Buying a house once matched for residency

[oci25]

Hello,
My wife and I are hoping to buy a house once we find out where we are going next year for residency and I was wondering what people usually had to do in order to get a mortgage and other tips they had for buying. Thanks for any help!!

I should also add that my wife is graduating from Physical Therapy School this year and will be looking for a job at that time wherever we go in case that factors in to your advice.

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[Khaos]

You can look into physician loans. These are loans with 100% financing without PMI. Bank of America, Suntrust, Compass Bank, and a few others will do this. I went through Bank of America after Suntrust gave me a few issues and wouldn't return calls or e-mails in a decent amount of time. Just contact the banks in the area of where you are accepted and ask about it. The banks do this because they know your potential earnings will increase in a relatively short amount of time and that physicians are very likely to pay their mortgage.

 

[filter07]

I recommend renting for a few months before buying a house if you're moving to a new area. This way you can really see what the neighborhoods are like, where your close friends will be clustered, where you will spend most of your time socializing, and so on. I bought just after driving through the town for a few days and although I'm satisfied with where I am, it is far from most of the restaurants I like to go to, and the friends I hang out with most often. During this time you can also see what your residency program is like. If they are unexpectedly intolerable in some way, you can always leave while you're renting. It's a bit more difficult if you have a house that you need to sell. Always have an exit strategy... that's my rule, anyway.

 

[hallam]

I recommend renting for a few months before buying a house if you're moving to a new area. This way you can really see what the neighborhoods are like, where your close friends will be clustered, where you will spend most of your time socializing, and so on. I bought just after driving through the town for a few days and although I'm satisfied with where I am, it is far from most of the restaurants I like to go to, and the friends I hang out with most often. During this time you can also see what your residency program is like. If they are unexpectedly intolerable in some way, you can always leave while you're renting. It's a bit more difficult if you have a house that you need to sell. Always have an exit strategy... that's my rule, anyway.

I wish I had read this excellent advice 6 months ago! We bought our house during a weekend visit to our new location, and we regret it now. Turns out, my boyfriend hates FP is going to be changing specialties/programs. He will be going through the Match again this spring. That means we may have to sell our house after only 1 year. NOT GOOD in this market.

I definitely recommend waiting a few months before you buy.

 

[gutonc]

I definitely recommend waiting a few months before you buy.

Agreed. This gives you the chance to do a few important things. First is to figure out the new town, where are the neighborhoods you want to be in, where are the good restaurants (or schools if you've got kids), where do your friends live, what areas are safe, etc. Renting for 6-12 months gives you a chance to explore the new place and not have to worry that you made a really bad choice on where to live.

Secondly, it allows you to view, firsthand, the local real estate market. If you think personal injury attorneys are scummy, just wait until you work with real estate agents. Most markets in the country are still trending downward somewhat or bottoming out right now. If you keep an eye on prices for the first 3 or 4 months you're there, you can get a feel for which direction things are going. You may not get the cheapest possible price but it's not like the prices will double in 6 months.

Finally, what if you get there and realize that you hate the place and want out as soon as your residency is over (3 years or so) or hate your program/specialty and want out sooner? I'm a PGY4, most of my IM intern classmates bought as soon as they moved here, in a market that was about 6 months from peaking. With one exception that I'm aware of, those who bought houses, then moved after finishing residency this Spring all lost money on their sales (or haven't been able to sell at all).

 

[bigDinLV]

I bought a house when I found out where I was going. Zero regrets at all. I got to town a few weeks before work and got settled in.

The mortgage process can be a pain in the butt. You'll need to supply a copy of your contract with your income, statements from your lenders saying your loans are deferred for at least the next year and all the other various crap. Quite a few hoops to jump through.

Talk to someone at your residency program, they might have a realtor they send people to regularly. I was lucky, my program directors wife was my realtor, she was absolutely great. Talk to the people at your program about the best places to live and where the places are with good schools for your kids (if you have any). If you have kids check greatschools.net (or .com?) or another site like that to do your reasearch. Google maps to see how far the house is from work, in case you have to live within a certain distance.

On the plus side of things, prices and interest rates are good right now. Buyer's market!!

