Mortgage Hunting Thread

Discussion in 'Clinical Rotations' started by Goofy, Mar 22, 2002.

  1. Goofy

    Goofy Senior Member

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    Now that our fates are sealed for next year, it's time to think about moving into a new place. For many of us, that means conning a bank into giving a poor physician a mortgage with little to no down payment. I have seen certain web based services that specialize specifically in applicants in our particular situation, but have lost the addresses. If anyone has started either started or completed the mortagage hunt process, please share any useful information, insight, web addresses so that we all might benefit.

    I am relatively new to this process, but have some information. It seems that banks are willing to lend between 2-3 times your salary for a mortgage. For those of you with dual income, this is quite encouraging. The problem is that most banks want some sort of downpayment, in the neighborhood of 10-20%. You can do no downpayment mortgages, but generally the rates are higher unless you find one of the specialty services I alluded to above.

    Again, please share your insights with the group so that we all might benefit.
     
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  3. mpp

    mpp SDN Moderator
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    Try <a href="http://www.physicianloans.com" target="_blank">www.physicianloans.com</a>
     
  4. gem777

    gem777 Senior Member

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    I've found that most mortgage lenders require a minimum of 5% down. Of course, you have to pay monthly mortgage insurance. Additionally, it seems that local banks that do not sell their mortgages on the open market tend to be more accomodating to the new resident with outrageous debt. Many mortgage lenders also require proof that you have been granted a deferment on your student loans.

    My question is this: How much mortgage is a good idea, considering your student debt load? Is it a good idea to buy "more of a home" at the expense of paying less on your monthly student debt? For instance, if you can manage to pay $700 a month on your debt if you continue to rent, but you if you buy a home you could only pay $300 on your debt - is that a sign that perhaps you should not be buying the home?

    I've been debating this one. My husband and I have found a home that we absolutely love. But if we do not purchase it, we would be able to pay a larger student loan payment. On the other hand, if we buy that home, we will have a great place to live, but take longer to pay back the debt. I really want the debt to disappear, but I also want to live a little.
     
  5. surg

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    I would recommend checking with your education office for your residency since they probably already know local lenders that may be ummm... understanding... of your situation.
    In general, you should expect to put at least
    3% down. If you are a first time home buyer I believe that Fannie Mae has special allowances for this type of loan. As far as how much to spend, I would recommend, spend less than the bank allows. (They will allow an extraordinary amount sometimes if your credit is pristine) If your situation changes (read: kids or a second income going away, etc.) then being able to
    swing it on one salary will make a huge difference in your stress levels. Good luck.
     
  6. Goofy

    Goofy Senior Member

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    </font><blockquote><font size="1" face="Verdana, Helvetica, sans-serif">quote:</font><hr /><font size="2" face="Verdana, Helvetica, sans-serif">Originally posted by gem777:
    <strong>I've found that most mortgage lenders require a minimum of 5% down. Of course, you have to pay monthly mortgage insurance. Additionally, it seems that local banks that do not sell their mortgages on the open market tend to be more accomodating to the new resident with outrageous debt. Many mortgage lenders also require proof that you have been granted a deferment on your student loans.

    My question is this: How much mortgage is a good idea, considering your student debt load? Is it a good idea to buy "more of a home" at the expense of paying less on your monthly student debt? For instance, if you can manage to pay $700 a month on your debt if you continue to rent, but you if you buy a home you could only pay $300 on your debt - is that a sign that perhaps you should not be buying the home?

    I've been debating this one. My husband and I have found a home that we absolutely love. But if we do not purchase it, we would be able to pay a larger student loan payment. On the other hand, if we buy that home, we will have a great place to live, but take longer to pay back the debt. I really want the debt to disappear, but I also want to live a little.</strong></font><hr /></blockquote><font size="2" face="Verdana, Helvetica, sans-serif">Gem,

    Your assesment about downpayments seems correct. I have found several brokers that offer no downpayment, and even one that does it without requiring mortgage insurance. Unfortunately I lost that link. I am starting to pursue this process in earnest and will share any info I learn.

    It seems that most want at least 15% down to avoid mortgage insurance however.

    Paying off the debt is indeed nice, but having a place to call 'home' is sensational. I have come to terms with my debt and don't want to wait 6 more years before home life begins, so I'm opting for the latter choice. Those are six years I will never ever have again. Money can always be earned at some point, but 6 wholesome years of home life is priceless, at least in my opinion.

    Let me know what you decide to do. Maybe we will have a joint housewarming. :)

    P.S. The link to the physician lender at the top of this thread is only applicable to certain states. They do not have a national presence, and certainly not in my neck of the woods.

    I have amassed a list of useful sites to help in the process, here they are:

    <a href="http://www.doctorsfirst.com/links.html" target="_blank">http://www.doctorsfirst.com/links.html</a>

    <a href="http://www.doctorloans.com/asp/index.asp?page=home.asp" target="_blank">http://www.doctorloans.com/asp/index.asp?page=home.asp</a>

    <a href="https://siren.safe-order.net/towermortgagecorp/physicianloans/frameset/frames_contact.htm" target="_blank">https://siren.safe-order.net/towermortgagecorp/physicianloans/frameset/frames_contact.htm</a>

    <a href="http://www.pmdnet.com/" target="_blank">http://www.pmdnet.com/</a>

    <a href="http://www.webcom.com/pgi/homebuy.html" target="_blank">http://www.webcom.com/pgi/homebuy.html</a>

    <a href="http://mommd.medcareers.com/resources/onlineresource.asp?Category=Relocating&audience=seeker" target="_blank">http://mommd.medcareers.com/resources/onlineresource.asp?Category=Relocating&audience=seeker</a>

    <a href="http://www.residentphysician.com/" target="_blank">http://www.residentphysician.com/</a>

    I am going to ask the owners of the DoctorPalm Yahoo group to include these sites, as well as others I find in their directory. Hope this is helpful to someone out there.
     
