Buying a house/condo during dental school

[onetoothleft]

I was reading a thread where someone mentioned that they bought a place while attending dental school with their low interest student loans. I am very interested in doing the same.

I wanted to know how this works out financially, so I was hoping that someone can help me out.

How did you pay for it? You would have to borrow the max the first year to meet the down payment, right? How did you get a housing loan when you had a student loan at the same time??

Any help would be greatly appreciated! thanks!

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[TucsonDDS]

I feel that you are going to have a very difficult time finding a lender that will be willing to carry a morgage for you unless it is a private party. Lenders will be looking for a source of income about 3 times that of your total monthly dept repayment. I would seriously doupt if any lender would consider student loans as a source of actual income. I think that most people that have purchased homes during school probably had at least a down payment saved and some sort of actual income at the time that they closed the loan. Then, after they closed the loan they started school. Or they had a spouse or other co-signer for the loan that had a source of income. Real estate however is a great investment and the quickest way to build wealth in this country realistically and legally.

 

[onetoothleft]

well I have a good job now and will have 3 years of working full time at about 35k/year. (i could probably get a house loan), and I guess I could trick them by being a "first time home buyer" (no money down) and quote the salary that I make now, get the huge home loan, and then get the money from my student loans, because from what I have heard, anyone can get a student loan.

Is there anyone that has successfully done this?? will lenders let you go 150k in debt, then 300k in debt for dental school??

 

[TucsonDDS]

You would be much more likely to be able to close on a home first and then take the money out for dental school. My wife and I have own both a house and some rental property that we will most likely keep and rent out during school. We will probably buy another home to live in while at school prior to my cutting back my hours. I don't feel that we would be able to obtain another loan if the lenders knew that I was enrolled in 40-50 hours a week of education. It is important to have both your W2's and last couple of bank statements and pay stubs if you plan on getting a decent rate for your morgage. Would your parents or grandparents be willing to cosign the loan for you?

 

[dr_benj]

I bought a house in June and start dental school this august. I qualified for the loan using a cosinger and an FHA loan. It was very easy to do. I will make the monthly payments using my financial aid as well as my wife's income. (My wife has no job right now, so she did not help me qualify for the house loan as we were not married at the time). We had to pay about $4000 which includes the down payment and the closing costs. We got the seller to pay an additional $5000 to get to the 3% downpayment required by FHA loans. All in all, it is about the same price (if not cheaper) than renting, and when I sell the house in four years I will likely make a profit, or at the very least have lived in the house for free. Plus it will make getting loans easier once I get out of school. Let me know if you have any questions.

 

[dr_benj]

P.S. I just received my financial aid for dental school. I had no problem getting a school loan after having a house loan as well.

 

[onetoothleft]

thanks for all the good advice. This is great--I can't believe they let us get away with this! Now lets say that I get a FHA loan and get my parents to cosign.

I would have to come up with:

1. 3% for a down payment
2. closing cost/ realter costs
3. money to get ready for dental school

another question . . . . what is the most anyone has ever heard of a student being able to borrow for the first year of school? (to make up for the above costs) In other words, do you think i could get 15k more than the average student that first year to cover these costs? Do they question whether getting 70k rather than 50k for being unreasonable?

 

[Biogirl361]

i want to bump this thread because i too am interested in buying a condo rather than renting an apartment. the fha loan scenario sounds like a good plan. does anyone else have experience or advice about buying while in school or before going to school?

 

[Sprgrover]

i want to bump this thread because i too am interested in buying a condo rather than renting an apartment. the fha loan scenario sounds like a good plan. does anyone else have experience or advice about buying while in school or before going to school?

It is possible to purchase a home while in school - though it is a good idea to have some understanding of the mortgage industry. Since late payments and reposessed property is bad news to the credit industry, the best way to deter such trends is to weed out those customers during the application process. In addition to pulling your credit score, mortgage lenders use a two debt-to-income ratio system to determine if you qualify, and for how much. The first ratio is sometimes referred to as the 'front' end ratio and is your monthly housing expenses (insurance, taxes, etc.) divided by your pretax income. The second, or back end ratio, is your total monthly housing expenses plus all other monthly debt (car payments, creditcards, etc.) divided by your pretax income. Pretax income refers to any legitimate source of funding, such as trust-funds, benefit checks, etc. The numbers derived from these two ratios are what lenders go by in qualifying you for a loan. Besides testifying to your debt to income ratio, these numbers are used to determine your long-term stability and likelyhood to default on your mortgage, i.e. your 'risk'. In addition, these stats will also determine how much you qualify for and often the rate of the loan.

