mortgages

[secretwave101]

To ban the posting of SPECIFIC information on experiences with lenders and their contact information would do a great disservice to future SDN members.

I agree, but my post was deleted by overrule. I am HUGELY grateful to my mortgage broker - who's specific name I obtained on SDN - because another broker that was recommended to me by my residency program had significantly LESS to offer me. If I hadn't found that specific broker - actually, that specific loan program - I would have never known what else was out there.

But it can cut both ways. The thread could become saturated with "XX broker was great and I love him" posts, many of which could be spurious. So, I can see the point of the moderators. HOwever, my specific broker has experience with my situation - transitioning out of school and into residency - and offered a great program. I found him here, and I wanted others to have the same experience.

So, how 'bout this instead: I used a broker that I trust, he can offer a program that is one of the best available. If you want his info - PM me and I'll set you up.

---

Members don't see this ad.

 

[Jocomama]

I did mortgage banking for 7+ years, but have returned to Surgery (for less money).
I am re-quoting my post for information purposes ONLY. Having seen how much WE are targets, and being on the other side, I am sticking with my Medical colleagues. Please PM me with general questions (as many have done since my original post). I will not refer you; but will answer basics. This is why I am happy to help co-moderate the new Investment Forum on SDN. Be careful: sales people actually do what their name implies: sell for commission. We take care of patients. Thank you

Well, I have been suffering a cranio-rectal inversion. I am bummed I did not look at this particular forum. I have been developing a Plastic Surgery Match forum.

I was a mortgage banker for 7 years inbetween residencies in General and returning to Plastics. I worked with RBC (now Home 123) and Countrywide.
Here are the rules:

1. Shop 3 major lenders; you can let them pull your credit report (all 3 bureaus, otherwise they are not doing you justice). Do this within 30 days maximum of each other, and the credit scoring computer systems will NOT affect your score.

2. DO NOT give any bank money for application or credit in advance.

3. Pre Qualification is just taking a calculator, and un-validated information from the client, then calculating the Debt ratio. I can provide details if interested. I would not do pre-qualifications: only pre-approvals. They take your credit, salary, and personal info, then run it on standard bank software through Fannie Mae, Freddie Mac, or lender, and provide you a real answer of your "credit-worthiness" minus the actual property.

4. It doesn't matter if you work with a bank or broker. When at RBC I could broker a deal to HSBC, CitiMortgage, Bank of America, etc. and get a better rate 90% of the time, than when I was at Countrywide.

5. 0% down - most banks do an 80/20. However, RBC Centura, SunTrust and a few lenders have a Drs Loan where you could get 5% down and NO PMI.

6. At this time, unless you are sure of being gone <5yrs, I would not suggest a 5yr ARM. It is NOT cost effective based upon the flattened yield curve between short and long mortgage backed securities.

7. I did my last loan in February, 06. Since then, all my referals go to my old associate at another company (no solicit) in Chicago.
I stay active in the business via knowledge, and ONLY advise. I don't charge for advice; we as physicians are targets.

8. Golden rule - if a realtor anywhere in the country tells you rates and prices are going up, and you will not find a deal like this........you walk.
This is buyers market everywhere (except S Beach, suburban Wash DC, Studio City and Santa Barbara, CA).

9. My favorite? Anytime a mortgage banker or broker tells you rates are going up, they better be talking to you from their 100ft yacht in the Carribean, because if we know where the market is going, we would be millionairres.

10 - Last one : Closing costs. This is like someone asking the survival rate of cancer. What type of cancer? It is a marketing ploy.
The ONLY thing you can compare between banks are called
"Items payable in connection with the loan" or the Federally regulated Good Faith items under the 800s.
Outside of that - split it up
Also - remember - there are no hidden fees - it is listed by comparing the APR, which is the rate plus other specific fees.
And the rate???? The Good Faith does NOT guarantee the rate. You need to have a signed (S-I-G-N-E-D) RATE LOCK AGREEMENT disclosure. Otherwise you ain't got nothing, baby!!!

Also - NEVER give money to the bank until you are 110% sure that you are definitely going with them.

