Does anyone happen to know at what point you can buy a house based on your residency income? Do you have to have several months of pay stubs available, or is your match letter and contract enough? When do you normally sign the contract? Thanks!
Buying a house in residency
- Thread starter RedPeony
- Start date
- Joined
- Dec 21, 2007
- Messages
- 2,085
- Reaction score
- 2,948
You can buy a house at any point if you have the money. Contract letter is enough, and it was sent to me around mid april I think (I'm sure this will vary based on the program).
A note of caution - it's usually not a good investment for a resident to buy a house. If you're buying it so you dont ever have to move or it gives you some other intangible fine, but people seem to think that they're just going to sell the house for a profit after 5 years of building equity or something.
- Joined
- Aug 14, 2006
- Messages
- 1,326
- Reaction score
- 671
I am not sure about that cautionary advice. If you have good credit and some backup money saved up you are not in bad shape. There are Dr loans out there, no down payment, 5 year fixed then adjustable, no pre payment penalty, reasonable interest rate. Basically they are banking on the knowledge of your income trajectory and job security. If you finish residency and home values go down, you're protected by bigger income.
The biggest downside is maintenance costs which might bite you like, ooh look roof leak and AC system needs replacement, etc. Home inspections are far from infallible.
The biggest downside is maintenance costs which might bite you like, ooh look roof leak and AC system needs replacement, etc. Home inspections are far from infallible.
- Joined
- Feb 18, 2009
- Messages
- 329
- Reaction score
- 16
You can buy a house after you match. You don't even need a contract, just an official letter stating when you will start and what your income will be. This is what we did and didn't have any
problems.
problems.
Last edited:
- Joined
- Dec 21, 2007
- Messages
- 2,085
- Reaction score
- 2,948
Having more income does not "protect you", those are unrelated things. Just because you make 200K more does not mean that you didnt lose money on your house, wtf.
I agree with all the stuff before that, those are facts but they do not change the fact that buying a house is often a net loss if you're going to sell after <5 years. "Dr Loans" are often predatory and bank on physicians being financially stupid. "Doctor" anything is often going to be predatory.
- Joined
- Oct 22, 2013
- Messages
- 25,523
- Reaction score
- 40,121
I know they have special doc mortgages. Like anyone, credit aside from your educational debt matters, credit burden overall, as well as down payment.
I would really look hard at anything that doesn't want a down payment. Variable rate? Yuck.
Look at white coat investor online maybe. That's what I would do. Always, when you actually match it is a good idea to contact the program. They usually have agents they know, or residents who know agents, or even houses that have been passed down graduating resident to incoming intern multiple times! That can actually lead a to good deal for both actually. Usually if there's an agent that works with a program they're not going to be sheisty as when they work with that group they know it's a small circle which is what they're relying on. That said, trust nobody.
I know someone who bought a house, hated intern year, switched programs and made even. Granted, location and timing and a million things matter for that.
The thing on buying the house is to know that you are stuck with the mortgage until you sell it, which you cannot control exactly. Period. You might do OK in that you could rent it, are able to swing 2 mortgages with your next job, or rent and pay that mortgage. Some people don't "make money" and some even lose, but sometimes what happens is you spend less than if you had rented. Sometimes you lose even more than that though because you have to remove the asbestos. And sometimes you lose your shirt because they build a prison down the street.
Do your homework.
And ditto "Doctor Deal" usually = predatory
I would really look hard at anything that doesn't want a down payment. Variable rate? Yuck.
Look at white coat investor online maybe. That's what I would do. Always, when you actually match it is a good idea to contact the program. They usually have agents they know, or residents who know agents, or even houses that have been passed down graduating resident to incoming intern multiple times! That can actually lead a to good deal for both actually. Usually if there's an agent that works with a program they're not going to be sheisty as when they work with that group they know it's a small circle which is what they're relying on. That said, trust nobody.
I know someone who bought a house, hated intern year, switched programs and made even. Granted, location and timing and a million things matter for that.
The thing on buying the house is to know that you are stuck with the mortgage until you sell it, which you cannot control exactly. Period. You might do OK in that you could rent it, are able to swing 2 mortgages with your next job, or rent and pay that mortgage. Some people don't "make money" and some even lose, but sometimes what happens is you spend less than if you had rented. Sometimes you lose even more than that though because you have to remove the asbestos. And sometimes you lose your shirt because they build a prison down the street.