I mention this because so many people don't realize how credit, much less buying a home, works. Since most of us, myself included, won't be holding down a great paying job (probably not one at all) while in dental school, it can be really easy to jeopardize your chances of obtaining a loan. To help your chances do things like pay off credit cards or consolidate them to lower your monthly payments. I know of people that decided to celebrate being 'pre-approved' for a mortgage by going out and getting a new car, only to find their new purchase threw their ratios upside down and they lost the ability to get their home. You'd be surprised at how much of a difference just a couple hundred dollars on either side of those rations can make.

By no means am I posting this to scare anyone, rather it is my intention to briefly inform readers whom may want to purchase a place within the next year about some things to consider and little steps they can take to greatly improve their chances. Such steps include getting credit cards current, or even better - paid off, don't be late on any payments - including utility bills (which are often promptly reported to credit agencies), avoid bouncing any checks, don't buy or lease that new car you have had your eye on, getting a better insurance rate, and so on. If possible, start saving for a down payment, closing costs, and the like. I think that buying a place is a good investment - renting is simply throwing money down a rat's hole - and buying is something people should at least consider.

 

[Biogirl361]

what is the average monthly payment on an fha insured loan? can i make those payments using my student loan money, since it is going towards housing while in school? in other words... pay off a loan with another loan (until i am done with school and sell the house to pay off the remainder of the house loan)

 

[Sprgrover]

what is the average monthly payment on an fha insured loan? can i make those payments using my student loan money, since it is going towards housing while in school? in other words... pay off a loan with another loan (until i am done with school and sell the house to pay off the remainder of the house loan)

That depends on the amount of the loan, the interest, and how much of a down payment you make. Currently FHA requires around 3% as the down payment and, at present, I believe that FHA applicants must fork over a down payment in order to qualify for an insured loan. Good news is I have heard rumors that the government is looking to change that in order to turn more lower-income applicants into homeowners . Bad news is when have you ever seen the government act with lightning speed? In regards to payments, (and this is a rough estimate) for a $100,000 loan the monthly payment would be around $650. I don't know how the government would view you taking their money from pile 'X' and paying off pile 'Y' - though if you get the loans (which are a source of funds) to pay for living expenses, then I see no immediate issues. Check with a government housing authority if you are wanting to go through FHA.

 

[ronmiller]

Once my wife and I found out that we had been accepted into UT Houston (she was accepted into the dental hygiene BS program there), we began looking to purchase a house. We both had jobs at the time, so we wanted to buy before we quit to go to school. We will be taking out the maximum amount in loans the first two years, at which time, she will start working so we may only need to take out loans to cover my tuition and fees. We both graduate from undergrad in May of '03, had jobs by August, were accepted to school in December, and purchased the house in Februrary of '04. One thing that helped us is that we had no car payments or credit card debt (only loans from undergrad). We were happpy to learn from fellow students, however, that our mortgage payment on our 1,900 square foot house is about the same as the rent for a 900 square foot 2 bedroom down near the school. If you combine that with interest rates for mortages that will never be lower, if you can buy, do so.

 

[bigsmile]

I'm a homeowner in Austin, Texas. And, I want to put my two cents.

It's likely that your monthly payment is about the same as renting. Plus, you get a bigger place. Definitely a big Plus.
Nothing is better than having your own place. And, it's a long term investment.
However, the cost of owning a home is not just the monthly payment.
There are other costs to be considered:
1. Homeowner insurance ( I pay about $1000/year)
2. PMI insurance (waived because I put down >20%)
3. Property tax ( I pay $10,000/year for $350,000 property value ). Texas property tax is high because we don't pay state income tax.
4. Homeowner asssociation fee, if living in a subdivision. ( I pay $700/year)
5. Maintainance cost. Always have something to fix especially in older home. (rule of thumb, $50/month)
6. Larger area to cool/heat, higher utility bills.
7. Higher water bill ( in Texas summer) to keep the lawn green or alive.
8. Waste water and garbage fees

I hope this info is useful, especially for people who never own a home.

 

[toothcaries]

i think buying a house is a great idea.

personally,
i'd buy a house close to campus (or where ever students live)
...and then rent out your extra rooms.
that should cover your morgage/bills.

after 4 years u sell.
great way to cut expenses..

 

[akathisia]

i think buying a house is a great idea.

personally,
i'd buy a house close to campus (or where ever students live)
...and then rent out your extra rooms.
that should cover your morgage/bills.

after 4 years u sell.
great way to cut expenses..

This is a great thread! I'm interested in buying a home while in dental school and hearing what you all have to say is very useful. My problem is that my fiancee' is applying to residency programs and we won't know where she is going to be located until after I start school. We dont' know where she will end up (hopefully in the same area as me!) so I think it not prudent to look for a place until we know we are going to be settled. It looks like many of you bought property before starting school, I will not have that option. Question: Do you think a bank will loan me money to buy a house in my first year of D-school with my only income being finanical aid + loans? I would think not but I haven't visited any banks yet. Any comments? Thanks!