Does buying a home impact need-based aid

[JohnMadden]

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Does anyone know if and how buying a home for medical school impacts institutional aid/scholarships?

For example, Hopkins has all need based scholarships that are subject to change each year. Will I get screwed over if I buy a home and receive less funding?

 

[sirus_virus]

Does anyone know if and how buying a home for medical school impacts institutional aid/scholarships?

For example, Hopkins has all need based scholarships that are subject to change each year. Will I get screwed over if I buy a home and receive less funding?

No

 

[GoGoPandaBot]

because you bought the home in a crashing housing market. However, I dont think it will effect your aid, especially if you went 100% LTV. If you put a down payment in, well, be prepared to see it vanish, and it will still show up on your net worth calculation until they mark your house to market value. Ouch.

 

[JohnMadden]

I'm not currently in the market for a home... However, there are going to be a lot of bargains for long-term home buyers within the next year or so. If the fed cuts rates this summer, you could get a benefit from a stagnant market and slighly lower rates...

I did want to see if anyone had a bad experience with financial aid because of purchasing a home.

 

[GoGoPandaBot]

It's going to be a few years...probably once med school is over there might be a buying opportunity.

 

[Sol Rosenberg]

Does anyone know if and how buying a home for medical school impacts institutional aid/scholarships?

For example, Hopkins has all need based scholarships that are subject to change each year. Will I get screwed over if I buy a home and receive less funding?

I believe that it might actually help you out as you are not required to include your primary residence as an asset on your FAFSA.

For a while, I was considering selling my pieces of rental property, which IS considered an asset (to take a profit -- not all housing markets are in the toilet right now) and putting all that cash into one new home. But I wondered what I would gain from it -- the 8k in Subsidized Loans? Doesn't really seem worth it (they are profitable properties. Some of them just barely, but overall profitable.) I don't think I will qualify for any real financial aid.

 

[Sol Rosenberg]

It's going to be a few years...probably once med school is over there might be a buying opportunity.

Buying opportunity is now, if you have the $$$.

Remember Business 101: Buy Low, Sell High, Collect Now, Pay Later (Only the 1st is really relevant if you are in the market for a home in a down market.)

 

[JohnMadden]

I believe that it might actually help you out as you are not required to include your primary residence as an asset on your FAFSA.

I was thinking about that. But Hopkins also requires the Need Access application, which could screw me over. I think the major problem would be the income associated with renting rooms to my classmates.

 

[Sol Rosenberg]

I was thinking about that. But Hopkins also requires the Need Access application, which could screw me over. I think the major problem would be the income associated with renting rooms to my classmates.

Oh the beauty of it all. Through some "creative accounting" you might be able to offset that income with "normal" expenses for your house (i.e. mortgage interest, prop. taxes, etc) to the point where it disappears. Since rental income (or loss) is accounted for on Schedule E, it shows up as INCOME. What I am trying to say here is that the deductions for rental property/rooms directly offset the rental income. It's not like normal deductions where the income is included in your AGI and then you write deductions against it (on Schedule A or whatever) later (FAFSA asks you to provide your AGI.) If you can use household expenses to offset your rental income, it never shows up as income.

Something for you to consider....

P.S. Obviously, nothing I am saying is in the context of the extra Hopkins application that you are talking about (which I know nothing about,) so that may, indeed, screw you over in the end.

 

[GoGoPandaBot]

Buying opportunity is now, if you have the $$$.

Remember Business 101: Buy Low, Sell High, Collect Now, Pay Later (Only the 1st is really relevant if you are in the market for a home in a down market.)

you are sorely mistaken...low will be in a few years. The carnage has just begun.

 

[gotmeds?]

Does anyone know if and how buying a home for medical school impacts institutional aid/scholarships?

For example, Hopkins has all need based scholarships that are subject to change each year. Will I get screwed over if I buy a home and receive less funding?

How needy could you possibly be if you're buying a house?

 

[JohnMadden]

How needy could you possibly be if you're buying a house?