  7. Ligament

    Ligament Interventional Pain Management
    Physician Lifetime Donor SDN Advisor Classifieds Approved

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    hey all,

    PLEASE keep this thread going! I am in the same situation. I will contribute as I find useful info.

    Regards!
     
  8. Neurogirl

    Neurogirl Resident Extraordinaire

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    Just an FYI for those who might be interested. You all qualify for a $10,000 resident relocation loan. The loan is deferred until the end of residency, along with your other student loans. All you have to do is call them and give them a little info. After you are approved (EVERYONE gets approved), they send a promisary note which you sign and return. You get the check within 2-3 weeks. I'm sorry I don't have the phone number, but you can get it via the AMSA web site. It seems like the number is 1/800-key-loan. Don't quote me though.
     
  9. Future GI Guy

    Future GI Guy Hoo Hoo....

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    Neurogirl,

    Question. I am not a member of AMSA. Does one have to be to receive that relocation loan?

    As for mortgages. A good friend of mine is a mortgage officer and he says that you can get virtually any loan if you have an M.D. behind your name. Seriously, (if it's not an exorbitant amount of money) banks will take a 3 year risk (residency) for a physician. Perhaps it is a mistake on their part, but they can justify it by the promise of more income in a relatively short period of time.

    That said, the advertisements for

    <a href="http://www.lendingtree.com" target="_blank">http://www.lendingtree.com</a>

    keep jumping into my mind as a place to start.

    I've also heard that

    <a href="http://priceline.com" target="_blank">http://priceline.com</a>

    has a mortgage service now. I used them a couple times for hotel rooms and I was EXTREMELY happy with their service. I don't think that the mortgage service is 'binding' like the travel service is, because if you find a better rate somewhere else, they'll give you $300.00.

    Okay, good luck and congratulations on matching. I can't wait until this time next year when I need to start thinking about this stuff.
     
  10. callowna

    callowna Junior Member

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    Wachovia offers zero down mortgages without requiring mortgage insurance. I think you can also put the closing costs in the mortgage e.g. instead of lending you 100% of the cost of the home they can lend you 103% to cover the closing costs. They also offer special accounts for resident physicians that include a ton of free services like free checks, interest bearing checking with no minimum balance, a personal banker, etc.

    As for the relocation loan, whoever services your regular medical school loans probably offers the relocation loan as well. If not MEDLOANS which is through AAMC offers it to any 4th year med student.
     
  11. Goofy

    Goofy Senior Member

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    This is turning out to be one of the most useful threads on this forum. Thanks for all of the contributions!

    Neurogirl, thanks for the info on relocation loan. I bet with a little bargaining we might even be able to get more. Every little bit towards a downpayment is useful.

    I am also going to be speaking with wachovia on Monday regarding there no insurance, zero down loans. It sounds like a very good deal, so I am somewhat suspicious. Having said that Wachovia has a history of offering some of the best rates on revolving credit.

    I will keep everyone posted.
     
  12. Goofy

    Goofy Senior Member

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    A little bit of research has yielded quite a bit of information. Wachovia is now merged with First Union, so I'm still not certain of the status of these no down payment/no mortgage insurance loans. I can tell you that First Union does have one of the best sources of information I have found, including this MUST READ article for anyone purchasing a house, especially the trusting intern to be:

    <a href="http://personalfinance.firstunion.com/pf/fpg/0,2915,714_972_974_981,00.html" target="_blank">http://personalfinance.firstunion.com/pf/fpg/0,2915,714_972_974_981,00.html</a>

    If anyone has any other advice, please do share.
     
  13. Goofy

    Goofy Senior Member

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    Neurogirl,

    One quick question, is this relocation loan a part of the 5000 interview loan or an entirely different beast? Thanks in advance.
     
  14. miami

    miami Junior Member

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    I have been working on a mortgage for a month now and this is what I found out so far:

    I applied for a 120K loan through physicianloans.com (1-877-913-6286). The lender is actually called Tower Mortgage Company. They have many options, but I chose the
    80/20 plan. That is 0% down and no PMI (private mortgage insurance). Most banks
    require PMI if you put down less than 20%. You can usually stop the PMI after you
    accumulate 20% of equity (takes about 1-3 years) PMI is about~$100 a month which is
    added to your mortgage payments. On my loan, there is no PMI but you have to pay the
    closing fee's which can be 3-7K depending on the cost of the house. First Union (now
    Wachovia) has a similar plan but the APR is higher. I would suggest you call Tower
    Mortgage Company and speak to a representative. I spoke with Tal (ext 119) and he was
    very helpful. Good luck. BTW, for some good general info try checking out Buying a
    Home for Dummies. Hope this helps

    Miami MSIV NSUCOM
     
  15. Goofy

    Goofy Senior Member

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    Miami,

    Thanks for the info. I contacted physician loans directly. Unfortunately they are not licensed in all states so they wont be able to help me :(.

