Medical student home loans?

[bruinrab]

My parents may be able to help me with a deposit and I have good credit, so I was thinking about buying a place to live instead of renting. A friend of mine who is med school said that a Bank of America rep told her that they have mortgage programs specifically for medical students. Anyone know of other lenders who have this type of program?

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[mpp]

One that I know of is the Merrill Lynch Credit Corporation for members of the American Medical Student Association (you'll likely become a member the first week of medical school as they will give you a free Netter Anatomy Atlas for joining).

The difficulty in being approved for a mortgage while in medical school is that you don't have an income (unless you have a spouse and then this post is moot). Most lenders will not consider student loans as income.

One solution (if you have good credit) is to look for a no-doc loan, a loan for which you provide no documentation of income. Your interest rate will be a bit higher but at least you will qualify.

Another solution of course is to have your parents (or someone else) buy the home for you and then you pay the mortgage. Although you'll miss out on the tax deduction for mortgage interest in this way, that tax deduction generally amounts to nothing in medical school since you'll likely have no income and hence nothing to deduct the interest from.

Try the Merill Lynch program or the B of A program you mentioned and get back to us and let us know how it worked out.

 

[jojo88]

Another possibility is an FHA loan...it does not require you have a job and your downpayment (3%) can be gifted to you(it doesn't have to come from your savings)

 

[beriberi]

uhhh... every FHA loan I know of requires a job. AND you are required to put down some of your own money (you can get a gift for the down payment, but gift forms have to be filled out AND your own money has to be part of the mix.

There is a much better thread on this in the general residency forum.

Bank of America's loan is limited to only a few states.

 

[ophtho1122]

Get an FHA loan with a parent as a cosigner. Get your parent to claim the interest deductions on their taxes and give them back to you, assuming you make all the house payments.

 

[Dr. Cat]

Does anyone know what states the Bank of America program is available? I can't find any medical student program on their website. You might look into the FHA Kiddie Condo loan, which involves using a cosigner, but its purpose is for students looking to buy a house, so it doesn't matter if you have a job.

 

[jojo88]

uhhh... every FHA loan I know of requires a job. AND you are required to put down some of your own money (you can get a gift for the down payment, but gift forms have to be filled out AND your own money has to be part of the mix.

There is a much better thread on this in the general residency forum.

Bank of America's loan is limited to only a few states.

Maybe I got a different FHA loan...but I have not had a job for over a year and did not have to fill out gift forms..and got a FHA loan..but I did have a cosigner

 

[jojo88]

Get an FHA loan with a parent as a cosigner. Get your parent to claim the interest deductions on their taxes and give them back to you, assuming you make all the house payments.

can a cosigner (parent) take mortgage interest deductions on more than one house? (say their own and yours)

 

[ophtho1122]

Yes, your parent can claim mortgage interest deductions on two homes. Many people own more than one home these days so it isn't so unusual for this to happen.

 

[beriberi]

When you have a cosigner, that person is assuming full responsibility for the loan should you choose not to make payments. So, you could not have a job, be mentally incompetent, deal drugs to small school children and get a very good FHA (or other) loan---if you had someone responsible to cosign.

FHA loans without a cosigner require a job, some credit history and some money of your own (though much less than other loans.) They also require that your total debt service (car payment, student loan payment and house payment) be less than 41 percent of your gross (that is the highest percentage allowed among different loan types, which make FHA loans easier to get for some people).

 

[wrigliarows]

...

 

[mpp]

I've heard of them as a scam to get you to pay a higher interest rate.

On the first four or so years of your 30-year mortage (the time while you are in medical school) most of your mortgage payment is interest anyway (more than 80% of your payment is interest at the beginning of the loan).

My advice would be to get the lowest interest rate for house that you can afford. If you know you will be moving in 4 years, get a 4-year ARM. If you think you might stay for residency, get a nice low fixed rate 30-year or 10-year ARM. Stay away from things that sound too good to be true.

 

[jnh99]

I am looking to buy a house before medical school, but even if I found a house today I would only close on the house end of july.

What should I do If I don't want the downpayment on the house to count as savingson my fafsa.

 

[wrigliarows]

I've heard of them as a scam to get you to pay a higher interest rate.