VERY... Buying a home has nothing to do with need. In my opinion, paying 750/month in rent is the same as buying a 100K home (600 mortgage + 150 utilities/PMI/etc) and so on. To me, there isn't much difference from a short-term financial perspective. Adding a roommate obviously improves the situation.

Obviously there are risks/benefits of renting and buying.

 

[Topspin82]

I'm glad someone started this thread!

As my parents are getting older, they gave me and my sister co-ownership (I own 25%) of the house. We refinanced and got a 2nd mortgage to do some extensive renovations.

I have a lowly research salary + loans + God willing med school, even more loans + partial payment of the new mortgage

I'm curious to see how everything will pan out financially.

If I think about my finances too much, I start worrying like mad.

 

[jsnuka]

You do realize that your mortgage shows up on your taxes, right?

You turn in a FAFSA and your tax forms each year.

 

[lilnoelle]

Maybe it varies from school to school, but at my school, need based scholarships are based solely on parental income and they don't take student income into account. That sort of makes sense because a student will most likely not be working all throughout med school, and so a high percentage of the classes income will be zero for all four years of med school.
I wish they took student income into account in situations where individuals have been out of the house for years and have families of their own. Obviously those individuals have more than their own needs to supply at that point and are unlikely to get help from parents.

In my situation, my parents no longer claim me on their taxes and so they barely make more than the maximum for me to get need based scholarship. If I were claimed, I could get the scholarship. My family of four (me + hubby + two kiddos) make less than the max for need based scholarship for a family of four, but they don't take our income into account for need based scholarship, so I'm out of luck.


Oh, and I own a home and that info wasn't included in the FASFA application. Even in the situation of renters, as long as that home is also your primary place of residence, I don't think you have to put it FASFA application. (I mean you don't have to claim the home as part of your net worth, obviously you would need to claim the income made from your renters) I don't know anything about your "other" application.

 

[baylormed]

Does anyone know if and how buying a home for medical school impacts institutional aid/scholarships?

For example, Hopkins has all need based scholarships that are subject to change each year. Will I get screwed over if I buy a home and receive less funding?

It wouldn't. When you fill out your FAFSA, it will ask you to list any "investment properties", but it specifically tells you not to list the property in which you live, AKA your family home. If you have more than one house, then it may affect you, but otherwise it will not.

 

[gotmeds?]

VERY... Buying a home has nothing to do with need. In my opinion, paying 750/month in rent is the same as buying a 100K home (600 mortgage + 150 utilities/PMI/etc) and so on. To me, there isn't much difference from a short-term financial perspective. Adding a roommate obviously improves the situation.

Obviously there are risks/benefits of renting and buying.

I think you're missing my point. No doubt it's a good investment and will save you money in the long-term. But if you actually have the money to be able to buy a home, then you're not all that needy. Most people who pay $750/month on rent would love to be spending that money on a mortgage instead but can't afford the down payment on a house. Luckily, I'm pretty sure that your home-ownership won't be taken into account on your FAFSA, but it's still a little bit of a strech to play the starving student if you own a home.

 

[JohnMadden]

I think you're missing my point. No doubt it's a good investment and will save you money in the long-term. But if you actually have the money to be able to buy a home, then you're not all that needy. Most people who pay $750/month on rent would love to be spending that money on a mortgage instead but can't afford the down payment on a house. Luckily, I'm pretty sure that your home-ownership won't be taken into account on your FAFSA, but it's still a little bit of a strech to play the starving student if you own a home.

You don't NEED a down payment to buy a home...

 

[gotmeds?]

You don't NEED a down payment to buy a home...

Sure, if you have a very well-paying job and good credit. Once again, "starving student" doesn't fit into this category. "Student with rich parents" does. But then again, the latter isn't someone who I'd say is exactly hurting for need-based aid.

 

[JohnMadden]

No one is trying to play the "starving student". The fact of the matter is that schools will assess financial need based on their predetermined algorithms. Schools that require NeedAccess (e.g. Hopkins, Duke) or similar applications get even more information to weed out anyone who is trying to "get over"...