    Were you able to haggle on closing costs at all? In my neck of the woods, houses go for 200-250 with closing costs almost 20k it seems. If I could work that into the deal I might be able to save a significant amount of money.

    It seems that you have found an excellent deal. The 80/20 means that you are getting two seperate loans, with one being a higher rate, correct? If so, will the actual rate really be higher than what Wachovia, AKA First Union is asking for?
     
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  17. blotto geltaco

    blotto geltaco Old-timer

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    </font><blockquote><font size="1" face="Verdana, Helvetica, sans-serif">quote:</font><hr /><font size="2" face="Verdana, Helvetica, sans-serif"> That is 0% down and no PMI (private mortgage insurance). Most banks
    require PMI if you put down less than 20%. You can usually stop the PMI after you
    accumulate 20% of equity (takes about 1-3 years) PMI is about~$100 a month which is
    added to your mortgage payments. </font><hr /></blockquote><font size="2" face="Verdana, Helvetica, sans-serif">Unfortunately, accumulating 20% equity will likely take a lot longer than 1-3 years, especially with 0% down - assuming a 30 year mortgage which is what most people get. If you look at an amortization schedule, very little goes toward prinicipal payments in the beginning of the life of the loan. You pay off the principal quickly towards the end. Banks want their interest payments and to minimize their risk.

    PMI is a headache and I would avoid it however possible. It is also a way for the mortgage companies to fleece you. Some time back there was an uproar because it became widely known that lenders did not have to notify borrowers when they reached 20% equity. In some cases, people paid PMI for years when they were not legally required to do so.

    Buying a house can be a nasty business. There are ALWAYS unexpected snags and costs that come up at some time or another. Closing is the worst when you are blindsided with some new fee. You have no rcourse except to pay when you are that far along in the game.

    One word of advice, though it may sound impractical for those in serious school debt. Make extra principal payments once a year (specifically principal payments). This can can 10+ years off a 30 year loan if done regularly. It is a pain, but saves tons in the long run. It's the same reasoning I use when I put 2K in my IRA every year, no matter how painful it is.
     
  18. hurl2002

    hurl2002 New Member

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    Has anyone called the number for the relocation loan? I haven't had a chance to try it yet and was wondering if the number was correct. I have not been able to find anything on AMSA's web site about relocation loans. Does anyone have a link where I can find this info?
     
  19. tedsadoc2002

    tedsadoc2002 Senior Member

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    This post is to answer one question and clarify another.

    Clarification on the point made by neurogirl, I wished it were true that they approved everyone, but I was recently denied the relocation loan. I checked my credit rating and though it was high, I recently had a negative report for a bill that was sent to my old address and it wound up in collections because it was held at the post office and not returned to the sender.

    Answers to questions posed by Klebsiella and hurl2002: There is a separate 10,000.00 relocation loan (separate from the one for residencies). The web address is <a href="http://www.key.com." target="_blank">http://www.key.com.</a>
     
  20. Voxel

    Moderator Emeritus

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    Paying off the mortgage earlier is not necessarily the best idea. This is because one gets a interest deduction and this makes the equivalent interest rate paid to be lowest rate on can get for purchasing any assets. It may make more financial sense to invest in the stock market or other asset classes that return more than your effective loan rate on the mortage. Any basic finance class will tell you if you can borrow $100,000 @5% and then turn around and invest that $100,000 @7% return (after tax rate of return), then you will come out ahead. Of course the 7% rate of return is not guaranteed or fixed like the mortgage rate.
     
  21. blotto geltaco

    blotto geltaco Old-timer

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    You make good points. Unfortunately, the wild bull ride is over for the time being. Calculations such as this are difficult to make and can be fraught with assumptions. Looking at an amortization schedule can help. It is astounding the amount of interest you pay to own a house. Most of this interest is in the beginning of the loan, and should be deducted from your income taxes, along with any property taxes. These numbers can add up quickly and provide hefty tax savings. Towards the end of the loan, you pay less interest, hence less tax deduction. You must weigh the benefit of paying it off early versus a comparable investment elsewhere. The numbers get complicated and expert advice should be sought out.

    For the vast majority of people in the US, debt is a fact of life. That doesn't mean I have to like it. It feels really good to get debt paid off, whether it is for a car, house, school or whatever. I will point out that having some debt and paying it off regularly helps your credit rating. Shows that you are good for loans.

    Unfortunately, interest is only a deduction not a credit. So you really are only cutting down your taxable income versus a direct credit to your tax bill.
     
  22. Voxel

    Moderator Emeritus

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    Yes, but you can always sell your house, so why worry about paying it off? First you must realize that most property, that is adaquately maintained, appreciates over time. If you have a healthy investing philosophy and have been investing all those tax deductions and the difference in cash flow over the long haul you should be ok. In fact, I would argue that it's almost never in your best interest over the long haul to pay off your mortgage early, especially if you 1) invest wisely and 2) the value of your home increases at a nice rate year over year.

    However, I can see your point that the psychological benefits of "owning" your home can outweigh any financial benefits from keeping a mortgage.
     