Do your homework.
And ditto "Doctor Deal" usually = predatory
- Joined
- Oct 22, 2013
- Messages
- 25,523
- Reaction score
- 40,121
But yes where there's a will there's usually a way for a resident to buy a house, good idea or not. No you don't need paystubs.
- Joined
- Aug 14, 2006
- Messages
- 1,326
- Reaction score
- 671
Protect you in the sense that a loss would have much less impact on your life. You could still lose. 4 years of equity also helps.
Whether it's predatory or not depends on the terms. Mine is far from predatory. Basically an equivalent deal to a traditional mortgage except no down payment and arm. Of course I can refinance at any time with no penalty.
Whether it's predatory or not depends on the terms. Mine is far from predatory. Basically an equivalent deal to a traditional mortgage except no down payment and arm. Of course I can refinance at any time with no penalty.
- Joined
- Dec 21, 2007
- Messages
- 2,085
- Reaction score
- 2,948
Well then why not just buy a ton of stock in travel agencies and bear stearns you're protected by your income.
Did you actually compare your mortgage and shop around? Guarantee it's not "equivalent".
I can't even
- Joined
- Aug 14, 2006
- Messages
- 1,326
- Reaction score
- 671
I can give you some information, and you can all draw your own conclusions. No need to get worked up.
We did shop the loan, as a matter of fact. Here were the advantages of the Doctor loan:
1. No down payment
2. No mortgage insurance required
3. No pre-payment penalty
Here are the disadvantages:
1. Slightly higher interest rate
2. Adjustable interest rate
3. Required to be your primary residence
Running the math, disadvantage #1 was offset significantly due to advantage #2 (e.g. monthly interest difference similar to monthly cost of mortgage insurance). Of course you'd have to compare your loan options to see how this works out for you, and your financial situation & down payment affect whether you need mortgage insurance. Disadvantage #2 is significantly offset by advantage #3. My plan, if I keep the house, is to refinance at some point before the rate adjusts to a fixed rate loan. Since there is no pre-payment penalty, this will not cost me anything. The gamble here is that interest rates in the future are unpredictable, and interest rates in the present are historically low.
Thinking about advantage #1, having the cash in your pocket gives you significantly more financial flexibility than having it be tied up in home equity. If you wanted, you could put that money into the house. However, home equity might not be your best investment. It doesn't draw a return in itself, it only protects you from paying interest on that portion of the principle. You might argue, in case of ending up upside-down on the home, you'd be better off having no equity because the bank might write off the difference in a short-sale situation. Although, the combination of finding yourself underwater and financially unable to eat the loss in the bank's eyes seems highly unlikely.
The rest of the question comes down to a broader question, is it a good financial decision to buy a house in residency? That's too individual to answer as a whole. The biggest argument for doing so is that all the money you would spend on renting goes to the ether, and the much of the money you spend on a home goes into an investment which has the potential to be returned, or even returned with profit. No one can predict the housing market, and I won't try to, so I offer no opinion on the risk involved or likelihood of potential gain.
I worded my statement about being protected by future income very poorly. However, projecting your future income as a physician in training is about as reliable as you can get in projecting future income. Using that to inform the amount of financial risk you take in residency seems reasonable to me, especially when you consider that you would otherwise be throwing away 10s of thousands of dollars in renting a home. Without doubt, the potential loss owning a home is greater than the known loss in renting. Only you can decide if the likelihood of less loss than renting or gain is high enough to take the risk. This is not under any circumstances equivalent to investing money in anything else, because it is also something that you use and would spend a great deal of money using even if it were not an investment.
We did shop the loan, as a matter of fact. Here were the advantages of the Doctor loan:
1. No down payment
2. No mortgage insurance required
3. No pre-payment penalty
Here are the disadvantages:
1. Slightly higher interest rate
2. Adjustable interest rate
3. Required to be your primary residence
Running the math, disadvantage #1 was offset significantly due to advantage #2 (e.g. monthly interest difference similar to monthly cost of mortgage insurance). Of course you'd have to compare your loan options to see how this works out for you, and your financial situation & down payment affect whether you need mortgage insurance. Disadvantage #2 is significantly offset by advantage #3. My plan, if I keep the house, is to refinance at some point before the rate adjusts to a fixed rate loan. Since there is no pre-payment penalty, this will not cost me anything. The gamble here is that interest rates in the future are unpredictable, and interest rates in the present are historically low.
