living off a resident salary

[Roadrunner]

Okay, every 4th year student is starting to think ahead about his/her financial situation and I'm one of them... For those of you who received "resident physician loans," i.e. little or no money down, no mortgage insurance, etc.-- how are you making it work financially? If you get a loan for $200-250K and finance the entire amount then you're paying $1300-1700 per month for your mortgage. If you make a net income of $2600-2900 then more than half of your income is going towards your mortgage payment. How do you do it? Either you live very frugally, you budget very closely, or there's something in the equation that I'm not getting...

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[toxic-megacolon]

Okay, every 4th year student is starting to think ahead about his/her financial situation and I'm one of them... For those of you who received "resident physician loans," i.e. little or no money down, no mortgage insurance, etc.-- how are you making it work financially? If you get a loan for $200-250K and finance the entire amount then you're paying $1300-1700 per month for your mortgage. If you make a net income of $2600-2900 then more than half of your income is going towards your mortgage payment. How do you do it? Either you live very frugally, you budget very closely, or there's something in the equation that I'm not getting...

That's the reason why many residents rent instead of buy. Who can afford a $2000 mortgage on a resident salary? No one, unless you are getting help from somewhere else (ie parents, roommates, spouse). Although in many cities, especially in the Southeast and Texas, you can buy a decent place for <140K. This translates to managable payments.

 

[geekgirl]

Okay, every 4th year student is starting to think ahead about his/her financial situation and I'm one of them... For those of you who received "resident physician loans," i.e. little or no money down, no mortgage insurance, etc.-- how are you making it work financially? If you get a loan for $200-250K and finance the entire amount then you're paying $1300-1700 per month for your mortgage. If you make a net income of $2600-2900 then more than half of your income is going towards your mortgage payment. How do you do it? Either you live very frugally, you budget very closely, or there's something in the equation that I'm not getting...

yes, please help. my head is starting to reel....

 

[skypilot]

or there's something in the equation that I'm not getting...

Get married. Don't have kids till residency is over.

 

[Gut Shot]

Although in many cities, especially in the Southeast and Texas, you can buy a decent place for <140K. This translates to managable payments.

In Houston you can buy a condo near the med center for about 110K. Doesn't sound bad, until you add in the condo fees (which tend to be very high) and the property taxes (which are absurd). A friend of mine did this and her monthly housing costs come out to $1,200 which is about half of her net income.

Tack on a car payment, insurance, utilities, etc. and you can get eaten alive pretty quickly. That's why I rent. I'm not building equity, but I'm also not eating Ramen and drinking Schlitz in some bare-ass condo until 2009.

 

[AngryTesticle]

Okay, every 4th year student is starting to think ahead about his/her financial situation and I'm one of them... For those of you who received "resident physician loans," i.e. little or no money down, no mortgage insurance, etc.-- how are you making it work financially? If you get a loan for $200-250K and finance the entire amount then you're paying $1300-1700 per month for your mortgage. If you make a net income of $2600-2900 then more than half of your income is going towards your mortgage payment. How do you do it? Either you live very frugally, you budget very closely, or there's something in the equation that I'm not getting...

Yeah more than half of my monthly pay goes towards paying off mortgage. However, my account took a big bump up when I got $1700 in federal and state tax refunds. Now, I'm gonna go to Vegas and gamble all that money away (well not all of it).

 

[Koko]

I'm not building equity, but I'm also not eating Ramen and drinking Schlitz in some bare-ass condo until 2009.

Hey, Schlitz makes a mean malt liquor. Ride the bull!

 

[trouta]

Getting a 200-250K mortgage on a residents salary is probably over-extending yourself. If you really want to buy something and are going to do it alone, you should probably shoot a little lower in terms of price.

Just as a guage, most mortgage companies expect you to spend about 40% of your salary on your mortgage payment. So more than 50% is probably way too much to be sustainable.

That being said, Im sure you could make it work if you lived on a tight budget. I guess it depends on your priorities.

 

[lateness]

Getting a 200-250K mortgage on a residents salary is probably over-extending yourself. If you really want to buy something and are going to do it alone, you should probably shoot a little lower in terms of price.

Just as a guage, most mortgage companies expect you to spend about 40% of your salary on your mortgage payment. So more than 50% is probably way too much to be sustainable.

That being said, Im sure you could make it work if you lived on a tight budget. I guess it depends on your priorities.

thats the problem, under 250 there isnt much in the bigger cities, at least things that are too nice

 

[usnavdoc]

One thing to consider is the possibility of moonlighting as extra income in your PGY2+ years. The rules are different program to program and state to state but you can make alot of extra money in a few weekends/mo.

 

[kbrown]

Getting a 200-250K mortgage on a residents salary is probably over-extending yourself. If you really want to buy something and are going to do it alone, you should probably shoot a little lower in terms of price.

Just as a guage, most mortgage companies expect you to spend about 40% of your salary on your mortgage payment. So more than 50% is probably way too much to be sustainable.

