Anyone else in my boat.....?

[coffeeaddict]

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Just wanted to poll you and see if anyone else is in my boat. I'm graduating in May from med school and will have about 100,000 in debt. I want to buy a townhome or condo for residency, but no lender will give me a loan except for a doctors loan from Compass with a higher interest rate. It's too bad because I have only student loan debt (no credit card, car debt, etc) and an outstanding credit score. What have you all done in this situation? I appreciate your advice.

 

[TysonCook]

Start at BankRate.com and go from there. Also, once you match, usually your program/hospital will send out some information re: local lenders who are familiar w/your situation.

If you can, try to save up some amt of money to put down (even if it is minimal), this will help as well. While many quote 10% down, that is still very negotiable.

Lastly, get on the phone and discuss it w/the local banks, you'd be surprised what changes.

 

[dragonfly99]

It is hard in the current economy to get any kind of no-down loans. The local banks and credit unions I talked to will do FHA loans (3.5% down, plus closing costs) but are not doing "no down" loans. You can try lendingtree.com.
It might be hard to find anyone but Compass doing a no down loan right now.
Think hard about whether you REALLY want a house right now. If doing a 5-7 year residency, it probably makes sense, especially if you are married. For a single person doing a 3-4 year residency, not so much.

 

[boho]

If you have down payment go to BOA or Suntrust and let them do Doctor Loan with 3-5 % downpayment. It did bring down interst rates for us. Some lenders have 10% down loans as well. You can do FHA loan if you or your spouse have work history, if not you will need a co-signer. More downpayment you have is better coupled with good credit rating. Some banks will be willing to deal. Another way to reduce interest is to pay some points, it might work nicely if the seller will pay closing costs and banks do not limit how much they can pay.

 

[The White Coat Investor]

You saw my other thread, right? How long is your residency? Have you considered that you might be better off renting than buying?

 

[TMP-SMX]

How have you built your credit score thus far? You need to build your credit and use credit cards. Just make sure you pay off the full balance at the end of the month.

 

[coffeeaddict]

Thanks for the advice! To answer a few of your questions, I have built my credit score through cards and prior car payments. I always pay in full each month and have a fico of 760. It doesn't seem good enough though to get any other loans besides a doctors loan from compass. Even though I have 3.5-5% down, banks will not lend me an FHA loan or anything else due to my 104,000 dollars in student loan debt. Are 4th yr med students entering residency getting approved for FHA loans? Also, my residency + fellowship is 5 years.

I will try to call one of the local banks where I'm going (or think I'm going...match day is today!) to see if they will lend. I think they have an affiliation with the institution and often lend to residents.

I have pondering rent vs. buy very much. I was looking for a small townhome with a small yard for the dog. Looking for these places to rent easily will run 1100-1200 which is pretty much the exact same as my PITI would be if I were to buy with my 7.125 interest rate I was quoted.

It just frustrates me to no end that we are/will be physicians and are less likely to default on our loans, but cannot get approved with a good fico, no "bad" debt, and decent residency salary.

I'll keep everyone posted for others who may be in the same boat and will continue to appreciate any advice my seasoned colleagues have. Good luck with match day!

 

[TysonCook]

Good luck, another option would be to take out the "residency relocation loan", which was $10k when I had it, that would cover part of a down payment, also be very clear to the creditors what your debt is from and what you are doing (e.g. Medical school, no other debt).
Buying is a great idea currently dep on location, duration, etc of residency. Plus you get an $8k bonus for first time buyers.

 

[boho]

Plus you get an $8k bonus for first time buyers.

Everybody talking about 8k bonus, but if I understand correctly it is UP TO 8k or 10 % of your house purchase price. So if you paid 200k for house you will get 2k bonus. Correct me if I'm wrong.

 

[bjackrian]

Everybody talking about 8k bonus, but if I understand correctly it is UP TO 8k or 10 % of your house purchase price. So if you paid 200k for house you will get 2k bonus. Correct me if I'm wrong.

10% of 200K is 20K so you'd get 8K. The tax credit hits its max at a sale price of 80K.

 

[boho]

10% of 200K is 20K so you'd get 8K. The tax credit hits its max at a sale price of 80K.

🙂Sorry for bad math. For some reason my mind could not comprehend that government will give 8k for 80K house. So I thought more in terms of 1%. That's a great deal.

 

[dragonfly99]

coffeeaddict,
I don't think the 105k student loans are the reason you can't get an FHA loan. I have 120k+ and I'm getting a FHA loan. You do have to have proof of income/a job to get a FHA loan, which will prevent most all 4th year med students from getting one (at least as far as I understand).

Even if you pay the same PITI as you would rent, you might lose money by buying because you will have to pay the real estate agen 5-6% when you sell your house again in 5 years. Also, could lose money if it doesn't sell right away when you try to sell it, or if real estate prices go down more. You might break even. You might make a little money if housing prices go back up. Money-wise, it's a gamble. Just realize what you are getting in to. If not for the 8k tax credit, I would not be buying right now. The tax credit tipped the balance in favor of my buying a condo, but it's still a gamble (and I'm a fellow with current income, etc. to be able to get a better interest rate than most of you).