  23. blotto geltaco

    blotto geltaco Old-timer

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    OK, this is turning into a difference of opinions so I will just spit out some info. and leave it at that. Generally speaking, buying can be risky if you plan to sell in less that 5 years. that's just a general rule of thumb. that being said, I bought a condo (which is riskier than a house) and sold it two years later for 15K more. I didn't make 15K clean, I had to eat some costs as the sellers market had cooled off a bit from the mid and late nineties. Real estate "usually" goes up with time. Not all the time. Depends a lot on what area of the country you are in as well. Unfortunately, good upkeep costs money. If you ever sell a place, a new coat of paint all around on the inside can jack the price up a bit.

    Assume a 30 year fixed at 7%. Excluding the veritable ripoff called PMI your monthly payment is $665. One extra $665 payment a year shaves 6 years off the life of the loan. It saves you nearly $33K in interest. At what cost? 665 x 24 years is $15960. Of course you would invest the money during this time to make a decent rate of return. Would it equal $33K. Dunno, don't have future value tables handy. Also you have 6 extra years of no mortgage payments to invest the money that would have gone towards your mortgage - nearly 8K per year. So you are losing 6 years of interst deduction on your federal tax return. For this hypothetical for the last 6 years you are paying from $2500 or so down to less than $1000 the last year for interest (don't forget the standard deduction for a single person w/out depndents is $4150 or so). If you are in a 35% (arbitrary #) tax bracket, you get pay %35 less in taxes of whatever the interest payment is (plus your other deductions). So the tax break isn't all that great the last few years.

    So I would argue strongly to pay it off early. I would also argue to do your homework and consult a professional and take the gibberish you read on the internet with a grain of salt.

    RAM#48
     
  24. miami

    miami Junior Member

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    I am still looking for a condo, so closing fee's have not come up yet. I have heard that you just have to suck it up so to speak. You can, however, try to have the seller pay a portion of the closing costs. This depends on how bad they want to sell. Wachovia's program allows you to borrow up to an extra 3% to cover closing costs (103%). All lenders must provide a "good faith" estimate of closing costs before you go to closing so that you can compare costs of different loans. Tower Mortgage Co. has a lower APR than Wachovia. When I called, Wachovia rate was 8.75 while Tower's was approx. 7.8% avg. for the two loans (80/20 plan). Both plans had no PMI. I am going up to MD to look at condo's next week and I will share any other info I learn. Concerning buying Vs renting for 5 years, they way I look at it, I would have to loose 36K on my condo to equal what I would waste if I rented for 3 years at $1000/mo. Not to mention the tax breaks I would not have if I rented. Hope this helps

    Miami MSIV NSUCOM
     
  25. blotto geltaco

    blotto geltaco Old-timer

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    Yes, the 5 year thing is just a rule of thumb. Like I said, I came out fine in 2 years with a condo. I did have to pay closing costs when I sold though. I think that is still very feasible in this economy. Unfortunately, they can add up into the thousands quickly.

    When I bought my condo, the market was red-hot. I put in an offer for a condo for the FULL PURCHASE PRICE (this is unusual, since often the first offer is as much as a 20% lowball). It was turned down. The next condo, I bought sight unseen (it was the same as the earlier one, just 4 doors down) because I had to get an offer in THAT afternoon. The place appreciated very nicely in only 2 years, but the market was cooling and I had to pay closing costs - plus I needed to sell quickly.
     
  26. blotto geltaco

    blotto geltaco Old-timer

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    Miami, consider this. Every monthly mortgage payment is composed of a priciple and interest balance. Unfortunately, the part that goes towards the interest is throwing money down the drain. It sucks, it is a crappy feeling to throw rent money down the drain for years while you are in school. it can really add up after a while. you do get to deduct this interest though, so it isn't all that bad.

    Also, condo fees (aka homeowner's assocoiation dues) can be a real pain in hte @ss. Mine started out at $75/month. Seemed like they went up the year after that. I know of someone who pays &gt;$200 per month. Just another expense to consider.
     
  27. 12nico12

    12nico12 Junior Member

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    thanks everybody for such a useful thread. i called physicianloan.com and spoke to a really helpful patient guy (rick- ext 116) who walked through the whole thing with me on the phone for over 30 minutes! i guess it's in their interest but i was really impressed. very helpful and i was comparing with bank of america's doctor loan program (zero down). a 30 year fixed rate is 7.375%- actually lower than tower mortagage/physicanloan. not very helpful though. my gut feeling is to continue with tower. miami- where in maryland are you looking?
     
  28. Goofy

    Goofy Senior Member

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    Ok gang here comes some more information, courtesy of your favorite infection:

    Admittedly I have never purchased a home before, so I cant speak from experience. However, I have read 4 books on the subject and surfed at least a 100 different web sites in the last few days. My information indicates that the addage about needing to be in a property for 5 years to make it worthwhile financially is horsesh.t, pardon my french. As indicated by some posters above, there are significant tax benefits that materialize in the first year of ownership. There are numerous strategies one can adopt if planning on only being in a property for 3 years or less, like adjustable rate mortgages. In the overwhelming majority of cases, you are much better off buying a home, EVEN FOR A SHORT period of time than throwing it into the big garbage bin of renting.

    Another insight I have gleaned. There is an infinite number of ways to finance a property, even if you have little to no cash for downpayment. There is also an equally large number of ways to finance the property even if you don't qualify for as much as you want/need.

    The bottom line is that purchasing a property is a lot more doable than many banks and hearsay would have you believe. Yes resident salaries can still make this a viable alternative to renting.

