how to get mortgage as incoming PGY-I

[Igor4sugry]

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I'm evaluating the idea of buying a home before starting medical school.

My wife and I are both med students with ~400k dept.

What are our options for getting a mortgage?
We won't see first paycheck until July.

 

[Fah-Q]

You have $400K in debt...and you want more debt??

Housing prices are still trending down. You would be a fool to buy a house now with that much debt. Find a cheap place to rent and start paying down your debt, which is probably at a much higher interest rate compared to a 30 year mortgage.

Don't buy a house. Seriously.

 

[Sol Rosenberg]

I'm evaluating the idea of buying a home before starting medical school.

My wife and I are both med students with ~400k dept.

What are our options for getting a mortgage?
We won't see first paycheck until July.

Your only option is probably a Physician Loan, as these loans do not take your student loans into account when calculating debt:income ratios. There are many threads about these in the Finance and Investment Forum, so you can start by checking them out there.

 

[ensuii]

You have $400K in debt...and you want more debt??

Housing prices are still trending down. You would be a fool to buy a house now with that much debt. Find a cheap place to rent and start paying down your debt, which is probably at a much higher interest rate compared to a 30 year mortgage.

Don't buy a house. Seriously.

I understand that paying off the debts are a priority...but you have to live SOMEWHERE. Renting in most cities for a couple would probably cost $700-1200/mo. If they rent, isn't that just money down the drain? I'm still an M3 but I've been thinking about the transition a little bit since I'm in the same situation. It just seems that with a mortgage, even though you would add debt to an already high figure, the money you would be putting towards housing would stay in your own pocket through equity as opposed to giving it to someone else.

 

[shantster]

I understand that paying off the debts are a priority...but you have to live SOMEWHERE. Renting in most cities for a couple would probably cost $700-1200/mo. If they rent, isn't that just money down the drain? I'm still an M3 but I've been thinking about the transition a little bit since I'm in the same situation. It just seems that with a mortgage, even though you would add debt to an already high figure, the money you would be putting towards housing would stay in your own pocket through equity as opposed to giving it to someone else.

There's a ton of good information in the finance forums. In general, buying a place is not a good investment for short term. Usually it's 5 years to even break even, and that's assuming that you are selling the place right away.

Besides mortgage payments, there's closing costs, monthly insurance if you put less than 20% down (may be different with physician loan, but the interest rate will still be higher without money down), taxes, utilities (your rental usually includes water and sewage and may include others - you're on the hook for all this as an owner), any upkeep necessary (your rental will cover if anything breaks and general maintenance - need a plumber, new roof, etc is on you), associated costs for selling, some cities also charge a sales tax on one or both ends, homeowners insurance (more expensive than renters). All those other expenses aren't "money in your pocket." If you move for fellowship or a job, you need to sell the place right away, which is not exactly easy unless the market goes up dramatically. You could either sell it for much less than you want or have to pay a mortgage for a house you aren't living in.

Really it's not a good investment for residency unless you can put some money down and have a long residency (6 or more years). Also, with the hours that you'd be working in those residencies, you won't have the time to put into the basic upkeep unless you have a spouse with better hours. Pay the rent, let others worry about the expenses, and be able to move as soon as residency ends. Don't buy until you have a real job.

 

[ensuii]

There's a ton of good information in the finance forums. In general, buying a place is not a good investment for short term. Usually it's 5 years to even break even, and that's assuming that you are selling the place right away.

Besides mortgage payments, there's closing costs, monthly insurance if you put less than 20% down (may be different with physician loan, but the interest rate will still be higher without money down), taxes, utilities (your rental usually includes water and sewage and may include others - you're on the hook for all this as an owner), any upkeep necessary (your rental will cover if anything breaks and general maintenance - need a plumber, new roof, etc is on you), associated costs for selling, some cities also charge a sales tax on one or both ends, homeowners insurance (more expensive than renters). All those other expenses aren't "money in your pocket." If you move for fellowship or a job, you need to sell the place right away, which is not exactly easy unless the market goes up dramatically. You could either sell it for much less than you want or have to pay a mortgage for a house you aren't living in.

Really it's not a good investment for residency unless you can put some money down and have a long residency (6 or more years). Also, with the hours that you'd be working in those residencies, you won't have the time to put into the basic upkeep unless you have a spouse with better hours. Pay the rent, let others worry about the expenses, and be able to move as soon as residency ends. Don't buy until you have a real job.

