Financing..Serious replies please.

Drmom-

I know this house sounds like a great deal and all, but there are several things that scare me about your idea:

Not being married to the person you buy the house with. Stats show that living together before marriage increase your likelyhood of Divorce. Aside from that, you're entering into a huge financial burden with a person that could conceivably walk out on you, or vice versa. (kids or not. Seriously, if you have a kid w/ him and wanna live together, go ahead and get hitched.)

Just how much do you two make right now (not "When I'm a Dr")? a $250'000 30 year fixed rate mortgage at 7% (not a great rate right now) has a house payment of over 1300 dollars a month.(not including taxes and such, and w/ a zero down payment) Trying to afford college, kids, and a whopping house/ utilities/insurance/tax bill on Army/nurses aide wages might be a hard thing to do.
There's something called "house poor" where you buy a house you can afford, but have such a huge payment that you can't afford upkeep or anything else. There's no wiggle room for kids emergencies, etc. The time may come when your income is NEEDED to make ends meet, and college may have to come second then.

Add that financial stress to the fact that you're a working and college going Mom with a boyfriend that might be in the sandbox come next week and it just might crush you.

The "family tie" thing hints that maybe there's some sort of emotion connected to this deal.

They keep building houses. You will find one you love, but right now isn't always the best time. IMHO, continuing to rent until you're out of school or at least firmed up on where you'll be (IE married and in med school for the 4 years). Sure, it's a great deal but with a Dr salary you can eventually afford a really nice house anyway, right? And maybe even pay cash for it (think of the money saved without paying interest!) You will not go to Hell for renting. Yes, you are not gaining equity in a house. At this time you also don't worry about property taxes, paying for all repairs, etc.

DrMom, we'll never meet but I genuinely hope the best for you and don't think such a large financial burden is a good thing for you at this time in your life. This is exacly what I would tell my sister over a cuppa coffee...
I have some more ideas for you, please PM me for more.

Aside from acrunchyfrog's first assertion, which is false, he makes some good points, especially about whether or not you're at a point where you can afford the house and whether or not this is the right time. Just don't feel rushed into purchasing it because the price has fallen so much recently -- other good deals will pop up.

For more specifics, you probably should check out he finance page below. Go to the main SDN forum list and scroll down to Money -- Finance and Financial Aid was included in that section. There are specific discussions about purchasing a house there.

DrMom2b - what are these horror stories you write about? I think there are loan assistance programs for those associated with the military, but that is something that you or your boyfriend need to find out.

Buying a house is a big financial obligation. Good lenders can help you with that decision, they will tell you what you can afford. I think you need to sit down with a lender and figure out whether you can realistically take on a mortgage and talk about with your b/f about this.

DrMom2b,

Don't forget that homeownership is really going to limit your choice of medical schools. Visit the Re-applicants forums for lots of horror stories about applying to too few schools. If med school's your dream, then you need to able to move.

My horror story: Bought a cute house in 2002 shortly before deciding that I wanted to be a doctor. We bought it for 109,000, and put 5% down. Our mortgage was a "split" mortgage with Countrywide, where we had two separate payments. Our first mortgage was for 80%, and we got a great 5% rate with no PMI or points. Our second mortgage was for 15%, essentially a home equity line, with a variable rate. Basically, we had to take whatever they gave us for the 15% in order to get the terms we wanted on the 80%. We refinanced the home equity line of credit immediately into a fixed-rate (7%), fixed-term loan. Overall we were really happy with Countrywide. We felt they were fair and easy to get ahold of if you had a problem.

The horror story: Six months after we bought the place, the foundation cracked, taking our plumbing with it. Repair bill: $15,000. And, because of the 80/15 mortgage, we didn't have any home equity to borrow against to fix it. We were lucky to have bought in 2002, because house prices were still going up. We sold in 2005 for 127,500, so we were able to recoup our money. But right now, house prices are going DOWN. So here's one worst-case scenario for you to think about:

You buy the house for $250,000, and put 5% down with no points. Your monthly payments at 6 to 6.5% interest are about $1,500 for interest and principal, plus $50/month PMI, plus property taxes-figure about $2,000/month.

Fast forward three years. You've just been accepted to the school of your dreams, 500 miles away. Home prices in Florida are dropping right now. Will it turn around in three years? Probably not. If prices drop 5% each year, your house that you bought for 250,00 is now worth 214,000. Unfortunately, you still owe $228,602 on the mortgage (commonly known as being "upside down" on a loan). You put it on the market anyway, not having a choice. It sells for $220,000... and the real estate agent takes her 8%, leaving you with $202,400 to pay back that $228,602 mortgage. Of course, that's assuming you can find a buyer-if prices continue to drop, then buyers will hold back, hoping that prices will come down a little more, and you'll be stuck paying rent at med school plus your mortgage payment.