    I have learned quite a bit in the last few days, and now feel comfortable responding to specific questions. I think this would be an easier way to share info, as posting a book of info on the forum is a bit exhaustive.
     
  29. mpp

    mpp SDN Moderator
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    Any suggestions for me?

    I've got plenty of cash (60,000+) at hand and currently earn ~55,000 per year. I will be leaving my job and headed to medical school in August. I would like to buy (first-time home buyer) instead of rent but would also like to be able to pay for medical school/living expenses with the minimal amount of student loan debt. I'll be at Mayo (tution $10,760/year) in Rochester, Minnesota and am looking at homes/condos around 75K-100K price range.

    Should I look for homes now, while I'm still employed to show the mortgage folks that I have income? What is the minimum downpayment I can place without having PMI? Any thoughts on re-sale value of a newer condo versus an older house -- that is to say which would have the greater resale value after 5 years if both are valued the same: a brand new condo, or a 30-year old house?
     
  30. Goofy

    Goofy Senior Member

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    MPP,

    My amateur advice is a definite YES. As a graduating senior, I look back at the 60+ thousand dollars I wasted on renatls over the past four years with great regret. With your finances and salary, you should easily be able to secure a mortgage for 150k and beyond. As an added plus, you will be staying put for at least four years. Learn from my mistake and get yourself a piece of property, even at the cost of having to take out government loans to pay for school. These are the best loans available, and you have a real opportunity to give yourself a significant financial edge.

    Disclaimer: I am not a mortgage counselor, nor do I play one on TV.
     
  31. Goofy

    Goofy Senior Member

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    Regarding PMI, there are a number of ways to avoid this. As previously noted, many lenders offer no PMI loans even with nothing down, you just need to do a little bit of research. For example there are FHA loans available that require very little to nothing down. There are also numerous other agencies that offer a wide variety of loans for little to nothing down including the HUD, Va, Fannie Mae among others. You can also engineer something called an 80/10/10 or even 80/20/0 loan (seller financed). Many sellers will engage this type of transaction as it facilitates a quicker sale.
     
  32. blotto geltaco

    blotto geltaco Old-timer

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    Sigh.

    I had the feeling that Klebs could not go thru this thread without finding a way to hurl insults and pass off misinformed opinion as fact. S/he is apparently still bitter about a flame war we had some time back on another thread. Seems to be a common theme on threads in which Klebs is involved. No matter, I have been around this board long enough to see flamers come and go.

    I have posted rational and sound financial advice based on my own personal experience, while providing some real numbers as examples. It seems like I am the only one thus far who has owned a residence, thus I am trying to pass along some helpful advice. My financial background: self-taught. That being said, I have made it thru two years of expensive private med school without debt and have 100K in assets (all without assistance). So I feel pretty good about my own financial knowledge for a layperson. Before med school I was a government employee and never made over 40K a year.

    The "addage" (sic) about 5 years is a RULE OF THUMB. It is not hard and fast, just generally applicable. Kind of along the lines that you do not want your money in high-risk investments (stock market) if you are going to need it soon. Keep your money in CD's, etc. if you can't afford to lose it and are gonna need it in the next couple of years. I guess that is horse**** too. A very good friend of mine did my mortgage, he agrees with me (he's pretty smart - owns his own company and makes oh say 300K per year). So it is really silly of you to call something horse**** when you yourself have never bought a home.

    Statements like:

    </font><blockquote><font size="1" face="Verdana, Helvetica, sans-serif">quote:</font><hr /><font size="2" face="Verdana, Helvetica, sans-serif">In the overwhelming majority of cases, you are much better off buying a home, EVEN FOR A SHORT period of time than throwing it into the big garbage bin of renting.
    </font><hr /></blockquote><font size="2" face="Verdana, Helvetica, sans-serif">are just plain wrong and misleading to folks who are looking for credible information here. In reality, generally speaking it is VERY financially unwise to buy a place if you are only going to live there for 2 years (unless it is a fixer-upper). Let me guess where you get this info. - people who want you to buy. Why? Because they make money off of you no matter what. They don't give 2 craps about you. Wait till you actually go thru the process. Deals that are too good to be true fall thru.
    ----

    To mpp: Lenders will not (as far as I know) lend you money unless you can prove an income. So if you are going to buy, do it now. Loans DO NOT count as income. You can't rob peter to pay Paul, so to speak.
     
  33. Goofy

    Goofy Senior Member

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    RAM,

    Actually I don't hold grudges and didn't even remember the fact that you were the yutz that plagued so many other threads with your juvenile barbs. My above comments weren't even directed at you, as I read the thread largely oblivious to the other. It was the rather futile advice I challenged, advice that is largely disspelled by financial advisors with even half a brain. The fact that you have been through the process and still possess less knowledge than someone who has only done a weekend's worth of research says more about you.

    Your advice is just plain wrong! Get over it. If you had done even the smallest amount of research before purchasing you cell, I mean condo, you would know that what I have shared is largely self evident. Your advice reads like a pamphlet from my mortgage broker. Apparently thats the extant of the research you have done. Don't try to pull the cover over other members because you have received such a poor education and have clearly inferior knowledge about a process you should know more about. I certainly hope this doesn't translate into your medical care, although I fear the worst.
     