That being said, Im sure you could make it work if you lived on a tight budget. I guess it depends on your priorities.

I couldn't agree more. My only question is that all of these post re housing and cost of living are assuming that you are single or a single-income household.

I am hoping (crossing all appendages right now) that I end up on the East Coast. Cost of living sucks out there. BUT...I will be in a two-resident salary household. Do you think that that income could function if a 200-250K mortgage was purchased?

 

[lateness]

I couldn't agree more. My only question is that all of these post re housing and cost of living are assuming that you are single or a single-income household.

I am hoping (crossing all appendages right now) that I end up on the East Coast. Cost of living sucks out there. BUT...I will be in a two-resident salary household. Do you think that that income could function if a 200-250K mortgage was purchased?

i think so. two resident salary definitely.

 

[Roadrunner]

A slight correction and additional information. Most traditional lenders (i.e. conventional mortgage) will loan allow 38% of your net monthly income to be paid towards debts, like your mortgage, car payments, personal loans, etc. Unfortunately, most of us new interns won't be able to qualify for this kind of loan primarily because these lenders consider your student loans, even if in deferment, in your debt ratio.

There are some loans specifically for resident physicians (see mortgage links for further info). These loans are great because they don't make you buy mortgage insurance and you can put little or nothing down. And they allow a debt ratio of 45%.

I just did a calculation on Yahoo mortgage calculator and if you finance all $200K of a house then your monthly payment would be $1,264.14, then add another $80-100/month or so for your home insurance and property taxes and you're paying $1350 per month. On an average salary of $42,000/yr., gross monthly salary is $2800, which brings your debt ratio to 48%!! You've gone over...

The reason for my original question is that I'm wondering how residents who live in cities and own houses can afford it. In most places over 300-400K people you can't find a decent house for less than $200K. How do they/you do it?

Getting a 200-250K mortgage on a residents salary is probably over-extending yourself. If you really want to buy something and are going to do it alone, you should probably shoot a little lower in terms of price.

Just as a guage, most mortgage companies expect you to spend about 40% of your salary on your mortgage payment. So more than 50% is probably way too much to be sustainable.

That being said, Im sure you could make it work if you lived on a tight budget. I guess it depends on your priorities.

 

[TheThroat]

If you live in a bigger city, buy a condo! I have lived in Houston and there are plenty of places less than $150K.

Currently, lwe live in Iowa, and, of course, here there are plenty of houses under $130 that are big enough for families. My wife doesn't work, we have had two kids while in residency, and we live (usually) within our means.

All this talk of waiting to have kids until done with residency or having to get further in debt or having to moonlight, which is practically impossible in a surgical residency, makes me love living in a place that has a lower standard of living.

 

[Blade28]

One thing to consider is the possibility of moonlighting as extra income in your PGY2+ years. The rules are different program to program and state to state but you can make alot of extra money in a few weekends/mo.

That's what I plan on doing!

 

[pruritis_ani]

One of the things that attracted me to my program is the cost of living in the area. But, after looking into buying, I just had a very hard time justifying it. I would have needed to get 100% financing, and on a place that was 150k, I would have had a spendy mortgage, over $1000/month. Then I was thinking about taxes, insurance, and what the hell I would do if the roof blew off or the water heater exploded. I just wouldn't have enough in the bank to cover these disasters. Finally, I was thinking that in this market, which is pretty over-priced all over the place, there is a decent chance that I would barely break even at the end of 4 years, or worse yet, actually lose money!

So, I took another tack...I found a great apartment for about $600. I take the extra $400 that I would have spent on the mortgage and invest it. I still have a lot more money at the end of the month because I don't pay all the bills (water, trash, heat covered at my place) and I don't have the other non mortgage expenses. I have more time because I don't have to worry about upkeep or cutting grass. At the end of my 4 years, I have a little saved. Maybe no the upside potential of a big gain in house prices, but no downside as well. I don't have to stress about property values or broken pipes.

Really think it through. I wanted to buy bad, but I just don't think the stress and risk is worth it. Renting has a bad rap over all, but in a lot of ways it is superior for us that are going to be on a lower salary and in the area for a short time period.

 

[dawg44]

You can moonlight
You can live in a cheaper house
as stated earlier you can rent.
You can take out extra loan money your 3rd and 4th years.

 

[Idiopathic]

In most places over 300-400K people you can't find a decent house for less than $200K.

This is pretty far off base. Some places I have been looking (i.e. where I might match) include, Nashville, Birmingham, Jacksonville, Dallas, St Louis ALL have over a million people and all have areas where housing is very reasonable. Yes, you CAN pay 200k+, but I would feel comfortable paying 15-18% less and still feel like I am in a decent area. I also dont view residency as the time to necessarily worry about building equity (wont build any in the first 3-4 years, for the most part, anyway), so renting is not a bad idea, especially with the way interest rates are rising...although allegedly the housing bubble is going to 'burst' soon and then we will see prices dip. Hard to time that for when you need to buy, though.

the caveat: oston, Cali, NYC , even Baltimore...these areas will always be difficult to buy in (some attendings down own homes) But plenty of the 50 largest cities still have reasonable real estate prices.