Please feel free to send me private messages if you have simple questions.
Thanks

 

[SDN]

Please post advertising on the For Sale and Advertising forum.

Salespeople, brokers and agents are welcome to post ads there:

http://forums.studentdoctor.net/forumdisplay.php?f=15

This thread is not intended for advertising purposes.

 

[SDN]

Please also see our new Finance and Investment forum at:

http://forums.studentdoctor.net/forumdisplay.php?f=176

 

[Jocomama]

Originally Posted by Jocomama
Well, I have been suffering a cranio-rectal inversion. I am bummed I did not look at this particular forum. I have been developing a Plastic Surgery Match forum.

I was a mortgage banker for 7 years inbetween residencies in General and returning to Plastics. I worked with RBC (now Home 123) and Countrywide.
Here are the rules:

1. Shop 3 major lenders; you can let them pull your credit report (all 3 bureaus, otherwise they are not doing you justice). Do this within 30 days maximum of each other, and the credit scoring computer systems will NOT affect your score.

2. DO NOT give any bank money for application or credit in advance.

3. Pre Qualification is just taking a calculator, and un-validated information from the client, then calculating the Debt ratio. I can provide details if interested. I would not do pre-qualifications: only pre-approvals. They take your credit, salary, and personal info, then run it on standard bank software through Fannie Mae, Freddie Mac, or lender, and provide you a real answer of your "credit-worthiness" minus the actual property.

4. It doesn't matter if you work with a bank or broker. When at RBC I could broker a deal to HSBC, CitiMortgage, Bank of America, etc. and get a better rate 90% of the time, than when I was at Countrywide.

5. 0% down - most banks do an 80/20. However, RBC Centura, SunTrust and a few lenders have a Drs Loan where you could get 5% down and NO PMI.

6. At this time, unless you are sure of being gone <5yrs, I would not suggest a 5yr ARM. It is NOT cost effective based upon the flattened yield curve between short and long mortgage backed securities.

7. I did my last loan in February, 06. Since then, all my referals go to my old associate at another company (no solicit) in Chicago.
I stay active in the business via knowledge, and ONLY advise. I don't charge for advice; we as physicians are targets.

8. Golden rule - if a realtor anywhere in the country tells you rates and prices are going up, and you will not find a deal like this........you walk.
This is buyers market everywhere (except S Beach, suburban Wash DC, Studio City and Santa Barbara, CA).

9. My favorite? Anytime a mortgage banker or broker tells you rates are going up, they better be talking to you from their 100ft yacht in the Carribean, because if we know where the market is going, we would be millionairres.

10 - Last one : Closing costs. This is like someone asking the survival rate of cancer. What type of cancer? It is a marketing ploy.
The ONLY thing you can compare between banks are called
"Items payable in connection with the loan" or the Federally regulated Good Faith items under the 800s.
Outside of that - split it up
Also - remember - there are no hidden fees - it is listed by comparing the APR, which is the rate plus other specific fees.
And the rate???? The Good Faith does NOT guarantee the rate. You need to have a signed (S-I-G-N-E-D) RATE LOCK AGREEMENT disclosure. Otherwise you ain't got nothing, baby!!!

Also - NEVER give money to the bank until you are 110% sure that you are definitely going with them.

Please feel free to send me private messages if you have simple questions.
Thanks

 

[kdawg]

I have no idea why this thread ever lost steam...it is VERY informative. Hopefully I can revive it.

I'm heading to dental school next summer and weighing all of the pros & cons of buying vs. renting. At this point, I am strongly convinced to buy given my situation.

My question is about qualifying for a loan as a pre-professional student. From what I've read from other SDNers, there are numerous ways to get this done. And, having one or more of the following can only help: a spouse with income; a parent as cosigner; and/or a big fat downpayment.

Now, for all of us who don't have any of the above going for us, we'll have a bigger challenge. While I am still fairly uneducated about mortgages, I have spoken and researched enough to know that students are getting around pretty much any obstacle. My wife & I both work now, have good credit (she's ~700 & I'm ~730), but virtually no downpayment. How are people in similar situations getting approved for home loans?

