Interest only physician's loan in Pennsylvania?

[sevensandeights]

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I posted this in the general forum but since I'm starting my anesthesia residency (PGY2) in July, I figured I'd put it in here also:

I just got done with a full mortgage application through Bank of America. I was 100% sure that I was told it had an interest only option only to find out today from the underwriter that it does not. Needless to say - I am WAY pissed off. 😡 I researched these loans for a month before going with BOA but now I need someone else because I can't afford the extra $175/month principal payment.

I already know that Suntrust and Compass bank offer interest only loans but they can't help me in PA. After speaking with them, I thought that Wachovia only deals with docs that are out of residendy but after reading the "mortgage" thread this does not seem to be the case.

My credit score is in the high 700s and I'll be making $39k as a PGY2 starting July 1rst. The house we are buying is $183k. Here's what I'm looking for:

5/1 ARM
Interest only option
100% financing
No PMI

Names and numbers of specific agents will be most helpful and appreciated.

Thanks!

 

[Fiend]

I can understand you dilemma, but interest only loans have gotten a lot of press lately but may not be a good deal for many primary home buyers. You are basically paying to rent, and you will not recoup anything if your house barely appreciates by the time you get out of it. Last I heard, Philly was not one of the top housing markets (although there may be neighborhoods in Philly that are pretty hot).
We are looking at doctor loans, but have you considered 80/20 or 80/10/10 piggyback loans? Also, for some loans, you can tack the PMI into the mortgage (which doesn't help as much with your monthly payments) but will allow to deduct more on your federal income tax if you itemize.
Also, if you can get a relative (i.e. the 'rents) to shell out a loan for your downpayment, that would be great b/c then you have the gamut of lenders without having to worry about pesky PMI.
Let us know what happens and good luck.

 

[bubalus]

Call around to some of the brokers. You might try Lending Tree or Quickenloans. I know Countrywide has 5/1 interest only loans. It's going to be a challenge to find an interest only with 100% financing and no PMI. You might be able to get an 80-20 or 80-10-10 with some combination of principal and interest only.

Many of the loan officers I talked to financed their homes with interest only loans. I went this route because I've only got 3 more years to contribute to a Roth before I make too much money, and I'd much rather have the extra money growing tax free rather than have it not growing as a principal payment. In addition, you won't pay off all that much principal after 3 years.

Good luck.

 

[sevensandeights]

First off - I will be in Pittsburgh and not Philly.

As for the interest only deal I think it's the only way to go. I will only be in this home for a maximum of 4 years but most likely only 3 years (no fellowship if the job market remains strong!). It makes no sense to dump $10k into a house as a downpayment because you are only going to make about 2-3% (standard real estate appreciation rate) per year on that.

I have plenty of $ for a down payment (savings and equity from my current home) but I am going to keep it where it's at (in the market) and continue to earn my 8% per year rather than pull it and use it as a down payment.

I have had no luck with 80/20 loans because the 20 is always an adjustable rate. That scares the crap out of me considering the fluctuation in rates over the last 2 months alone!

 

[thegasman]

He's right, interest-only isn't a bad deal for the short term if you do expect your house to appreciate. If you are only in it a few years on a regular mortage the vast majority of your payments go towards interest anyway so you will still make very little progress towards your principal. With interest only you save the 150 bucks that would go to principal.