong. I currently own multiple houses (my primary residence, as well as rental property,) and am looking to buy another one in the city where I will attend medical school. So, I have bought, sold, and rented property before.

wrong_answer said:

Used 0 down for the calculation. Usually, you can get away with as little as 5% down. If you put less than 20%, you need mortgage insurance... which is an added cost.

Click to expand...

WRONG! This answer may have been correct 10+ years ago, but in today's creative home financing market, 80/10/10 or 80/15/5 loans are common. What this means is that you take out 2 loans. One is the standard 80% mortgage (20% down) and the other is to help cover the 20% down payment (esentially borrowing part of the 20% down payment.) The 2nd mortgage usually has around 1% higher interest rate than the first. Because you are essentially putting 20% down on your first mortgage, you get out of having to pay PMI.

If your parents can get low interest loan, better for you, but they lose the tax break since it isn't their first house... and may have to pay extra capital gains tax if/when you sell... not sure how that works exactly.

Click to expand...

WRONG! Completely and flat-out WRONG! You can deduct mortgage interest and property taxes for ALL of the homes that you own. I am talking about Federal Income Taxes here. Your state income tax may have different rules, but I doubt it, as most states seem to follow the Fed. on things like this.

Should also be careful with getting a "refund" on the realtor fees. Generally, the 7% is split 4 ways. 1/4 seller's agent (your relative), 1/4 goes to buyer's agent, 1/4 goes to seller's agent's company, and last 1/4 goes to buyer's agent's company... so you may not end up getting it all back unless your relative is an independent agent and represents the buyers as well as you.

Click to expand...

First off, 7% is an OUTRAGEOUS real-estate commission. 6% is customary, but here, in TX, for example, 4% is becoming VERY common. The comission is usually split _2_ ways -- half to buyer's agency, and half to seller's agency. Who cares how the agent is paid from their company? (HINT: You shouldn't -- that is part of the agreement between the agent and their company) The 4% commissions that are becoming common are really just an uneven split between buyers and sellers. The buyer's agent still takes 3%, but the seller's agent is willing to do a "no-frills" listing for just 1%. But, yeah, the other poster's relative may still have to pay a buyer's agent, unless he/she can sell the house him/herself. In certain parts of the country (NJ, for example,) buyer's agents are essentially non-existant, so this may not be a bad assumption.

I'm renting/student housing it at least for the first year. I don't want to hassel of owning when I'm still trying adjust to medical school.

Here is my advice for prospective homeowners:

Consider the following:

If the mortgage INTEREST portion of your mortgage payment, plus property taxes, plus upkeep (15% of mortgage payment is a CONSERVATIVE/OVER estimate) is comparable to the monthly rent that you will be paying, you are likely a good candidate for home ownership. Note that this criteria DOES take into account your down payment, as that will affect your mortgage interest payment.

If Mortgage Interest + Prop. Tax + Upkeep < Monthly Rent, I would say, definitely consider home ownership, as your monthly costs to own are less than your monthly costs to rent. Yeah, you need to consider closing costs (essentially insignificant when buying, but significant when selling a property)

Most likely, this will not be the case, however, and the two figures will come out pretty close. That's when you need to consider the market conditions in your area. Fortunately, now is a probably good time to buy, as the market has just contracted a lot in many areas of the country. In some places (like Austin) the market is doing very well, because housing prices are being driven up by REAL demand (not through out-of-area speculative investment.) There will always be risk in any investment, including home-ownership, however, without risk, there is no reward. If market conditions aren't ideal when/if you have to sell your home in 4 years, you can always rent your property. That's why, in ANY real estate transaction, the most important factor is LOCATION! If you buy a property in a good location, you are helping to guarantee:

1. The property will continue to appreciate in value. Even when the housing market contracted here in Austin about 5 years ago, the properties in the prime locations (i.e. near the University) continued to appreciate at the same rate, almost unhindered. Real estate follows the free market. Properties in highest demand will nearly always be in high demand (of course, they will also always have higher prices too.)

2. You can rent the property easily.

Just my 2 cents. Obviously, I am very biased toward home ownership, but it is not for everybody. Do your homework (and lots of it) before undertaking such a big decision.