I have heard of people going stated income or no-doc. I have also heard of some claiming their future residence an Investment Property. I know that both of these options come with a higher interest rate, but we are convinced about buying enough to swallow a bigger rate.

What if I wanted to speak openly about my situation with someone who knows? Does anyone suggest going to some lender (whom I know I wouldn't end up actually borrowing from), telling them my entire situation, and seeing if they'll give me straight answers about my chances/options?

Looking for direction...

 

[Jaybe]

Buying a house isn't that bad. If you buy in a hot little area, you can come out ahead in four years, even in a down market. The only problem is that most of these "hot little areas" have a high price of admission since they tend to be priced above the median for the area due to their desirability. Anyway, start with Suntrust if they are in your area (as of summer 2007 they were offering a no-doc "doctor's loan" for up to 95% loan to value). Also check with lots of other lenders, but don't waste your time. You need to nail them down right away on whether they have a program that will approve you with no-doc.

Also, getting a cosigner is helpful. But the problem is that the house is essentially the cosigner's house. It affects that individual's credit as if he/she is the owner. So don't do that if it will be any sort of burden on the cosigner.

Also, make sure that you won't save money by just renting. Believe it or not, sometimes renting is the smartest thing to do.

Good luck.

I have no idea why this thread ever lost steam...it is VERY informative. Hopefully I can revive it.

I'm heading to dental school next summer and weighing all of the pros & cons of buying vs. renting. At this point, I am strongly convinced to buy given my situation.

My question is about qualifying for a loan as a pre-professional student. From what I've read from other SDNers, there are numerous ways to get this done. And, having one or more of the following can only help: a spouse with income; a parent as cosigner; and/or a big fat downpayment.

Now, for all of us who don't have any of the above going for us, we'll have a bigger challenge. While I am still fairly uneducated about mortgages, I have spoken and researched enough to know that students are getting around pretty much any obstacle. My wife & I both work now, have good credit (she's ~700 & I'm ~730), but virtually no downpayment. How are people in similar situations getting approved for home loans?

I have heard of people going stated income or no-doc. I have also heard of some claiming their future residence an Investment Property. I know that both of these options come with a higher interest rate, but we are convinced about buying enough to swallow a bigger rate.

What if I wanted to speak openly about my situation with someone who knows? Does anyone suggest going to some lender (whom I know I wouldn't end up actually borrowing from), telling them my entire situation, and seeing if they'll give me straight answers about my chances/options?

Looking for direction...

 

[secretwave101]

Would advise not buying unless you are planning on staying after your training or if the rental market is strong (and has been for years). Buying is worth it in the long run but is risky as a financial investment in the short run.

There are charts to identify when it is better financially to rent rather than buy. I'm sure you can find them somewhere. The idea, though, is that buying is not always the best option.

 

[mmynameisfrank]

An excellent calculator for this purpose:

http://www.dinkytown.net/java/MortgageRentvsBuy.html

 

[kdawg]

Thank you for the feedback and advice so far. Let me bring you up to date about what I've learned and kind of what I'm leaning towards.

Just to clarify, I did mention that I'm pre-dental, right? So I don't think I qualify for doctor's loans, correct? Anyways, I've run countless numbers by now about rent vs. buy & I'm still pretty convinced to buy. I've spoken to a few different lenders, each time taking a slightly different approach to get different feedback.

The first lender I was completely open about going to school next fall. He basically said that income would be a problem and my only shot with his company was doing an "investment property". The bad news is that comes with a higher rate and 10% down, which I don't have. Otherwise, my credit is good enough that he could swing it.

I told the next lender that I was currently renting but interested in purchasing a home in another state. Simple as that. He said that this would technically be a "second home" then, even though I'm just renting now. This gets me a slightly better rate than the investment option and with only 5% down. This lender also said that they offer a limited-doc loan which would increase my chances of being approved.

So what do you think? Any red flags with any of these options? I've given up even considering getting approved without my current income, so I'm pretty sure that any home purchase as a "primary residence" is totally out of the question.

