Buying a house for residency

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jackal307

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Hello all, I looked and didn't see a thread about this in two years, and with how much the economy has changed I figured it's a good time to ask again. I am considering buying a house if I end up matching in CT for about 150k, nothing outrageous. Does anybody have advice on where I can look for information about physican loans (does it matter that I don't actually get my MD until may?), and other options with specific detail to the problems with buying before residency (ex: student loans, forbearance, not having a paystub when applying for a loan, etc)
Thanks!
 
jackal307 said:
Hello all, I looked and didn't see a thread about this in two years, and with how much the economy has changed I figured it's a good time to ask again. I am considering buying a house if I end up matching in CT for about 150k, nothing outrageous. Does anybody have advice on where I can look for information about physican loans (does it matter that I don't actually get my MD until may?), and other options with specific detail to the problems with buying before residency (ex: student loans, forbearance, not having a paystub when applying for a loan, etc)
Thanks!
Click to expand...

Like all the rest of the sketchy loan instruments (no doc liar loans, subprime mortgages @ 110% of value, etc) which helped destroy the US housing market (and allow you to think about buying a house in CT for 150K), physician loans have largely (although not completely) disappeared. BofA (which was the only "real" bank that was doing them anyway) suspended theirs awhile ago. SunTrust (kind of a real bank I guess) still seems to offer one (although not apparently in CT), as do a few other sketchy sounding companies.

The real issue is that, although housing prices are in the toilet (good for buyers) and mortgage rates are @ 40 year lows (also good for buyers):

r_30_prime.gif


Actually getting a loan these days requires near pristine credit (think FICO >700, preferably 750+) and some form of down payment (10%+). While these are not absolute requirements, not meeting them will likely jack your interest rate up to the point that owning will be more expensive than renting.
 
I was thinking the same thing OP. After speaking with some friends (a mortgage broker and a financial adviser) they basically said forget about any special treatment for being a physician and that I would be stupid to try to buy a house with out putting a full 20% down. Anything less and your rates will suffer and you will be forced to pay a hefty PMI.
 
jackal307 said:
Hello all, I looked and didn't see a thread about this in two years, and with how much the economy has changed I figured it's a good time to ask again. I am considering buying a house if I end up matching in CT for about 150k, nothing outrageous. Does anybody have advice on where I can look for information about physican loans (does it matter that I don't actually get my MD until may?), and other options with specific detail to the problems with buying before residency (ex: student loans, forbearance, not having a paystub when applying for a loan, etc)
Thanks!
Click to expand...

Good luck finding a house for 150K in CT. My situation is different from yours since I am an attending with a child. So, I am looking at areas with good schools, etc.

We just put in a bid for a house in ct, and are going thru the mortgage application process. No one offered me any special loan product based on occupation. We are just hoping to lock in at a low interest rate. You need a pristine credit report/score, and yes, you need to show your paystubs, and they will call your work 3 days before closing to make sure you are working. They don't care about a contract that you signed for work starting in july. If your first pay check is the one from residency, then most likely you will not be able to close until after you get your first paycheck.

I think buying is still a good option, but if you are not planning to stay in area, then I am not sure if is wise to buy. You can't flip houses like you used to. Many less desirable homes stay on the market for much longer now. There is a rent vs. buy calculator on nytimes.

http://www.nytimes.com/interactive/business/buy-rent-calculator.html
 
I strongly discourage you from buying a house unless you intend to spend significantly longer than the legnth of your residency training in it. And by longer, I mean at least a decade. Part of the problem with the recent mortgage crisis is that people stopped looking at home-ownership as what is has been for the bulk of the last century - a long-term investment. Depending on your training, you're looking at moving out of that house between 3-6 years from now. It's highly unlikely that you'll come out ahead financially over that timeline. What's more, you don't want your home-ownership to influence your decision making with regard to subsequent training (i.e. fellowship) or job locations. Don't put yourself in a position where you have to say, "well, I'll just take this fellowship because I won't have to move, even though I'd rather go to that fellowship." This, of course, says nothing of the hassles of buying, maintaining, and selling a home. Your life will be stressfull enough. Instead, save your money so that you'll have a substantial down payment when your training is over.
 
I have the same decision to make. Check into state-specific programs. I will be moving to Cleveland, Ohio and they have several programs for those in our situation. One is called the Heroes Program which allows firefighters, policemen, new medical residents and a few other professions a 30-year fixed rate of 3.5% (I think the latest figure I've seen for a standard 30 year is something like 3.97%). There is also another program there called Grants for Grads that will give you 2.5% of your down payment if you have graduated from a professional school in the last two years. The amount of the grant is forgiven if you stay in the home for 5 years. You repay 20% if you move after four years, 40% if you move after three, etc. This one is a no-brainer if you are doing a 5 year surgery residency.

I don't know if CT has any opportunities similar to this, but it's worth a shot. Good luck!
 
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Agree with the above posters. just rent unless you know you will be in CT long term. Even then, with a resident salary, and not being able to take out a mortgage with a payment that is more than 33% monthly of your salary taking into account loan debt, etc... it's hard to get a great deal or any deal for that matter. And if you decide to get a loan, ihighly recommend Wells Fargo-- they really worked with me, but I was also going to be an attending with a better salary. and it was still a huge pain.