Thinking about advantage #1, having the cash in your pocket gives you significantly more financial flexibility than having it be tied up in home equity. If you wanted, you could put that money into the house. However, home equity might not be your best investment. It doesn't draw a return in itself, it only protects you from paying interest on that portion of the principle. You might argue, in case of ending up upside-down on the home, you'd be better off having no equity because the bank might write off the difference in a short-sale situation. Although, the combination of finding yourself underwater and financially unable to eat the loss in the bank's eyes seems highly unlikely.
The rest of the question comes down to a broader question, is it a good financial decision to buy a house in residency? That's too individual to answer as a whole. The biggest argument for doing so is that all the money you would spend on renting goes to the ether, and the much of the money you spend on a home goes into an investment which has the potential to be returned, or even returned with profit. No one can predict the housing market, and I won't try to, so I offer no opinion on the risk involved or likelihood of potential gain.
I worded my statement about being protected by future income very poorly. However, projecting your future income as a physician in training is about as reliable as you can get in projecting future income. Using that to inform the amount of financial risk you take in residency seems reasonable to me, especially when you consider that you would otherwise be throwing away 10s of thousands of dollars in renting a home. Without doubt, the potential loss owning a home is greater than the known loss in renting. Only you can decide if the likelihood of less loss than renting or gain is high enough to take the risk. This is not under any circumstances equivalent to investing money in anything else, because it is also something that you use and would spend a great deal of money using even if it were not an investment.
- Joined
- Oct 22, 2013
- Messages
- 25,523
- Reaction score
- 40,121
wow now I see why no one reads my posts & complains
that's OK, the people who really need to see this will read it & if they don't **** them
without having read this, gotta say
"but I thought variable interest rates on home loans were uber yucky and was what collapsed the economy last time"
keep in mind, doctor not an economist
that's OK, the people who really need to see this will read it & if they don't **** them
without having read this, gotta say
"but I thought variable interest rates on home loans were uber yucky and was what collapsed the economy last time"
keep in mind, doctor not an economist
- Joined
- Aug 14, 2006
- Messages
- 1,326
- Reaction score
- 671
Oh my that's a whole other can of worms. The system failed basically because a variety of practices led to gross overestimation of investment value of property (on the bank's side). ARMs are one of the incentives that encouraged people to buy houses, and many of those loans should not have been permitted because loan providers absolutely mis-perceived their risk.
But, just because ARMs contributed to a system failure requiring market correction, does not mean that ARMs are inherently bad for the loan holder. They make it easier for the consumer to buy a home in the current market. The problem exists only if the consumer doesn't have good financial backing. I suspect it's a small incentive to act now, pay later built into the loan because they realize that doctors have much more income security than nearly everyone at the same salary level. This way they can offer a slightly lower interest rate to start, and make more money on the back-end with people who are too lazy to refinance or don't recognize when it's in their best interest.
But, just because ARMs contributed to a system failure requiring market correction, does not mean that ARMs are inherently bad for the loan holder. They make it easier for the consumer to buy a home in the current market. The problem exists only if the consumer doesn't have good financial backing. I suspect it's a small incentive to act now, pay later built into the loan because they realize that doctors have much more income security than nearly everyone at the same salary level. This way they can offer a slightly lower interest rate to start, and make more money on the back-end with people who are too lazy to refinance or don't recognize when it's in their best interest.
- Joined
- Mar 6, 2005
- Messages
- 22,169
- Reaction score
- 19,427
Remember over here when you gave this guy a ration of s*** for talking out of his butt? That's what you're doing here.
Interest only balloon mortgages (interest only for 1-5 years then principal+interest resulting in monthly payments of 3-5X the initial), sub-prime lending ($750K mortgages for people with credit scores of <600) and no-doc mortgages ("I make $150K/y and have no credit card or other consumer debt...trust me) nuked the housing market (and were partially responsible for the overall economic meltdown).
But ARMs? They're just a tool. And they can be a powerful tool when used correctly. They can be misused. Or poorly understood. But they weren't the problem in the economic disaster.