Oh ya...lastly...my dad is a real estate attorney. He is strongly recommending that I do a "deed for contract", also known as a "land contract". Basically, I agree on a price with seller and have the option to buy for that price at a later date. Then, I just make payments similar to as if I were simply renting. The seller maintains title until I exercise my option to buy. I could also just walk away if the market isn't so hot. Thoughts?

 

[secretwave101]

Don't know about the 'deed to buy' thing. Never analyzed it. Probably fine if the seller goes for it.

As for the loans. 5% is still huge. If you have that cash, great. You'll already have equity. I didn't. I basically didn't have anything so I needed a loan that could get me into a house anyway.

The trick with loans is all the secondary stuff that NEVER gets mentioned on the front end. There's loan fees, and often you have to pay insurance on the loan itself. Often they offer a rate that turns out to be higher based on their jump from prime, and then try to get you to pay it down with points. One old trick is for many of these terms and fees to "come up" right at signing. Especially if you don't use a local lender who is thus not in the room, or even the state, when the deal is getting done.

So, there you are, sitting in some nicely-furnished room. Your broker and often a staff person flanking you, they buyer's broker and staff (and sometimes the buyer too) on the other end of the table. Suddenly, significant additions need to be made on your loan. It has to do with percentages and fees that you were told about but didn't seem to really understand. Never mind, though, the deal can still get done. Don't worry about it. Just sign here and things will be fine. You don't want this whole thing to fall apart, do you?

Upshot, find a loan broker who is pretty much ALWAYS available to take your calls and is willing to answer an incessant stream of questions from you...starting with loan basics. If they're in ANY way evasive or just difficult to reach, don't fund the house with them. One thing about buying is that the entire investment depends on how much you spend for it. Therefore, irrespective of the market, you can make a crummy investment before you even move in just because of the crappy loan you took.

 

[Sol Rosenberg]

Oh ya...lastly...my dad is a real estate attorney. He is strongly recommending that I do a "deed for contract", also known as a "land contract". Basically, I agree on a price with seller and have the option to buy for that price at a later date. Then, I just make payments similar to as if I were simply renting. The seller maintains title until I exercise my option to buy. I could also just walk away if the market isn't so hot. Thoughts?

I think it will be very hard to find a seller willing to go for this.

 

[secretwave101]

Depends on the agreed upon lease-option price and the out-clause for the seller.

 

[Sol Rosenberg]

Don't know about the 'deed to buy' thing. Never analyzed it. Probably fine if the seller goes for it.

As for the loans. 5% is still huge. If you have that cash, great. You'll already have equity. I didn't. I basically didn't have anything so I needed a loan that could get me into a house anyway.

The trick with loans is all the secondary stuff that NEVER gets mentioned on the front end. There's loan fees, and often you have to pay insurance on the loan itself. Often they offer a rate that turns out to be higher based on their jump from prime, and then try to get you to pay it down with points. One old trick is for many of these terms and fees to "come up" right at signing. Especially if you don't use a local lender who is thus not in the room, or even the state, when the deal is getting done.

So, there you are, sitting in some nicely-furnished room. Your broker and often a staff person flanking you, they buyer's broker and staff (and sometimes the buyer too) on the other end of the table. Suddenly, significant additions need to be made on your loan. It has to do with percentages and fees that you were told about but didn't seem to really understand. Never mind, though, the deal can still get done. Don't worry about it. Just sign here and things will be fine. You don't want this whole thing to fall apart, do you?

Upshot, find a loan broker who is pretty much ALWAYS available to take your calls and is willing to answer an incessant stream of questions from you...starting with loan basics. If they're in ANY way evasive or just difficult to reach, don't fund the house with them. One thing about buying is that the entire investment depends on how much you spend for it. Therefore, irrespective of the market, you can make a crummy investment before you even move in just because of the crappy loan you took.