 

[notinkansas]

If you've been paying attention to what's been going on in this country in the past year (maybe you've been busy, you have been in medical school, after all) I can't imagine why in the world you'd be willing to consider 100% financing. In fact, I would say slow down and evaluate if you are in a strong enough financial position to buy at all.

Since fall 2007 we have learned that real estate doesn't always go up.

Do you want to be stuck with a house in 3-4 years that's worth less than you owe? Could you sell such a house if you have a job in another city? Do you have student loan debt? Do you plan to buy a car(s) or still have payments on vehicles? Do you know how much interest your student loans will rack up if you defer them? Are you prepared for the maintenance involved in a house? What about the furniture you'll have to buy to fill it? What about property taxes? What about income taxes? Who will stay home from their residency when the heater breaks to wait for the repair person to come "between 1-5"? Do you have credit card debt? What if one of your cars needs a major repair- do you have money to cover that? Who will shovel the snow in the morning before you go in to round? Who will mow the lawn? Do you have a lawnmower? How will you buy one? Snowblower? Do you have your own washer/dryer, or do you plan to go to the laundromat? Do you know how much lawnmowers, washers and dryers cost?

I know, I know-- you don't want to "throw your money away" on rent. But it's not throwing money away. It's providing shelter for you, for a fixed period of time, for less overall cost (by the time you factor in maintenance/repairs, insurance, taxes.. renting is always cheaper than buying). Renting gives you flexibility to move when you need to move, not when your house sells. When the stove breaks you just call the landlord and they put in a new one. You don't have to shop for it, pay for it, or wait for delivery. Renting gives you time to build up savings and pay down other debt so that you are moving into your house with a solid financial foundation- not on a whim and a prayer.

And, like some other posters said.. what if you hate your city/residency and you wind up moving sooner than you expected?

Remember-there is NO guarantee that any house you buy will go up in value during you residency. Or ever. I'm not saying that you should never buy a house. Just do it at the right time.

 

[bigDinLV]

^^ very negative person there.

 

[Substance]

The answer to this question depends on your outlook.

If you plan on staying in the city of your residency for at least a decade or more, then buying a house isn't so bad an idea. In that timeframe, it is very likely that the value of the house will increase. Furthermore, you will have a lot of time to make valuable additions to the house to increase its value.

If you don't plan on staying in that city after your residency, or you haven't even been to that city and don't know the neighborhoods too well, I'd refrain from buying just yet. Actually, in the long term, assuming your residency is no longer than five years, and is lucrative out the back end, and you're not frivolous with your money, you likely would be better served by renting a modest dwelling until you start making attending bucks. Once you're making top cash, you could buy a house 100% down in a few years if you're smart. I've done the math and, in my case, it's gonna save me about 75k in the long run as compared to a mortgage. Consider it.

 

[Tone2002]

^^ very negative person there.

No he isn't at all, something people seriously need to think about before going even into more debt.

 

[sam1999]

There 2 thoughts:

1. Right now most appealing thing about buying a house is house prices are low in general overall and interest rates are low. Both are true.
There has been many studies showing over long period of time rise of interest rate correlate with low house prices as seller have to discount home price. Right now interest rates are low but they are going to stay low for ever as there is a talk of inflation coming in few years etc and banks are still unloading forcloseure or short sales home. So if you don't buy now you will not miss a great deal.

2. Most people have idea of home price going through the roof in late 90s and earlier this decade. That was some abnormal time frames as late 90s correlated with dot com boom and early 2000s with artificial low interest rates. I don't think one will see 10% a year home price appreciation per year any time soon.

One can say fairly assume there are 10% costs when you buy and sell a house esp. with mortgage. 6% is typical sellers agent commission rest is for the bank to protect the loan money which it has given to you to buy a house.

Residency is short time period and as a resident you have very limited income so you will not be able to buy a great house. I don't know where you will buying any way as there is great variations. Lets say if you want to stay in same city but your income will jump a lot from resident to attending and it is very possible you may not want to live in the same house.

It is all about money. Many people buy brand new expensive cars every 2 -3 years even when you know these car loose half of their value in that time period. If you have lots of money to spare then is different matter. In the end it depends upon your overall financial situation.

By the way i read recently that in Detroit one can buy a house for $5000 - $15000 but I don't think they will be in ritzy neighborhood etc. Some real estate markets are still over valued due to lots of factors high local employment like Detroit, over built like Miami etc.