 

[drguy22]

coffeeaddict,
I don't think the 105k student loans are the reason you can't get an FHA loan. I have 120k+ and I'm getting a FHA loan. You do have to have proof of income/a job to get a FHA loan, which will prevent most all 4th year med students from getting one (at least as far as I understand).

Even if you pay the same PITI as you would rent, you might lose money by buying because you will have to pay the real estate agen 5-6% when you sell your house again in 5 years. Also, could lose money if it doesn't sell right away when you try to sell it, or if real estate prices go down more. You might break even. You might make a little money if housing prices go back up. Money-wise, it's a gamble. Just realize what you are getting in to. If not for the 8k tax credit, I would not be buying right now. The tax credit tipped the balance in favor of my buying a condo, but it's still a gamble (and I'm a fellow with current income, etc. to be able to get a better interest rate than most of you).

The student loan debt is actually removed from the ratios as long as its not in re-payment. In terms of a job, you can use a irrevocable contract as the income amount. I was told I can get a FHA loan.

 

[CaliGirl83]

any luck?

im still trying to get pre-approved :-( one small lender told me flat out that they dont care if my loans are deferred through residency (even though it says deferred on my credit report, i gave them a letter from my financial aid people, and a copy of an email the loan people saying its not due for years). i tried to get around the whole "you dont work YET" by giving them a copy of my contract (that includes how much i will get, a link to the website that says what R2 & R3 are making this year to prove it will go up at least), i gave them a copy of my latest 3 statements showing i have enough for >6months worth of mortgage which i read somewhere would be helpful. and the biggest annoyance is that im even planning to down 20%+. my residency is only 3 years but its a place i know i want to someday raise a family, safe, and has a great school system. rents in the area would be at least 1100-1300/month. i have a place i really really want that will equal that amt (principle + interest + HOA fees) but i cant offer until i get a loan and by the time i find a place that will say "yes" that one will be gone for sure. Now im trying BofA (hopefully they will take in acct all the documents unlike the other lender) but i dont know :-( wow that was a long rant. im at a standstill at this point and have no clue what to do. any advice?

 

[dragonfly99]

any luck?

im still trying to get pre-approved :-( one small lender told me flat out that they dont care if my loans are deferred through residency (even though it says deferred on my credit report, i gave them a letter from my financial aid people, and a copy of an email the loan people saying its not due for years). i tried to get around the whole "you dont work YET" by giving them a copy of my contract (that includes how much i will get, a link to the website that says what R2 & R3 are making this year to prove it will go up at least), i gave them a copy of my latest 3 statements showing i have enough for >6months worth of mortgage which i read somewhere would be helpful. and the biggest annoyance is that im even planning to down 20%+. my residency is only 3 years but its a place i know i want to someday raise a family, safe, and has a great school system. rents in the area would be at least 1100-1300/month. i have a place i really really want that will equal that amt (principle + interest + HOA fees) but i cant offer until i get a loan and by the time i find a place that will say "yes" that one will be gone for sure. Now im trying BofA (hopefully they will take in acct all the documents unlike the other lender) but i dont know :-( wow that was a long rant. im at a standstill at this point and have no clue what to do. any advice?

Is your credit score really bad or something?
This isn't quite making sense. I think you just need to try different lenders (and/or a different mortgage broker) until someone says yes. You could try Compassbank too (physicianloans) but I think they don't have good interest rates.

 

[CaliGirl83]

Is your credit score really bad or something?
This isn't quite making sense. I think you just need to try different lenders (and/or a different mortgage broker) until someone says yes. You could try Compassbank too (physicianloans) but I think they don't have good interest rates.

my credit score was like 730+. this is my 1st major purchase and my real estate guy seems to be leading me to all the wrong directions and sounds like he is REALLY bullying me to have my parents cosign with his lender (who just put the numbers in the comp and didnt ever look at any of my documents and didnt even give me the "rate") saying if i dont get preapproved in the next wk all the homes in the area will probably be sold. ive tried the small one, 2 different people at wells fargo (as soon as i say i havent officially started they said no), 1 person at chase (says need cosign since no job yet - the hospital is well known in the area too), and pending bofa (if that falls thru ill try compassbank. hopefully someone will say yes cuz ive been trying since match day )

thanks for the advice. Take care!

 

[dragonfly99]

Hmmm...that sucks. It sounds like your mortgage broker sucked...
You could try Lendingtree.com and put in what you need, and see if you get any offers.

I never tried to get a loan while in med school (with no job yet).
Even now, about to start fellowship, they didn't want to give me a loan based on my current job/research salary, and demanded to see my fellowship contract. I don't know why, since I actually made more money last year (counting moonlighting $$) than I will in 2009.

You could try one of the local credit unions or banks that does FHA loans...someone posted on here earlier that they were told they could get an FHA loan even without a job, just with their signed contract. Not sure about that, though.

My impression is that the underwriters often have more leeway than we realize...the mortgage broker or banker himself isn't the one deciding to approve the loan or not...it's those pesky underwriters.