It just doesn't happen like this. The lender must provide you with a "Good Faith Estimate" that includes all of their fees. It will also include an APR that is caclulated with all the fees rolled into the loan. APRs from one lender to another can be accurately compared. The lender is required by law (The truth in lending act? I forget exactly) to provide this in this manner. The good faith estimate should be 100% correct on all of the lender's fees. Things like title insurance, etc that are not handled by the lender directly are estimated by the lender on the good faith estimate. You should be able to get a "HUD form" that shows the exact settlement charges a day or two before closing from your Title Company or Attorney (depending upon which you use in your state.) The HUD form should have all settlement charges (lender's fees, title insurance, etc) 100% correct. If the HUD form doesn't match your GFE, you call your lender and find out why and have them fix anything that is not correct. If the docs at closing don't match your GFE or the HUD form that you were given before closing, you don't close. Period. You'll be amazed at how quickly people jump into line when you say the words, "I'm not closing until....." If things happened to you like you describe above, pardon my French, but you had a ****ty real estate broker/attorney advising/representing you.

In this respect, kdawg, it sounds like you are a step ahead of the game, because you have your father to advise and/or represent you in your transaction

 

[secretwave101]

Sol,

I just recently went through the entire process myself. It was a concern of my real estate broker. I've watched my dad - also a real estate broker - do hundreds of deals and talk about problems that arise with funding. My uncle - a loan broker - was also concerned about last-minutes fees and changes because the broker I was using was in GA but the deal was being done in WA. You state the rules correctly, but what I'm trying to impart is that shifty brokers are good at working around those rules. In particular, the GFE is a starting point but not always the end of the story. The best way to have a very clear idea of what you're getting into is to have a responsive and helpful loan broker.

And I'd prefer that instead of me being required to "pardon your French" you work on your collegiality.

 

[Sol Rosenberg]

And I'd prefer that instead of me being required to "pardon your French" you work on your collegiality.

How's this:

If things happened to you like you describe above, you had a really horrible real estate broker/attorney advising/representing you.

Better?

EDIT: Make that really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really <keep going hundreds of more times> horrible real estate broker/attorney advising/representing you.

Have I made my point? (My original wording was much more compact.)

 

[kdawg]

How's this:

If things happened to you like you describe above, you had a really horrible real estate broker/attorney advising/representing you.

Better?

EDIT: Make that really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really <keep going hundreds of more times> horrible real estate broker/attorney advising/representing you.

Have I made my point? (My original wording was much more compact.)

Lol. Anyways...

I appreciate all of the input, both secretwave and Sol Rosenberg! While everyone experiences something a little different, it is nice to be made aware of the situations that can arrise and be able to go into it having at least thought about these things.

 

[kdawg]

I think it will be very hard to find a seller willing to go for this.

I was thinking the same thing. I asked my dad and he seems confident that, given the market right now, there are plenty who are desperate enough to do it. I'm still unsure though.

 

[kdawg]

Don't know about the 'deed to buy' thing. Never analyzed it. Probably fine if the seller goes for it.

As for the loans. 5% is still huge. If you have that cash, great. You'll already have equity. I didn't. I basically didn't have anything so I needed a loan that could get me into a house anyway.

The trick with loans is all the secondary stuff that NEVER gets mentioned on the front end. There's loan fees, and often you have to pay insurance on the loan itself. Often they offer a rate that turns out to be higher based on their jump from prime, and then try to get you to pay it down with points. One old trick is for many of these terms and fees to "come up" right at signing. Especially if you don't use a local lender who is thus not in the room, or even the state, when the deal is getting done.

So, there you are, sitting in some nicely-furnished room. Your broker and often a staff person flanking you, they buyer's broker and staff (and sometimes the buyer too) on the other end of the table. Suddenly, significant additions need to be made on your loan. It has to do with percentages and fees that you were told about but didn't seem to really understand. Never mind, though, the deal can still get done. Don't worry about it. Just sign here and things will be fine. You don't want this whole thing to fall apart, do you?

Upshot, find a loan broker who is pretty much ALWAYS available to take your calls and is willing to answer an incessant stream of questions from you...starting with loan basics. If they're in ANY way evasive or just difficult to reach, don't fund the house with them. One thing about buying is that the entire investment depends on how much you spend for it. Therefore, irrespective of the market, you can make a crummy investment before you even move in just because of the crappy loan you took.