  34. Goofy

    Goofy Senior Member

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    My dispute with this other poster with degenerate advice notwithstanding, I would like to share several truisms that others with similar dispositions of this RAM character have subscribed to over the years:

    'The prices of houses seem to have readched a plateau, and there is reasonable expectancy that prices will decline' Time, Dec 1947

    'The median prices of a home today is approaching 50k...Housing experts predict price rises in the future won't be that great' nations Business, june 77'

    'The era of easy profits in real estate may be drawing to a close.' Money Jan 1981

    'In california...for example, it is not unusual to find families of average means buying 100k houses...I'm confident prices have passed their peak' (John Wesley English and Gray Emerson Cardiff, The coming Real Estate Crash, 1980

    'The Golden Age of risk free run ups in home prices is gone' (Money, March 1985)

    'If you're looking to buy, be careful. Rising home values are not a sure thing anymore.' (Miami Herald, Oct 1985)

    'Most economists agree...[a home] will become little more than a roof and a tax deduction, certainly not the lucrative investment it was through much of the 1980's.

    'We're starting to go back to the time when you bought a home not for its potential money-making abilities, but rather as a nesting spot.' (los angeles times, jan 1993

    'Financial planners agree that houses will continue to be a poor investment.' Kiplingers nov 1993

    'A home is where the bad investment is.' San Fran examiner 1996

    And the absolute worst insight of all comes from our very own RAM, whose moniker most appropriately reflects the value of said RAM's advice:

    'Generally speaking, buying can be risky if you plan to sell in less that 5 years.'

    This last piece of advice 'generally speaking' is a terrible jumping off point when considering the pros/cons of home ownership. It is just plain wrong.

    Members will note that I have in good faith attempted to learn and share. At this point I cant recommend RAM's advice. I would recommend that you seek the advice of a professional financial planner, preferably someone you know and trust with your best interest at stake. Additionally, please visit your local library for recent publications on the subject. By no means should you blindly use my recommendations. But certainly exercise extreme caution when listening to anything this RAM says. If this individual has indeed gone through the process, and still lacks even basic fundamental knowledge about home ownership, than there is an obvios deficit.

    My next post will offer strategies to make a short term, yes less than 5 years RAM, still a viable and financially beneficial prospect.

    '
     
  35. Goofy

    Goofy Senior Member

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    Since one of the members on this advice has chosen to offer up poor advice, I thought it would be useful to examine the matter in more detail. Additionally, I would like to direct members to a book entitled Housewives, by Suzanne Brangham. The author states:

    "There is no wrong time to buy real estate. Regardless of the market, regardless of interest rates, I've turned a profit on my homes through good times and bad for the past 15 years."

    This particular author lived in no fewer than 12 homes in a short 15 years.

    I would add there are many many ways to make a short term mortgage work in the overwhelming majority of scenarios. Buying and selling in a short period of time does incur real estate commission as well as closing costs. The problem is that if you rent, you lose thousands and thousands of dollars automatically. You lose thousands and thousands more because you cant take advantage of significant tax breaks. Another potential problem from waiting is that housing prices and interest rates can jump, only adding insult to injury. Additionally, a fixer-upper provides you with the opportunity to turn a meaningful profit, EVEN IF OWNED LESS THAN 5 YEARS.

    If you are a knowledgeable buyer (unlike certain nameless personalities) you can make a big score immediately by locating a bargain. This of course requires research and time, not simply going through the process blindly.

    Another way to pseudo purchase a house is the lease-option. Essentially you rent with an option to buy. In many ways this gives you benefit of both options. If the price appreciates during the stated period, and you opt not to buy, you can sell your option at a significant profit.

    Those who perpetuate the five year rule as a kind of home owner dogma are doing you a real disservice, as this advice is poor in the overwhelming majority of cases (notice I didn't say all). The point is that many of us can and should give serious consideration to homeownership despite seemingly insurmountable barriers. And certainly give serious consideration to those who have clearly and publically NOT done his/her homework.
     
  36. blotto geltaco

    blotto geltaco Old-timer

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    Actually, we sparred over a single thread. Anybody who looks at my history will see that I have posted constructive advive during the time I have been a member of thsi forum. None of it was juvenile. I really don't post here a lot.

    Klebs, you certainly look like you have bones to pick with me. You obviously have alot of time on your hands to extensively flame me three posts in a row within 38 minutes. Translation: get a life. Furthermore, you have not offered up one single number to substantiate your claims.

    I am not trying to dissuade anyone from buying a home. Just pointing out that there are many pitfalls and options available. As someone who has gone through the process, filled out my own taxes for years, invested and done well I am simply offering up what I know. If you choose to flame me, go ahead. Hopefully others can learn something from what I have offered up.

    As I stated earlier, I owned a condo for 2 years only and I came out nicely. So why would I dissuade anyone from buying a home?

    I said:

    </font><blockquote><font size="1" face="Verdana, Helvetica, sans-serif">quote:</font><hr /><font size="2" face="Verdana, Helvetica, sans-serif"> In reality, generally speaking it is VERY financially unwise to buy a place if you are only going to live there for 2 years (unless it is a fixer-upper). </font><hr /></blockquote><font size="2" face="Verdana, Helvetica, sans-serif">A fixer-upper can be profitable, as I said. i know people that do it for a living. It is not for someone to do on a whim. you must be a pro or you may lose your pants.