On the first four or so years of your 30-year mortage (the time while you are in medical school) most of your mortgage payment is interest anyway (more than 80% of your payment is interest at the beginning of the loan).

My advice would be to get the lowest interest rate for house that you can afford. If you know you will be moving in 4 years, get a 4-year ARM. If you think you might stay for residency, get a nice low fixed rate 30-year or 10-year ARM. Stay away from things that sound too good to be true.

Interest only loans are not a scam, they are intended to give you the lowest possible monthly payment to get you into your house. However, they dont allow you to pay down the principal, thus, you build up no equity. Every ARM loan that I have seen is still more expensive than an FHA loan. My delima is whether or not I want a cheaper monthly payment but build no equity, or pay a little more a month with the FHA loan and build equity. Does anyone have an opinion. I plan on getting out of the house once I graduate anyway, 4 years from now.

 

[DoctorWannaBe]

Every ARM loan that I have seen is still more expensive than an FHA loan.

What do you mean by this? If the interest rate is lower, which it should be on an ARM, it will cost less per month and you'll build more equity because the interest rate is lower (assuming you're not doing an interest only loan). I've looked into FHA loans and they all had higher interest rates, thus higher payments and less going into equity than with a 3, 5, or 7-year ARM.

 

[hillofbeans]

If your main reason to buy a house is:

I'm tired of paying rent money each month when I could be building equity in a home.​

Then my advice is ... don't do it. The house will probably appreciate in that time, and you will build some equity; but 1) you will have to put a lot of money into the house upfront (down payment, closing costs, furnishings), 2) 60 to 80 percent of your house payment is still going to interest or taxes, 3) you will have to give 6% of the selling price to realtors, and 4) things break all the time and you have to fix it.

The best reason to buy a house is if the non-economic benefits are very important to you right now. If you have small kids who need a backyard, or you love to knock down walls and remodel, then maybe buying a home is right for you.

Kind of like being a physician-- yes, you can make some money, but if it's not something you really love, then its not worth the huge hassle.

 

[mpp]

FHA loans are nice when there are no other options, but in today's mortgage market boom you might be eligible for a mortgage + home equity loan such that you will not have to pay the PMI/MIP that is required with FHA loans and get a better rate than an FHA loan. Shop around, and figure things out dollar per dollar (including closing costs, points, PMI/MIP, and any other fees) to see which is the cheapest way to go. For example, Countrywide, one of the largest national lenders, has the following rates for my area this week (all no points):

FHA 30-year fixed 6.25
Regular 30-year fixed 6.170
FHA 1/1-ARM 4.493 (only ARM they offered in an FHA loan)
Regular 5/1 ARM 4.473

FHA isn't always the best deal, just sometimes the only deal. And don't forget that for the above rates you'll have to add PMI for the FHA loans (the government does that for you by increasing the principal) or you can go with the regular loans and just get a home equity to make up for what down payment you don't have.

 

[gaf]

.... However, they dont allow you to pay down the principal, thus, you build up no equity....

You do have equity if the property appreciates. Okay, so you don't "build it up" as much as it appears on your door step, but it's still equity. On the other hand, if the market contracts, you are upside down.

If you're going to spend four years paying interest only in a hot market, you will make money. (Anyone buy a real estate in Metro DC four years ago?)

 

[wrigliarows]

The reason I am going to do an FHA is that I have been unable to find any type of ARM loan (5, 7, or 10) where I dont have to put any money down. Plus, unless you put down 20% you still have to pay PMI on an ARM loan. The PMI for an FHA loan is alot lower than a private loan. The only loan program that comes close to the FHA is the 80%/20% ARM's, but still my blended rate would be above the convential FHA rate of 6.25%. I am going to get into a house with an FHA loan w/ no money down and no out of pocket expenses such as closing costs. The FHA loan can be up to 97% of the purchase price and the remaining 3% will be "gifted" to be by the seller through programs such as Ameridreams or Neighboorhood Gold.

I appreciate everyone's advice, if anyone still thinks this is not the best idea I would love to hear your thoughts.

 

[ophtho1122]

I don't know much about interest only loans, but be careful before you sign into one. I've heard a lot of interest only programs lock your payment but do not lock your interest rate. So, if interest rates go up, your payment stays the same but the extra money you now owe adds to your principal. If this happens, you'll owe more than the house is worth when you go to sell.