You don't need a high paying job to get 100 LTV loan or similar products (80-10-10, etc). If you have a solid credit history and reasonable assets, then it's possible. The key is that your assets need to be tied up into retirement accounts (IRAs, 401-K, 403b's) so that they don't count against you on the FAFSA. For those who are married or been out of school for a while, this is reasonable.

 

[Dianyla]

Sure, if you have a very well-paying job and good credit. Once again, "starving student" doesn't fit into this category. "Student with rich parents" does. But then again, the latter isn't someone who I'd say is exactly hurting for need-based aid.

But, consider how many nontrad applicants are out there who do have reasonably well-paying jobs and good credit and already own homes. Most likely they will have to quit that well-paying job in order to attend medical school. Just because they don't need help now doesn't mean they won't need help during 4 years of non-income-generating med school.

 

[Dookter]

But, consider how many nontrad applicants are out there who do have reasonably well-paying jobs and good credit and already own homes. Most likely they will have to quit that well-paying job in order to attend medical school. Just because they don't need help now doesn't mean they won't need help during 4 years of non-income-generating med school.

That's not the sort of "need" schools are looking for. ALL medical students have that kind of need. Medical school is expensive, and we all "need" some money to pay for it. That is why we take loans to cover that "need." It may be a drastic change of lifestyle for a non-trad who has a good job already....but that's life. The students that get the most need-based aid have no money themselves and their parents really have no extra money to give them either. They haven't had high paying jobs, their parents usually haven't had high paying jobs, etc. That's just the way it works. I'm not arguing for or against that system, but you need to realize that this is generally how need is defined. In the end this helps level the debt load for students.....

EDIT: And as for having home ownership wreck your finaid.... if you actually are in the "needy" category on the forms schools like Duke and Hopkins use, you probably will not have much $$ for a down payment. So you'll get a huge, long loan. Then you'll be getting nailed in interest, and the amount of equity you build during medical school will probably not have much of an effect on your financial aid even if they were to directly calculate that as an asset.

 

[gotmeds?]

No one is trying to play the "starving student". The fact of the matter is that schools will assess financial need based on their predetermined algorithms. Schools that require NeedAccess (e.g. Hopkins, Duke) or similar applications get even more information to weed out anyone who is trying to "get over"...

You don't need a high paying job to get 100 LTV loan or similar products (80-10-10, etc). If you have a solid credit history and reasonable assets, then it's possible. The key is that your assets need to be tied up into retirement accounts (IRAs, 401-K, 403b's) so that they don't count against you on the FAFSA. For those who are married or been out of school for a while, this is reasonable.

We seem to be having a bit of a miscommunication here. Entirely my fault, I'm sure. I wasn't trying to argue the finer points of real estate investment. That's obviously not my area of expertise. For all I know, "LTV" is what people in Mexico call their television sets. All I'm saying is that if you can afford to buy a home, you've got very little claim to say you're being "screwed" out of need-based aid for the simple reason that you're not needy. Whether or not you can find some loophole to convince the schools that you are needy, is a whole different matter. And I'm not even going to argue that by doing so you are screwing over the people who actually are needy because there is a limited amount of need-based institutional funds. Oh no. I won't even go there.

 

[dpmd]

I think you are misunderstanding the concept that you can have parents that don't make much money, and a low income yourself (therefore meeting most schools criteria of needy), but still find creative financing in order to buy a house. For example, I was paying 1250 a month in rent (I had a roommate that lost her funding-she was from Africa so no student loans- and had to move out). My income was the 200 or so a month that I got by going to my Army Reserve weekends. I was considered needy enough to get my full subsidized loans and a perkins loan despite my big merit scholarship. I took out the max I could in loans and used that money to buy a condo that costs me 1000 a month. I would still have been considered needy (as my situation was not really different, except for who the money was being paid out to), were it not for the fact that I then got married to someone who made enough to make me no longer eligible for perkins loans (but I still got my full subsidized loan). Just because you have little money should not mean that you have bad credit, and your creditworthiness shouldn't affect how needy you are considered (since it is a reflection of your decision making, not your financial status).