Makes sense, thanks for the info! 👍

 

[gutonc]

I'm evaluating the idea of buying a home before starting medical school.

My wife and I are both med students with ~400k dept.

What are our options for getting a mortgage?
We won't see first paycheck until July.

Go here first. Put in realistic numbers. At that point, figure out whether this is still a reasonable question to ask at this point in your life.

I love to revisit this calculator every time I think about wanting to move and/or buy a place. It's a great reality check. As an example, at my current rent (3B/1BA house), using the cheapest comparable house currently for sale in my zip code and assuming a 20% down payment (which I don't have), even after 30 years, renting is still cheaper. If I increase my rent by 50%, it puts the break even point at 10 years. If I keep my rent the same and broaden the search to the 4 surrounding zip codes, it takes 23 years before I break even.

 

[dynx]

Go here first. Put in realistic numbers. At that point, figure out whether this is still a reasonable question to ask at this point in your life.

I love to revisit this calculator every time I think about wanting to move and/or buy a place. It's a great reality check. As an example, at my current rent (3B/1BA house), using the cheapest comparable house currently for sale in my zip code and assuming a 20% down payment (which I don't have), even after 30 years, renting is still cheaper. If I increase my rent by 50%, it puts the break even point at 10 years. If I keep my rent the same and broaden the search to the 4 surrounding zip codes, it takes 23 years before I break even.

Not that I'm arguing in terms of buying but...these calculators are total pieces of ****.

Sure if you ignore any tax deductions of owning and assume that any extra money that you have free because you rented would be invested and make an 8% rate of return then renting comes out way ahead in almost every situation. That's not the case. For people that might really be in a position to own a home (not the OP) these calculators would incline you to make the wrong decision.

 

[Igor4sugry]

Thanks for all the replies.
Our situation is a little bit different. We are planning to have a live-in nanny and finding a 3bedroom; 2 bathroom place to rent is difficult. I'm talking about Columbus, OH.

I am aware that it is not the smartest financial situation, but I think some circumstances you just have to take a loss if it makes your day-day life better.
I think it is always wise to rent if you are single or no kids, in which case a small place for 700-800/mo is great.
Any thoughts?

 

[dynx]

Thanks for all the replies.
Our situation is a little bit different. We are planning to have a live-in nanny and finding a 3bedroom; 2 bathroom place to rent is difficult. I'm talking about Columbus, OH.

I am aware that it is not the smartest financial situation, but I think some circumstances you just have to take a loss if it makes your day-day life better.
I think it is always wise to rent if you are single or no kids, in which case a small place for 700-800/mo is great.
Any thoughts?

Go for it. What could possibly go wrong?
The live in nanny is a particularly good financial move.

 

[HondoCrouch]

So you've got ~400k in debt at probably 6-8% interest that you will likely not even make a dent in over the next 5 or so years.

And you want to add another couple hundred thousand on top of that.

And a live in nanny.

You are going to be a slave to debt your entire life.

You need some basic personal finance education badly.

 

[Adam638]

As someone in a similar position as the OP, one has to take a few things into consideration. Depending on your location, you can be expected to pay around $1,000 / child / month for daycare. Most of these daycare centers are open 7-5 PM. This is obviously not conducive to a resident's schedule. Therefore the options are limited, especially if moving to a new city without friends or family. Second, the option of the landlord selling the house or condo always exists. Nobody wants to move every 1-2 years. There aren't a lot of landlords willing to give long-term leases; at least not where I'm at. You have to look at everyone's situation before suggesting basic personal finance education. In any case, paying off the debt will take some time, but with two physician salaries it shouldn't be that big of an issue.

 

[ladybuggy]

As someone in a similar position as the OP, one has to take a few things into consideration. Depending on your location, you can be expected to pay around $1,000 / child / month for daycare. Most of these daycare centers are open 7-5 PM. This is obviously not conducive to a resident's schedule. Therefore the options are limited, especially if moving to a new city without friends or family. Second, the option of the landlord selling the house or condo always exists. Nobody wants to move every 1-2 years. There aren't a lot of landlords willing to give long-term leases; at least not where I'm at. You have to look at everyone's situation before suggesting basic personal finance education. In any case, paying off the debt will take some time, but with two physician salaries it shouldn't be that big of an issue.