- Joined
- Oct 22, 2013
- Messages
- 25,523
- Reaction score
- 40,121
except I acknowledged that I didn't know what I was talking about, thereby inviting input to correct me
the other poster did not
and what I said was clearly meant to be a joke, a joke at my own expense highlighting my ignorance on the topic at that, one I meant to invite comment, which @thoffen provided a very thoughtful one at that
I forgot to end that statement in my post above with a question mark
this is why my posts are so long, every statement has to be backed up with a damn citation, disclaimer, etc etc etc
also I love how you bring up a different example from another thread that as I pointed out is dissimilar, so your point there isn't a good at all you just felt like ripping on me was all
the rest of your post was on point and helpful, I thank you
the other poster did not
and what I said was clearly meant to be a joke, a joke at my own expense highlighting my ignorance on the topic at that, one I meant to invite comment, which @thoffen provided a very thoughtful one at that
I forgot to end that statement in my post above with a question mark
this is why my posts are so long, every statement has to be backed up with a damn citation, disclaimer, etc etc etc
also I love how you bring up a different example from another thread that as I pointed out is dissimilar, so your point there isn't a good at all you just felt like ripping on me was all
the rest of your post was on point and helpful, I thank you
Last edited:
- Joined
- Jun 12, 2012
- Messages
- 205
- Reaction score
- 216
It depends on the lender and type of loan you are seeking.
Lenders have to securitize the debt so the more assets you can prove, the higher your income, and the higher your credit scores, the better your chance of getting the loan on more favorable terms.
Traditional lenders, like banks and credit unions, usually like to see proof of income, tax returns, lots of assets and few liabilities.
The requirements for doctor loans are far less onerous based on the extremely low rate of default for physicians: a contract or a pay stub or 2 may be all that's required.
Since fellowship, I've had a doctor loan, 30 year fixed loans, 5/1 ARM's, a few refi's, a few HELOC's, developed some real estate, and have also paid all cash.
In today's market, if I were a resident, I wouldn't buy a house unless I knew I was going to stay in it for at least 7-10 years. Given that the "normal" appreciation of a house is about 3%/year, that amount of time increases the likelihood of making a few quatloos.
I play Monopoly with real buildings, have passed "go" and collected my $200, and have gone directly to jails.
- Joined
- Dec 14, 2007
- Messages
- 3,266
- Reaction score
- 806
+1
There is a lot of money lost to real estate agent(s) both when you sell and then buy the property. You are going to easily lose a lot, if not most of your possible gains if you only hold the property for 5-years. Plus you are on the hook for interest and maintenance which aren't near zero.
If you are planning on staying in the area, then ok buy. But realize you might want to upsize that house when you are an attending. So you might end up wanting to sell before it's profitable.
- Joined
- Oct 22, 2013
- Messages
- 25,523
- Reaction score
- 40,121
Are condos any better as far as having higher turn around? They seem like less of a liability as far as getting them sold or rented but as I have disclaimed, I have more vague questions about financial stuff than answers.
- Joined
- Sep 26, 2002
- Messages
- 10,909
- Reaction score
- 1,156
Not necessarily. Some condos come with restrictions on renting where you need approval from the HOA to rent out. HOAs in general are also reportedly a PITA. Quality of condos also vary -- lots in my city are just converted apartment buildings with thin walls, etc. It would suck to be stuck owning a condo in a noisy building with obnoxious neighbors. In my city, lenders were also asking for more money down for condos as they were actually perceived to be a higher risk. I don't know if that's still true, but it was just 2 years ago.
- Joined
- Jun 12, 2012
- Messages
- 205
- Reaction score
- 216
I have owned a couple of condos/townhouses. As to how quickly they sell, it really depends on the local real estate market and available inventory. Two sold within 3 months, one took over a year.
- Joined
- Feb 6, 2016
- Messages
- 36
- Reaction score
- 9
I am not a money guy by any means. But, if I had 100K for downpayment for 300K home, what mortgage plans should I consider? Should getting a dr loan be helpful in this case? Should I get a home or a condo? I just don't like condo bc of HOA fees. My goal is to make an investment. Thanks.