 

[mshheaddoc]

Does anyone know if and how buying a home for medical school impacts institutional aid/scholarships?

For example, Hopkins has all need based scholarships that are subject to change each year. Will I get screwed over if I buy a home and receive less funding?

Simply call and ask their financial aid office. I think that is the only way you can get a "straight" answer. Many pre-meds aren't in the same situation as yourself.

If you are getting a 100% LTV loan in an area that isn't worried about values then I think its actually a good investment. You're thinking ahead and not wasting money on rent. Especially in that market. We did the same thing (not in that area though) and also some students even keep their homes as investment properties later on and rent to med students (if its in the right area).

If you are purchasing a home right now though you are going to have a few issues to hurdle.
1) Income, if you have income most likely your "need" that you are looking for isn't really there - meaning full-ride scholarships based on need. That doesn't mean you can't maybe qualify for perkins or something like that
2) Credit - if you don't have enough tradelines you will need your parents to co-sign
3) closing costs, unless you do a FHA which will allow you to roll the closing costs in. They can run you a couple thousand dollars.

I don't see how it would affect your financial aid b/c its a leveraged asset (if they ask what you have - it would probably mean equity which you'd have none).

And yes, many "need" based loans ARE based on your parents income. Your purchase shouldn't make a difference.



Oh and I'm moving this to the finance forum as well 🙂

 

[JohnMadden]

That was a very valuable post. I appreciate it.

 

[mshheaddoc]

No problem. That's why I'm here 🙂

 

[scgroat]

Let's turn this question around. Does applying for a student loan affect one's ability to purchase a home? I've gotten mixed answers thus far. I believe, though, that student loans do not hurt your credit (unless, of course, you default on your loan). I've also done some online navigating to no avail. Any advice is greatly appreciated.

 

[mshheaddoc]

Yes, student loans WILL hurt your credit. Usually its not a whole lot but equifax doesn't have a distinguishing of student loans and loans and that will usually be your lowest credit score. So if you have $200K in debt in student loans your credit will be worse (most likely) than if you didn't take out any loans (all other things considered). Hope this helps. ANY debt will affect your credit rating.

 

[scgroat]

Thanks! I guess I'm still a bit confused, though. I know that the three credit bureaus formulate your score slightly differently,and, perhaps the way they report student loans is one way they vary. Either way, many lenders take the average of your scores, which means that any dip would lower your credit. I hate not knowing exactly how this process works.

 

[mshheaddoc]

Lenders usually only use 1 score for many of their evaluations (at least with student loans) but if its not high enough you can request them to pull all 3 (we've had this happen actually!).

While the score if formulated slightly different (and not all reports might have the same information which is why its IMPORTANT to check your credit yearly https://www.annualcreditreport.com/cra/index.jsp!

The process isn't all that of a mystery and if you have any questions feel free to start a new thread and we'll answer them the best that we can.

 

[scgroat]

Hey. Thanks again for the help. I've since had the chance to speak indepth with a mortgage guy that I trust and have answered many of my own questions. For instance, a credit score can be used for up to 120 after it has been pulled. Why is this important? Because people can get their credit pulled by a loan officer and then apply for financial assistance. You then don't have to worry about your credit score dipping slightly. Bear in mind, though, that each state may have slightly different regulations.

 

[hilseb]

But, consider how many nontrad applicants are out there who do have reasonably well-paying jobs and good credit and already own homes. Most likely they will have to quit that well-paying job in order to attend medical school. Just because they don't need help now doesn't mean they won't need help during 4 years of non-income-generating med school.

Exactly where I am going to be. We have a nice home loan, a nice car loan, and no assets, and I am starting med school in the fall. My husband will be working, but he is a public school teacher (ha ha ha ha...sigh. Yeah, we don't value teachers).