Of course, that assumes your house doesn't need any repairs or maintenance... and most of the time, you'll spend about 1% of the home's value yearly in maintenance on a brand new house, 2% on an older house, and 5% on a historical house.

Sure, it's possible that this house could work out very well for your family. But it's also possible that it could put you into financial ruin. Any mortgage company will lend you the money for the house-usually a bankrupt chimpanzee can get a mortgage with no problem. Most honest people, though, will tell you that unless you have 20% to put down, and unless you can guarantee that you'll live in the house for at least 10 years, then you should rent. If you have a lot of extra money lying around, then you might be better off socking it away a safe investment vehicle for the day when you have your MD and you're looking at "forever" houses.

Hi, I just got married on Friday. I've been with my new husband, however, for over 16 years (since high school).

We bought our first home together almost five years ago. So... just because you're not married doesn't mean you can't or shouldn't buy a house together. Just make sure that you are darn serious and so is he. We put both our names on the title, and both on the mortgage.

I'd recommend a couple things.. and I'm far from an expert. I consider myself a novice, but here's what has helped us along:

1) Some books. Yes, sorry, books, but, they're pretty good - even if you only want to skim them in a store, at least humor me. Home Buying For Dummies was very helpful.

2) To play around with numbers, as far as what a mortage would cost you, where you can plug in your interest rate, amount of loan (mortgage), estimated property taxes, and estimated property insurance - otherwise known as PITI you can download a free demo of Wheat Works at www.wheatworks.com . Download the LoanSpread Financial Calculator by clicking Download and selecting the FREE trial. And yes, it really is a free trial. You can use it about a dozen times and print out the magic numbers. Great little program to crunch numbers and see what you'll be paying monthly!

How to know your taxes and insurance? Ask the home seller or your realtor. The taxes are usually easier to learn than insurance, but insurance shouldn't be that much harder. Don't just think about what your mortgage will be. You need to budget for the property tax and your home insurance. Hence, PITI payment estimators.

Make sure you'll be in the house at least four years, and ideally five or more. Ten is alot. However, people say that folks tend to stay in homes longer than they anticipate. But, if you're headed to medical school and may need to move shortly, you may want to rent for now and buy later!

Your credit score is critical to getting a good interest rate on a mortgage. Make sure your 'financial house' i.e., credit, paying bills on time, etc., is in good shape -- ideally before applying for your mortgage.

The one thing that totally saved me (and him) when we went looking for a house was this: in nearly ALL circumstances, be willing to walk away from that house! Don't get emotionally attached to buying THAT house. THAT house may be too expensive for you now, and you can end up 'house poor' as one of the above posters mentioned. I know it's hard, very hard sometimes, but you MUST believe this. There will ALWAYS be other homes to buy!

The Home Buying For Dummies book was a great tool for showing you the difference between what a bank will lend you, and what you can actually AFFORD. It sounds stupid and easy, but to actually write that crap down is a real good expenditure of your time.

Jot down on a piece of paper all of your current monthly expenses, for one. Your groceries, clothing, bills, insurance, gas, etc. etc. EVERYTHING. And round up. Because **** happens. That's a start... because a mortgage payment is going to be added right on that. Be sure you can swing it before you make a move.

Best of luck to you! I hope this helped, even if in some small way.

Doctor Bagel said:

Aside from acrunchyfrog's first assertion, which is false,

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One of many sources:

http://marriage.about.com/od/cohabitation/qt/cohabfacts.htm

http://www.marriagebuilders.com/graphic/mbi5025b_qa.html


I stand by my assertions based upon the information that was given to me at the time by the OP.

How long (# of years) do you intend to be in the location of this house? You say that you plan to become a pediatrician some day, so medical school is in your future? When?

Over the last half dozen years or so, the hyper market for real estate has made buying and selling of homes in short time frames possible and profitable. But the historical rule of thumb for how long to expect to need to live in a home before reselling (at least 5 years or so) and recouping all initial loan fees, closing costs, and sales commissions, as well as weathering any downturns in the market, is probably a good way to look at the current downturn market (plenty of exceptions to this "rule").