 

[dotdash]

We bought a house last year when we found out where we were going to go. The mortgage was a HUGE hassle. The lender, Wells Fargo, wouldn't accept the residency employment contract because it had some language in it like "contingent on completing credentialing" (which was a rubber stamp from the residency program office that happened a week before residency started). Other lenders might not be so picky or maybe it's different this year, but make sure you talk to the lender ahead of time about what the underwriters (not just the sales guys) will need for income verification. That alone held up our closing for 2 weeks.

Other than that, we're happy about owning the house. We did some homework on the area we wanted to live. I wouldn't buy right off the bat unless you know what you want and know that you have found it. A *good* realtor is invaluable. Ask for someone who knows the area right around the hospital and does a lot of work with medical staff.

 

[45408]

I'm planning on buying a house once I match. My wife has been working all through my time in med school, so we've got money saved. One thing to keep in mind is that the $8000 tax credit for first-time home buyers is only going to carry through the end of April (at this point), so you'll have to move quite fast to buy a house once you know where you've matched.

Everyone's point is well-taken about not knowing neighborhoods and such, but since I'm applying for surgery, it will be pretty hard to go house-hunting once I've started. I'd much prefer to be moved in by the time July 1 hits.

 

[maxpower75]

Hi,
We just purchased a house, utilizing the physician loan. Unless things have changed, B of A is no longer carrying this program. We used Compass Bank (it is the only one that is available that I am aware of). It is a good deal in that you can put 0% down, and not have to pay any PMI.
You might be able to get a lower rate if you qualify for an FHA loan and can put the required amount down, however they often require previous employment, with the physician loan, you can use your contract as proof of employment, and they will lend based on the money you will earn (also helpful that your wife is working).
Good luck in your search!

 

[sam1999]

One thing to keep in mind is that the $8000 tax credit for first-time home buyers is only going to carry through the end of April (at this point), so you'll have to move quite fast to buy a house once you know where you've matched.

I think it has changed now. Contract has to be signed by April end NOT closing. So you will have 5 or 6 weeks for house hunting. Contract signing is usually fairly easy once you have found your house and done all preliminary work.

 

[oci25]

Thanks for all the advice!!!

 

[Atomic]

Sigh...hate to be another Debbie Downer, but I reluctantly have to agree with the poster above. I too was a "I'm so sick of throwing rent money away" type of person, and purchased a home. Little did I know that in the meantime, my residency would undergo MAJOR changes that were not in the best interest of the residents. I actually would have transferred to another program if I hadn't been tied down with a house.

Also in the meantime, all of my friends who rent have been paying back loans, and living a relatively non-stressful home life. I have been saddled with many small home repairs, which has eaten up more of my money. And the fear of some major problem (furnace, AC) happening has been omnipresent (the townhouse I live in is only a couple of years old, but still.)

That all being said, every situation is different. I just wanted to let you know that not everything always goes to plan, and to weigh your options carefully.

Best of luck to you!

 

[notinkansas]

I find it interesting anyone who points out that home ownership is not always a picnic is seen as being a negative downer.

Our culture has become an instant gratification buy whatever you want now without thinking about any possible ramifications culture.

I heard a piece on the radio the other day about how people who are unemployed in this recession are having a much harder time than they did in the recession of the 80s. Why? Americans have FOUR times the debt that they did in the 80's. And almost no savings.

Even though you are unlikely to be facing unemployment soon when you start residency - why would you want to be in a position where you have several hundred thousand dollars in debt and no savings? I doubt any financial advisor would say that's a smart move. And many real estate experts think that in many markets, housing prices won't bottom out for another 3-4 years.

Obviously anybody who wants to buy a house for no money down, 100% financing on top of six figure student loan debt on a salary of $40K per year, they will ignore any potential ramifications and do what they want.

But if you are willing to think for a bit, read the book "The Millionaire Next Door" This is a book that reports on studies of millionaires in the US. They got to be millionaires by being frugal, and saving money. They don't buy the latest car. They buy houses with 20% down in neighborhoods that they plan to stay in. They don't move frequently (every time you move, especially with buying and selling a house, costs you money). Basically, you can't accumulate net worth by conspicuous consumption.

Food for thought - you are NOT what you drive!