 

[NinerNiner999]

We bought our home two years ago in Baltimore for $250k. My neighbor just sold hers for $350k. We do it on our combined salary and our total mortgage is about $1400. We decided to wait three years for kids (so she can stay home and I can see them) so life has been very good outside of residency. Baltimore housing prices are slowing down a bit, but will never drop. We expect to make $100-120k profit in our home (after closing costs) which we will easily roll over into a new home once I become an attending (allowing us to look at 500-600k homes straight out of residency). This is the only advantage of buying a home IMO, and with the market projected to remain stong, but slow down in the next couple of years, it may not be the best idea to buy now as a resident (Assume you will have to appreciate at least $20k during residency to cover closing costs when you sell).

 

[Koko]

Assuming your net loss from the sale and all payments into the home equal that of what you would have payed for in rent, why not still buy? Is there a tax benefit to such a "loss" as well?

 

[NinerNiner999]

There is a tax benefit in that you can deduct property taxes, points, and mortgage interest each year (which is most advantageous with interest-only mortgages). There is also a benefit to your overall credit rating, in that maintaining good credit through your mortgage financier can't hurt. Further, owning a home can reduce your car and personal property insurance if you are covered by the same company. Homes also qualify you for Home Equity loans, which can be helpful if you get in an emergency.

The negatives include HOA fees (which are not deductible), PMI (if you need it) which is not deductible, Utilities (which are much more expensive than an apartment), and risks (ex: if a water pipe breaks in front of your house and the street needs to be opened, you may be financially responsible). Buying in a market where your property value may drop could put you on shaky ground.

If I were entering residency now in the same market I was two years ago, I would definitely buy a home again. Ownership has been great for me! I'm not sure I would take the same plunge if I were single and facing this current market...

 

[Idiopathic]

I have owned a home for three years in a rather inexpensive housing market.

Mortgage on 110K is around 775, with 100/month property tax, 100/month homeowners, 20/month PMI - works out to 1000/month.

Add into that lawn care, hot water heater repair, AC repair, new appliances, and it works out to about 3 - 4k extra since we moved in, or a little over 100/month in incidentals.

We expect to make some money off our house, but not from equity paid in. We paid well below market value and any $$$ we recoup will be from appreciation. I believe we have only paid down about 6K in equity these three years, which will just about cover our realtor fee.

If I could rent for 100/month less than what I paid to buy, it would be a no-brainer, especially given all the incidentals. Also, every major economist says the housing bubble is about to burst - good if youre buying, but mortgage rates keep rising - bad if youre buying. Who knows where the lines will intersect for you

 

[Misterioso]

You can moonlight

How do you find the time to moonlight when you're already working 60-80 hours/week?

 

[NinerNiner999]

You work a little harder

 

[southcom]

All of these high prices for payments make me never want to leave Augusta, Ga. Gotta love the cost of living in the south, (excluding some areas (eg. Atlanta))

 

[mysophobe]

I'll probably just rent an apartment with a buddy.

 

[dawg44]

How do you find the time to moonlight when you're already working 60-80 hours/week?

You are talking to a surgical resident, 60-80 hours a week is PUD and doesn't happen at the better residencies. Only pus**** follow the 80 hour work week.

 

[Shah_Patel_PT]

Okay, every 4th year student is starting to think ahead about his/her financial situation and I'm one of them... For those of you who received "resident physician loans," i.e. little or no money down, no mortgage insurance, etc.-- how are you making it work financially? If you get a loan for $200-250K and finance the entire amount then you're paying $1300-1700 per month for your mortgage. If you make a net income of $2600-2900 then more than half of your income is going towards your mortgage payment. How do you do it? Either you live very frugally, you budget very closely, or there's something in the equation that I'm not getting...

When you are paying your loans off during residency, how much money can you claim as tax deductions for loan and interest payments????

 

[pinkeclipse]

bumping.... this is an interesting thread.

 

[Miami_med]

The standard for being able to afford a home is roughly 3x annual income. For two residents, annual income = ~$80,000. This, $240,000 should probably be the absolute ceiling. If you can rent, it is probably a better idea anyway. Your income will minimally triple when you are done. Buy a nice house then.

It was stated earlier that one can pay property taxes and insurance for $100/month. On much of the east coast, this is totally unrealistic. In Miami, a $250,000 condo would come with $500+/month in taxes + significant insurance (depends on location and beach proximity) and HOA fees will be between $150 and $700 month. Yes, it is possible to spend more on Taxes, Insurance, and HOA fees than the actual mortgage. Think carefully before putting your already debt ridden, financially exposed self in an even greater amount of debt risk with a mortgage.