I have read some examples on SDN of medical students rushing in and buying a home in their first year without a thorough knowledge of the local market, realizing after the fact it is not in a good location (or is too far from school), and then trying to resell it to buy something in a "better" location. Really foolish stuff if you ask me.

i can say that our house which we purchased new at slightly over 250,000 runs us (including pmi, home insurance, taxes etc) over 1800/month. this will be very tough on a med school budget..especially when you toss in daycare etc.
plus you have to figure on routine maintenence. now our home was brand new constructionw hen we purchased it but we have still had our share of issues with it...we have a septic system and have had issues with that, we have had issues with our dishwasher, and also one tub is bubbled up and needs to be replaced....so even new homes have issues.
secondly if you buy now you will limit yourself on where you can apply. aside from my hubby's job which keeps us where we are the main other thing is we have a 2 yr old house which we barely have any escrow in (but do have some) so it would amke it very difficult to sell and get any sort of money together for a downpayment on a different house. we are looking to move eventually (we have a 3bdr home and would liek a 4 bdr rome) but will not think of doing so until i am in residency when we can save my entire 1st year salary as a downpayment in addition to escrow...plus the added income will increase the amount of home we can buy.
if you can i would wait it out...especially since the housing amrket in the area is taking a downturn as eveidenced by the drastic cut in home price.

Sorry to be cynical here, but I think you'll look back on this as the decision that kept you out of medical school. Taking on that kind of debt and having to make payments on that house will probably make med school impractical for a long time. On the other hand, the option of starting a long career in nursing and not having to struggle financially will be right there waiting for you.

You are asking if it's a good idea to take out a mortgage under the following conditions:

1. You are single
2. You have a child
3. Your boyfriend is a member of the National Guard, which is being called up constantly for a war with no end currently in sight
4. You are currently a student
5. You are hoping to apply to medical school, which could take you literally anywhere in the country.
6. You are hoping to take out possibly hundred of thousands more in student loans
7. You are hoping to enter a career in which you will make 0 income for 4 years and relatively low salary for 3-7 years after that.

The reasonable answer is that buying a home right now is probably not a wise decision. Like other posters have said, it may very well interfere with your future goals. It sounds like a great deal, but there will be others.

Drmom2b said:

My b/f and I are wanting to buy a house that has recently been put on the market for a remarkably low price. Last year it was selling for close to 400,000 dollars and since the market is SO LOW now it is going for 250,000. This is such a great deal considering we have family ties with the owner...Please reply ASAP... Our lease is up on our apartment this month and we'd like to see if we stand a shot. Thanks

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Hi, Drmom2b,

I agree with what others have said. Great deals can be compelling, but they can also be a trap, especially when you are dealing with loans of this magnitude. It could end up being the booby prize.

My suggestion is that you take the time to tune in and think this through before you leap; there are many implications to your choice. I think it would be wise for you to consider what you want down the road and how you can organize yourself to get what you want. What are your goals? If one of your goals is to become a pediatrician, does getting a house now put in the direction of becoming one? Is it truly the right move at this point in time?

Don't jump simply because it's a good deal; jump because it's the right move for you. As one of my friends used to say, "You don't need to jump on the first spaceship that comes along." Anyway, I wish you luck in making your choice, and I hope you make the one that turns out to be optimal for what you want.

Drmom2b said:

I am so thankful for all of the replies! You guys have made EXCELLENT points and I will most certainly take them into consideration. We are still really interested in the House but as time is progressing I think we may end up moving into a NEW apartment complex that is SO much more secured than where we live now. Our biggest concern is the environment around us. Camden is getting old enough that he wants to stay outside as much as possible and in the neighborhood we live in now...I have to be more cautious now than when we first moved here. The house is still not a bad idea considering we will be living here another 5 years or so. My b/f had to leave for his 2weeks of AT training so we will be discussing things when he returns. With a wedding and possibly a new baby in the picture within the next 3 years I think the apartment will be the better choice. If any of you have any suggestions as to bringing my point across....what would you say?? Not to be needy but its nice and wise to hear others opinions!! Already I have learned quite a lot! Thanks Again!!

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Re: wedding. This is my own very personal opinion, and we all have our own values and feelings about what is important in this life, but:

We got married in city hall with just our immediate family present. We're planning to do something more after I finish vet school (in four years, hopefully) but it won't be elaborate. I'd like it to be in my own backyard here even.

The money you spend on a wedding, in some cases, is ALOT of money. It's one day. To some folks, it's worth it. For us, we put the money towards the down payment on this second home for example. And five years ago, we didn't get married and instead applied all of our savings to this down payment on our first home.

Not sure if you're planning something big or no... but just wanted to give my two cents on that.