- Joined
- Jun 12, 2012
- Messages
- 205
- Reaction score
- 216
- Joined
- Sep 1, 2008
- Messages
- 6,399
- Reaction score
- 6,244
It really depends on the market and length of ownership. I did the analysis and bought at the beginning of residency.
6 years later, I sold it for 30k profit. If I include equity instead of rental $ loss, I'm even more ahead.
Buying a house is a huge investment, and it should be thoroughly investigated before purchase.
6 years later, I sold it for 30k profit. If I include equity instead of rental $ loss, I'm even more ahead.
Buying a house is a huge investment, and it should be thoroughly investigated before purchase.
WHAT?!! 5/1 ARMs are the resident's best friend. You're not going to be there for more than 5 years. Lock-in the lower interest rate with the ARM. An interest-only option, if you can get it, is another situation that residents can uniquely benefit from. Rent the house from the bank for cheaper than it would cost to rent from a landlord and deduct the interest from your taxes.
Just make sure you don't get kicked out of residency.
- Joined
- Sep 19, 2011
- Messages
- 4,832
- Reaction score
- 14,382
I bought my condo 2 months before starting residency. Probably one of the best financial decisions I've made. Caveats of course being that I am in a 7 year program and intend on staying in the area that I am in residency. Also, we bought at the bottom of the housing melt down and a property that went bankrupt during construction and the government was having a fire sale, so we bought it at half of what they were originally asking for...
Maybe 1/4 of our residents own their property.
Maybe 1/4 of our residents own their property.
- Joined
- Sep 28, 2010
- Messages
- 253
- Reaction score
- 21
Buying is all situation dependent. I purchased with a 5/1 ARM. Where I moved, inventory was low for rentals, especially ones that would allow a large dog. To rent, I would have been starting around $1500 for a 1200 sq ft townhouse. By purchasing, my total monthly cost with mortgage, HOA, Taxes, insurance is less than $900 a month for a 2400 sq ft townhouse. That's 600 less per month plus 250 a month in equity. I had 2k in closing costs. If I sell without profit in 3 years, even if I use a Realtor to sell I am looking at a savings of over $15,000 compared to what rental costs would have been. It would take a lot of maintenance issues to cause me to have to spend that much over 3 years. It has also allowed me to make changes to the property that make my life more comfortable that I would have been unable to do in a rental.
- Joined
- Feb 6, 2016
- Messages
- 36
- Reaction score
- 9
We are couple matching to Boston area hopefully and have kid(s), it's our dream to get a townhouse there. My question is when is the good time to close the deal? Before starting PGY1, during PGY1 or PGY2?
- Joined
- Jul 27, 2013
- Messages
- 38,617
- Reaction score
- 76,045
If you plan on living in the area and would like to have a rental property in the future, it isn't a terrible idea. You can buy a house in CT, for instance, with a mortgage for far less than rental costs- a 3br/2ba house runs <600 a month on the cheap end of things, while a rental or apartment with the same beds/baths starts around 1400. Sure, it won't be your forever home, but it can be a good start to a real estate portfolio.
- Joined
- Jul 27, 2013
- Messages
- 38,617
- Reaction score
- 76,045
Boston market is going to be pricey. I'd run the numbers on what the premium for buying versus renting is, then make out a budget to see how affordable things will be before jumping into anything. If you can afford it, go all in year 1, but that's a big if in Boston.
Arch Guillotti
Senior Member
Staff member
Administrator
Volunteer Staff
Lifetime Donor
20+ Year Member
- Joined
- Aug 9, 2001
- Messages
- 9,914
- Reaction score
- 7,341
You aren't protected from possibly losing a significant amount of money though.
- Joined
- Aug 22, 2005
- Messages
- 3,077
- Reaction score
- 3,293
There is no guarantee that you can sell your house, or get your money back. It is a POOR financial investment if you will be living someone less than 5 years. You typically break even around year 4, and you may make a small profit thereafter. But you also assume more risk if you can't sell your house. It's just something you don't want to worry about when you are planning on transitioning to your first real job.
I get it...you want to own a home. It's a lifestyle decision. Don't worry...you'll get to own one soon enough, but don't do it until you become an attending.
I get it...you want to own a home. It's a lifestyle decision. Don't worry...you'll get to own one soon enough, but don't do it until you become an attending.
Similar threads