I would also like to add another thing for consideration. Rent in some places can be as high as $1200 to $2500 for a 2-3 bedroom place (give or take obviously). However, mortgage costs of an equivalent size home can be as low as $400 a month.
Here is one example related to the location I am moving to: I will be paying rent $1350-1400 a month for a 3 bedroom apartment including utilities, etc. However, houses of the same size (or bigger) int he same area cost ~$650 a month for the mortgage after 20% down payment (including insurance, property tax and home owners costs, etc). So, you can actually save a lot by owning a home and that additional money you save could be applied to your student loans. So, you pay it off sooner.

However, personally, I opted out of purchasing a home in this area because I do not plan to be around longer than 4 years. And having to rent it out once I move is more trouble than it is worth for me. So, I decided to go with the nice 3 bedroom apartment.

Also, for a nanny, if you can do it, go for it.

 

[O2Doc]

Thanks for all the replies.
Our situation is a little bit different. We are planning to have a live-in nanny and finding a 3bedroom; 2 bathroom place to rent is difficult. I'm talking about Columbus, OH.

I am aware that it is not the smartest financial situation, but I think some circumstances you just have to take a loss if it makes your day-day life better.
I think it is always wise to rent if you are single or no kids, in which case a small place for 700-800/mo is great.
Any thoughts?

As you said, it's not like you have that many options. Childcare is completely unavoidable, and a live-in might cost as much as full-time daycare anyways (not to mention be way more flexible on timing - really, with 2 people in residency you pretty much need to have in-home childcare, your schedule will be much too erratic for normal daycare).

I know nothing about Columbus, OH, but house prices are still going down in some places, but in others they're either stable or creeping up. It's not like you're buying at the height of the market. In the end buying might end up costing you more, but maybe not earth-shatteringly more unless your house ends up needing all kinds of expensive repairs.

Which it could. That's the problem with owning houses.

 

[gutonc]

Not that I'm arguing in terms of buying but...these calculators are total pieces of ****.

Sure if you ignore any tax deductions of owning and assume that any extra money that you have free because you rented would be invested and make an 8% rate of return then renting comes out way ahead in almost every situation. That's not the case. For people that might really be in a position to own a home (not the OP) these calculators would incline you to make the wrong decision.

I'm not saying they're infallible or anything, but it's a good starting point. I don't think there's any real difference between a 3 and 5 year (or any 2-3 year) break even point. But you can't seriously argue that I could make up a 12 or 30 year difference in break even point with mortgage/property tax deductions, can you?

It's a starting point, not a final solution.

But we agree that the OP really isn't in any position to buy at this point. Assuming no massive infusion of cash from the folks or in-laws.

 

[meister]

depending on where you live buying a house can be cheaper than renting. especially in areas where there are a lot of foreclosures, everyone right now is renting. the big downside is paying property taxes and being responsible for the upkeep. that being said, if you wind up saving a couple hundred bucks a month, one big repair job could throw that down the drain.

if you use a physician loan, you can often get set-up for a loan with no money down, no mortgage insurance and possibly an ARM loan that is cheaper during residency. it's a big gamble though if you don't plan on staying in the area after residency as to whether or not you can sell it when you're done

 

[Fah-Q]

Thanks for all the replies.
Our situation is a little bit different. We are planning to have a live-in nanny and finding a 3bedroom; 2 bathroom place to rent is difficult. I'm talking about Columbus, OH.

It's not difficult at all. We (me, wife, 2 kids) rented a 3/2 in Upper Arlington for $1700/month and that is the priciest neighborhood in the city. You will find plenty of options in good neighborhoods for much cheaper.

I am aware that it is not the smartest financial situation, but I think some circumstances you just have to take a loss if it makes your day-day life better.
I think it is always wise to rent if you are single or no kids, in which case a small place for 700-800/mo is great.
Any thoughts?

Owning a house as a resident will certainly make your life worse, not better. You are correct that it is not a smart financial decision. You will be buying a depreciating asset that requires a massive amount of time and money to maintain, insure, and pay taxes on. Which part of that sounds smart? Wake up.

I agree with the above comment about personal finance education for you. Buy or book or something, man. Quick. You are clueless. I'm not trying to be mean. I'm just trying to get you to see how ridiculous your plan is.