Drmom2b said:

Thanks for the reply. We want a nice wedding. Not a FANCY one but not city hall either. We want it to be intimate and a day to remember. We just truly dont want to settle. Ummmm we found a nice little house to rent and the owners are really "good people". We are considering this option.

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just an fyi and completely off topic but to let you know things can be done for cheap. my hubby and i just recently renewed our vows in the church and had the big celebration with family (we were originally married in the courthouse) and did not spend that much.
i found my dress for $200 including alterations at a wedding store in the mall near me...it is very plain. no train but i did not want anything very fancy...it did have some beautiful beadwork though.
hubby tux rental was $80..again we went very simple and plain...no tails, top hats etc.
we found a local restaurant that had a room which could hold a group of people...as long as we had 25 (which we did) and they let us set a menu of 3 possible choices for the adults at $25 a piece which included bread, relish tray, soup and ice cream with the cake.
we ordered our cake...since we had a small group it was not very large but it was a cake it was $175

all in all we pulled off the entire things (all costs included) for under $3000
we did not have dancing or dj or a photographer (my dad took pics for us) but everyone had a wonderful time and was glad to celebrate the evening with us. so it can be done for not very much money if you keep it simple and smallish

Hi, I'm presently in a situation where we have some great opportunities to go elsewhere (for husband's job, I haven't started the process of applying yet, that's for next year).....BUT we are stuck with a house in a very bad market. I know it looks like a great deal to you (and people everywhere are able to get good deals now) and if you were looking to buy my house I would be SO SO happy. I'm trying to keep positive and I sincerely hope that someone will be interested soon. But it may come down to reducing the price by more than we really would want to/are easily able, as the home's owners you mentioned have done. I mean WOW. That's a huge drop in asking price, especially if the home was really worth 400,000 to begin with.

Honestly if you are in school/will be applying to medical schools in just a few years, you need to be free to roam and possibly move. Having to sell a house is going to be a big burden on what should otherwise be a time of happy possibilities. Don't forget that you will have to pay realtor fees on selling a house too unless you do FSBO. I don't know what sort of down payment you are thinking of, but we essentially will be losing our minimal down payment towards the realtor fees. I think the standard is 6% on the first 100K and 1.5% on the rest. If your house were 250k, would that mean over $8000 just to sell potentially. Also, I don't know where you are and whether the market in your area is poised to improve shortly, but the fact that this house was 400K just a year ago and now is only 250K says a lot! Will it improve vastly in just a few years? Who knows.

This may be a lot of work for you too - the maintenance costs as others have said. It sounds like a big house too if it's that expensive (unless you are in CA?). That will be a lot of work to keep clean if it's just the 3 of you (including signf other and child).

I think I was similar to you a year ago in that we were both finished with schooling (at least I was for the short-term), and this was my husband's first real job. So we did what we thought we should do, which is buy our first home and make it ours and have fun with it. It just seemed that that's what you do. You have a job, you are an adult, so you purchase your first home. I WANTED to live in my own home.

[At least we bought a double (they are very popular in my city) and so we have tenants which helps us with payments AND I think hopefully will help us in a slow market (i.e., you can rent part or all of it out so there is more of an incentive for SOME buyers, although it is a niche market nonetheless).]

But fast forward a year later, I'm finally biting the bullet and seriously prepping for med school applications (which will take me who knows where) and my husband is seeing awesome and interesting job offers in other states and we're having to make all sorts of arrangements to make sure we live the life we want and can pursue the opportunities we want for ourselves. Positive thoughts are a must - we will sell this house.

But I just want you to be in a nice, easy place right now so you can jump at those opportunities that come your way. Granted, you might want to stay in your city forever and if you can, that's great! But there are lots of unknowns to consider and I just want you to be able to cut the ties easily and without stress and jump at those great chances that await you.

Clearly I've got a skewed point of view. But since I wasn't able to give myself this advice a year ago, I hereby pass it on to you.

Drmom2b said:

Thanks for the reply. We want a nice wedding. Not a FANCY one but not city hall either. We want it to be intimate and a day to remember. We just truly dont want to settle. Ummmm we found a nice little house to rent and the owners are really "good people". We are considering this option.

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I just saw your other post. I think renting a nice home is a GREAT decision. You get the benefits of a home (more sq footage, maybe your own nice lawn, etc.) without the worries of maintenance and having to sell it eventually. Good luck in whatever you decide!

I also believe that renting is best for you right now. Listen to the Dave Ramsey show at daveramsey.com & you'll hear many stories of people who bought a house when they were not ready. He also gives guidelines as to what you should have in place before you buy.