    You said:

    </font><blockquote><font size="1" face="Verdana, Helvetica, sans-serif">quote:</font><hr /><font size="2" face="Verdana, Helvetica, sans-serif"> you can make a big score immediately by locating a bargain. </font><hr /></blockquote><font size="2" face="Verdana, Helvetica, sans-serif">this sounds like a late night TV information.

    Finally, you know nothing about me. To state that:

    </font><blockquote><font size="1" face="Verdana, Helvetica, sans-serif">quote:</font><hr /><font size="2" face="Verdana, Helvetica, sans-serif"> I certainly hope this doesn't translate into your medical care, although I fear the worst</font><hr /></blockquote><font size="2" face="Verdana, Helvetica, sans-serif">is asinine. You don't agree with my advice on an anonymous interner board, so I am gonna be a bad doctor. You are so smart.

    That is all. I hate arguing on these boards, especially on such a non-inflammatory subject. take my OPINION on what it is worth, someone who has been through the process.
     
  37. Goofy

    Goofy Senior Member

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    You hate arguing yet you deliberately pick fights with other posters that you cannot possibly win. I think if you review this thread more carefully you will realize I launched into a tirade only after your highly insulting and deragatory remarks about me. While I could really care less what you say about me, I thought it was an excellent opportunity to expose your wholly uninformed advice.

    I have offered you spirited, yet cogent replies about a process you profess to be an expert at. Yet your only defense is that I am 'flaming' despite your instigatory post. And you continue to 'flame' without even an ounce of insight that might benefit others in the process. Worse, you attempt to discredit the hard work one of your peers has obviously undertaken, and proceed to mock my posting habits in a given 1 hour period. I suppose if you haven't the slightest idea about what your talking about, taking swipes of this nature are about as much as you can offer.

    Simply using mortgage jargon doesn't mean you have a clue about what you are talking about.
     
  38. mpp

    mpp SDN Moderator
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    Hey RAM#48 and others,

    I'm looking for some suggestions here and wondering if you could help out. I should be able to but 20 percent down (to avoid PMI) on a place and still have money for closing costs. But, I'd be left having to eventually use student loan money to pay that mortgage (probably by third year once my savings run out). Is this a stupid move, borrowing money to pay off borrowed money even though part of it will end up as home equity?
     
  39. WSU02

    WSU02 Member

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    May I point out that many schools have a "relationship" with a bank, such that they can write a letter stating that you will be using loans to live on - and the loans include living expenses such as housing - and the bank will accept that as "income." They do at Wayne State, I know personally several people who have done that.

    Trying to give hope to future students.
    Kristi
     
  40. Voxel

    Moderator Emeritus

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    mpp,

    I think this depends on whether or not the student loan is subsidized and will be deferred during residency and thus subsidized again, until you are making enough money to pay off both the mortgage and the student loans. If you get a subsidized loan I think you can turn out ahead of the game. Although you must realize that you do not get to deduct interest from your income during med school, but will be able to as a resident. Thus in reality you are getting a interest free loan money during all years and are turning this into some small amount of equity in the house for free during this time period (without pay interest).

    If it is unsubsidized and you cannot get deferred and the interest payments are capitalized then I think it is not so wise. This may not hold true if the interest rate you receive on your federal stafford loans (for med school) is actually lower than your mortgage loan.
     
  41. mpp

    mpp SDN Moderator
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    Due to my current income and savings level, I don't think I would qualify for any unsubsidized loans, although I might a few years down the road in medical school once my savings are dried up and I have no income.

    This is another thought. I could sink all my savings (obviously not my 401(k) and IRA's) into a home. I might then qualify for subsidized loans since they don't include the equity in your home or retirement savings as part of the Expected Family Contribution. The subsidization of interest on those loans would offer a better break than the tax deduction on mortgage interest as I'll be in such a low bracket (due to no income) that the deduction is minimal anyway. Can I get a better rate on a mortgage if I put down 50 percent as opposed to 20 percent or less (I'd definitely avoid PMI too)? I appreciate any thoughts on this.
     
  42. Pilot Doc

    Pilot Doc SDN Angel
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    Playing devil's advocate, owning vs. renting is not strictly a building equity vs. "throwing money away" proposition.

    (Scenario below is for a single resident. Would be worse $$ for one income married couple, better for two income couple)

    Given the amortization schedule, your first six months' payments will be almost all interest. That will get deducted against a measly half year's income. Probably won't save you a dime. In following years, if you earn less than $34,000 your marginal tax rate will be only 15%, so the tax savings are minimal. Finally, to get the tax savings, you have to itemize. The standard deduction gets you $4,550 right off the bat. Once you itemize, you have to earn that $4.5K back. If you paid $500 a month in interest and had no other itemizable deductions, you would only save $200 a year in taxes! [(6000-4550)*.15]

    You also have to pay taxes, insurance and possibly PMI -- all definite money down the drain. The 6% realtor's fee when you sell added to closing costs when you buy will together approach a year's payment. Maintenance is also a real consideration in both money and time.

    Finances can be argued back and forth, but time is a clearer advantage for renting. Your time is rare (if not yet actually valuable) as a resident. You can choose to spend your weekends mowing the yard, painting or reviewing umbrella liability coverage. But who waits for the cable guy or the plumber? Who runs the M-F 9-5 errands?