Also, as a resident, the benefits of having someone else deal with headaches of home ownership is not to be discounted. We didn't buy until we knew we had a greater than 6 year commitment to the area.
 
Dirt said:
I was thinking the same thing OP. After speaking with some friends (a mortgage broker and a financial adviser) they basically said forget about any special treatment for being a physician and that I would be stupid to try to buy a house with out putting a full 20% down. Anything less and your rates will suffer and you will be forced to pay a hefty PMI.
Click to expand...

Wrong. My PMI is .2% or less. My total interest rate with PMI included is 2.825%. I put 3.5% down.
 
What is the general timeline for getting pre-approved?

Mid March - Match, get contract signed.
???????? - Get preapproved, find house, offer, close?
June/July - Orientation/Start residency.
 
To the OP:
I did buy a house, even though I'm pretty certain I will be trying to move in 2.5 years. As of last year you can still get physician loans without a PMI and with a reasonable rate. I'm paying 3.875% with 0% down on a 5 year ARM. PM me if you want my mortgage broker.

The arguments for buying are:
1. Even if the market tanks your income will at least triple so it won't be so bad to have to make a mortgage payment until you can sell.
2. For a lot of places its cheaper than renting.
3. The extended childhood that is medical education sucks and it would really be nice to have a mortgage again rather than paying rent.

Arguments against buying:
1. You're thinking about buying now. What if you don't match in CT? Emotionally it's hard not to continue looking for a house once you started.
2. What if your program sucks? You can't get up and move easilly.
3. Be OK with being underwater for a few years if prices continue to drop. Eventually it will go back up, but whether it does by the time you finish residency is another story.

Hope that helps.
 
TexasPhysician said:
Wrong. My PMI is .2% or less. My total interest rate with PMI included is 2.825%. I put 3.5% down.
Click to expand...


What kind of mortgage, ARM?

And when did you get this, prior to the bubble bursting?
Those numbers seem incredibly good compared to what numerous sources have told me, and my credit score is >750 so I doubt that is the missing factor.
 
Dirt said:
What kind of mortgage, ARM?

And when did you get this, prior to the bubble bursting?
Those numbers seem incredibly good compared to what numerous sources have told me, and my credit score is >750 so I doubt that is the missing factor.
Click to expand...

maybe everything is different in texas
 
Dirt said:
What kind of mortgage, ARM?

And when did you get this, prior to the bubble bursting?
Those numbers seem incredibly good compared to what numerous sources have told me, and my credit score is >750 so I doubt that is the missing factor.
Click to expand...

5/1 ARM. Who knows where I will get a job after residency, so I got the hybrid arm.

I got it 13 months ago. My credit score at the time was 740.
 
koc123 said:
maybe everything is different in texas
Click to expand...

Must be.

I do know that none of the few remaining banks offering physician mortgages include any states in New England.
 
BBVA Compass also does doctor loans (5% down). PhysicianLoans still does 100% financing. Getting a loan to buy a house as a resident is still entirely possible. A single resident earning about 50k can be approved in the neighborhood for 180k or thereabouts last I checked, at least in the south.

Look at the market where you want to live after you matched, and don't blindly follow the naysayers. Buying a house isn't always a good idea, but my wife and I bought a house in med school, sold it, and bought another house in residency. We pay far less per month to live in far more than we could ever have with an apartment. We could take a huge hit on the value after residency if we needed to and still not lose money, but that really isn't the only point. We also like living in our own house that we can do whatever we want with.
 
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Some states do have physician home loans for 0% down (usually require credit score >700). TN is one. However you will need a residency contract to prove income before anyone will approve you for anything kind of loan. Some residencies have realtors that work closely with residents and resales their houses too (to incoming residents). I would wait until you match and have a contract then ask for realtor suggestions. There is also FHA loan that requires 3.5% down. You will be required to pay mortgage insurance if you do not have 20% equity. I bought my house and so happy I did. I planned on staying in the area but several residents in my program are not and still bought houses.
 
rachmoninov3 is correct, the Physican Loan Mortgage is alive and well. My wife (PGY1) and I used it to purchase a home in Wisconsin. Our broker services WI, MN, MI, OH, and IL.

Match time is coming soon. Pass your boards, and start looking for a home. Pre-approval is quick, but underwriting after the offer is accepted takes a while. Everything can be done over email now so you can be finishing your final rotations while the ball is rolling on your purchase.

PM or call me if you want details. (view my contact info in my disclosure post)

I am a licensed Realtor, and specialize in First Time Home Buyers. I have posted my affiliation in the Finance and Investment section.

I'd be happy to analyze a market and a rent vs. buy scenario wherever you are going.

I am not your normal average annoying Realtor. I was Pre-Med, volunteered, worked in academia and industry, published several times, all the while working in real estate part time and loving it. I pulled the plug on my physician dreams to allow my wife to give her physician career 125+% all day every day.

Thanks,

Brian
 
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