By the way, no bank is ever going to lend you the money. So, this whole conversation is moot.

 

[Adam638]

By the way, no bank is ever going to lend you the money. So, this whole conversation is moot.

False. Plenty of banks offer Physician Loans. Google it.

Owning a house as a resident will certainly make your life worse, not better. You are correct that it is not a smart financial decision. You will be buying a depreciating asset that requires a massive amount of time and money to maintain, insure, and pay taxes on. Which part of that sounds smart? Wake up.

Certain areas of the country actually have homes that have been appreciating during this mortgage crisis. Depending on when the home is built, the amount of time and money to maintain can be negligible. Homeowners insurance is cheap and taxes are figured into your mortgage payment in most cases. I suggest you meet with a mortgage lender to go over the facts and get a realistic idea of costs.

 

[papillon2]

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[papillon2]

It's not difficult at all. We (me, wife, 2 kids) rented a 3/2 in Upper Arlington for $1700/month and that is the priciest neighborhood in the city. You will find plenty of options in good neighborhoods for much cheaper.

Owning a house as a resident will certainly make your life worse, not better. You are correct that it is not a smart financial decision. You will be buying a depreciating asset that requires a massive amount of time and money to maintain, insure, and pay taxes on. Which part of that sounds smart? Wake up.

I agree with the above comment about personal finance education for you. Buy or book or something, man. Quick. You are clueless. I'm not trying to be mean. I'm just trying to get you to see how ridiculous your plan is.

By the way, no bank is ever going to lend you the money. So, this whole conversation is moot.

What did you do for daycare? How did you manage 1700/mo rent with children and wife and student loans on resident salary?

I found other avenues to qualify for a mortgage.

Right now I can do an $800-900/mo mortgage for a 3br, 2.5bath house in nice area, and space for a live-in-nanny. I also support renting whenever possible. Right now thought it seems that buying is better. Rental prices are up quite a bit these days.

 

[Dirt]

This thread is like a roller coaster of advice.

OP the key to buying a house for you is not debt, it is cash in the bank. Yes there are physician loans, but I have heard from a number of sources that finding loans where you don't put 20% down, or pay a hefty PMI are very few and very far between.

If you have the cash to put 20% down and still have enough in the bank for 3 or so months of expenses, it usually makes more sense to buy. Granted you are probably talking about $40,000-60,000 in the bank here.

To those who are claiming it's stupid to get a mortgage when you have student debt, do you plan to wait until your loans are paid off to buy a house?

Under IBR, your payments are capped at a very reasonable amount until you make enough money for the combined mortgage and full loan payments to be affordable. It doesn't really matter if your student loans are $100,000 or $500,000. Now it does matter if your mortgage is more than you can afford but the banks usually don't allow that to happen anymore.

 

[lowbudget]

Don't buy as a med student. After 4 years of med school, there's no guarantee which residency you will be at; which means you want maximal flexibility in living situation. You don't want to be forced to sell if you don't want to, or be saddled with a mortgage you don't want.

 

[dragonfly99]

I don't know how expensive houses are in Columbus, but probably not that terribly expensive. It sounds like this is a 2 resident household, or at least w/2 people working. Personally I think that buying a house is a bad decision unless perhaps you and the spouse are both in long residencies, like 6-7 years, and are thinking of even staying in Columbus long term, etc. It seems like you could rent a house and it would probably be better, financially speaking...particularly if you don't have a significant down payment to put down. Those Physician Loans, if they are still around in your area, tend to come with a significant added expense...any loan where you aren't putting down 10-20% is going to have PMI which is basically another added expense on you that doesn't benefit you, but just insures the lender against people who default on their mortgages.
You won't build up much equity in a 3-5 year residency, and if the house doesn't go up significantly in price you'll likely lose money when you sell it.
Also, keeping up with things that go wrong with houses can be a pain...what if you have a yard problem or plumbing problem that has to be dealt with THAT DAY...and you and your spouse are both rotating on inpatient rotations. Who is going to take care of that? If you have a landlord it's on them. I guess if the nanny is reliable you can turf some of that stuff to that person...
If you can get a big down payment from somewhere, like if you have it saved or your spouse does, it might be doable, but I still don't think you should buy now.
You could just have less stress, rent a house or large apartment, and see how that does.
How long will your residency be?