    I've owned all through med school. It is my first house and I've loved living in it and taking care of it as my own. But my preference during residency will be to rent. One simple monthly payment with no surprises and free, full service maintenance a phone call away.
     
  43. mpp

    mpp SDN Moderator
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    I agree with everything you have to say there PilotDoc. It is why I have always rented for the last 12 years (I'm 31). I agree that buying versus renting should be a lifestyle choice and not a financial choice. I think I am ready for the lifestyle of a homeowner and now I want to ensure if makes sense financially as well. If it doesn't, than I won't bother.

    The advantage of buying a home at this point is to save that initial equity/down payment. If I don't put that somewhere, the government will force me to spend it while in medical school by limiting the amount I can borrow at 'student' rates. If I stick it in a house that it is treated as non-existant in terms of financial aid to pay for school and living expenses.

    Lets say I just buy a place for cash outright. Sure I spend $400 a month in taxes, insurance, repairs, etc which will come from student loans (some of which may be subsidized and who would turn down free money). But, the principal should still be there (assuming the value does not go down -- a big assumption of course) when I'm ready to sell.

    If I don't put that money into the house, I'd have to spend at least $400 in rent and then won't qualify for the loans so I'll spend my capital.

    It seems like a no-brainer to me, but I just want to be sure I'm not missing something.

    Thanks for everyone's comments so far.
     
  44. Neurogirl

    Neurogirl Resident Extraordinaire

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    Sorry for posting bad info. The number for the $10,000 resident relocation loan is 1-800-key-lend (originally I posted 1-800-key-loan). The loan can be taken only until the end of internship and can be used for ANY purpose (I used mine to consolidate credit card debt). Also, as someone noted, not EVERYONE get approved, but most do. :D

    Finally, I don't know anything about the $5000 interview loan, so I don't know if the two are related (but I doubt that they are). Regarding AMSA, I may have been mistaken. I thought they were associated, but after thinking about it, I remembered that I got the phone number from a friend...not the AMSA web site.
     
  45. Tigger14

    Tigger14 Ready to move

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    I did not read everything before this word for word, so forgive repetition...

    Bank of America has a zero down, no PMI loan if you have excellent credit. I just bought a home in my new location and it was relatively painless to get the mortgage.

    I also got my realtor's name from a resident in my new program, and he was the one who knew this loan. I will look up the number and post it for you all.
     
  46. I haven't read this entire thread so I hope this information isn't repetitive. I wound up buying a house this weekend and found that the 5/1 loan works well for residents. The reason is that interests are lower and you really can't say with certainty whether or not you will still be there in five years. I wound up getting a Jumbo loan which means greater than ($307,00) and the interest rate I got was about 6.6%. American Interbanc had the lowest rates out of all the banks I found. The interest rate was 6.125%. However, they are very strict about who qualifies and they will verify all your income. If you can qualify, however, this bank has the best rates out there. Here's the link:

    <a href="http://www.americaninterbanc.com/" target="_blank">http://www.americaninterbanc.com/</a>
     
  47. dr.evil

    dr.evil Senior Member
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    I ditto the Bank of America Doctor's Loan Program. I was pre-approved for this loan with ease by the BofA Mortgage banker in the town of my residency. EXTREMELY PAINLESS!! No PMI, 100% financing, pretty low loan fees. I highly recommend the 5/1 ARM loan which you can easily get with a 6.5% interest rate or lower.

    Their web address will point you in the right direction.

    <a href="http://www.bankofamerica.com/mortgage/index.cfm" target="_blank">http://www.bankofamerica.com/mortgage/index.cfm</a>
     
  48. I called Bank of America today and they only offer the program in certain states. Unfortunately, those states do not include MA and CT. If they do offer it in your state, the program is definitely worth looking into.
     
  49. Goofy

    Goofy Senior Member

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    Thanks to Neuro Girl for sharing the information on key lend with us. I called up the other day and had a ten thousand dollar committment in two days. Very painless. The only information you need to give is your social security number, address information, and your medical school.

    I'm glad something good came of this thread, the scathing tirade notwithstanding.

    Good luck to everyone on the hunt, and I hope none of us are left homeless in the coming weeks as we embark on our internships etc..
     
  50. Sandpaper

    Sandpaper Member

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    I received an offer from a company on LendingTree.com today that quoted a 5 year balloon with 100% financing, no points, and the interest rate at 5.625%. The only catch is the PMI, which is quoted at $34/month. Overall, not too bad, but looks too good to be true. Anyone found anything better?
     
  51. doc_hubby

    doc_hubby Junior Member

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    Bump.

    This is definitely one of the more practical and informative threads on the board. I appreciate both the information and the discussion.

    All I would like to add is that I have found the "Rich Dad, Poor Dad" series by Robert Kiyosaki. It's entertaining and enlightening, although it is more about an aproach to organizing your financial life than any particular investment.
     
  52. Goofy

    Goofy Senior Member

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    I'm glad you bumped the thread. With the search function not working, it makes finding threads a bit more challenging.

    In any case, I would like to give everyone an update. After careful research, I opted to go with Wachovia/Fleet. The process was exceptionally painless, and I had no trouble at all getting approval. I was initially able to secure a committment without any kind of downpayment or PMI. In the end I decided to put 20% down because I was purchasing in a hot market, making myself more attractive to the sellers. But I can assure you they offer competitive loans without PMI and without downpayments. I have already recommended them to several of my peers who also report a seamless process.
     

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