Good points. I've actually felt that way just working out a LEASE for an apartment! Sitting there thinking...wtf!?! I have to do what to get this deal done? Believe me, I'm doing as much homework as I can on this. My knowledge of mortgages has multiplied by hundreds just within about a week span. While none of us INTEND to get into a crappy loan, I'm trying to do everything I can to be educated and equipped to avoid one.

 

[kdawg]

It just doesn't happen like this. The lender must provide you with a "Good Faith Estimate" that includes all of their fees. It will also include an APR that is caclulated with all the fees rolled into the loan. APRs from one lender to another can be accurately compared. The lender is required by law (The truth in lending act? I forget exactly) to provide this in this manner. The good faith estimate should be 100% correct on all of the lender's fees. Things like title insurance, etc that are not handled by the lender directly are estimated by the lender on the good faith estimate. You should be able to get a "HUD form" that shows the exact settlement charges a day or two before closing from your Title Company or Attorney (depending upon which you use in your state.) The HUD form should have all settlement charges (lender's fees, title insurance, etc) 100% correct. If the HUD form doesn't match your GFE, you call your lender and find out why and have them fix anything that is not correct. If the docs at closing don't match your GFE or the HUD form that you were given before closing, you don't close. Period. You'll be amazed at how quickly people jump into line when you say the words, "I'm not closing until....." If things happened to you like you describe above, pardon my French, but you had a ****ty real estate broker/attorney advising/representing you.

In this respect, kdawg, it sounds like you are a step ahead of the game, because you have your father to advise and/or represent you in your transaction

When working out all of the closing charges and underlying fees, isn't it true that even those are negotiable and even potentially absorbed by the seller, depending on their motivation and the deal you can work?

 

[Sol Rosenberg]

When working out all of the closing charges and underlying fees, isn't it true that even those are negotiable and even potentially absorbed by the seller, depending on their motivation and the deal you can work?

Kinda sorta. Desperate sellers might offer a $xxxx allowance or offer to pay $xxxx of the buyer's closing costs, but they will offer that anyway, so it's best to keep the junk fees as low as possible so that more of that is actually credited against the contract sales price, instead of ofsetting the junk fees.

Loan packages are definitely negotiable, but most especially if you are a "high quality" buyer (large down payment, great credit, high income, etc) which might not apply to your situation. But, you have nothing to lose in talking to lots of lenders and seeng if they will compete for your business. Sometimes it can be difficult to compare because they will each have their own way of structuring the loan costs (interest rate and fees and terms of loan,) but it can be done.

 

[MacGyver]

I want the seller to pay closing costs because from what I've read thats the main reason people get baited/switched and generally screwed over on mortgages. If I offer the list price up front in exchange for closing costs, instead of low-balling it, is that reasonable or will most sellers balk at that?

 

[MacGyver]

How much house did you guys get approved for? Is it still a hard/fast rule that you can only get approved for up to 3X your gross income? Or will they go higher if you have a great credit score?

Has anybody gotten preapproved for a mortgage amount thats 4X or 5X their income? Or is everybody sticking to the 300% or less?

 

[USCguy]

We got preapproval for a $140,000 home (FHA first time homebuyer) based solely on my wife's income as a public school teacher (~$32k). We met with a mortgage broker, worked out all the numbers, and he gave us the go ahead to sign on a home. He said that based on our credit scores and debt:credit ratios, we were well within our window of what we could qualify for. I was pretty shocked, especially when he did everything based solely on her income...I thought we would be cutting it close with her income + living allowance I get. Then I got paranoid that we would get screwed in the end, but the company has been around for 25 years, is local, has an actual office building, and the guy we are using is the vice president. So, I figure that it is more legit than going with a fly by night internet company.

Also, the VP is a patient at the clinic I worked in this summer (remembered me taking his daughters history).


The builder pays the closing costs, + $2000 at closing. House comes with fridge, stove, microwave, dishwasher (already own washer and dryer). We have to pay 4200 for the down payment (3%), so I'm hoping that we can apply the $2k to the downpayment.

 

[secretwave101]

FHA's aren't the cheapest out there (Dr. ReallyReally, back me up here if you know). Being a Guv thing, there's Guv regulations...insurance being one of them. If I remember right, you have to buy insurance on the loan...meaning you're insuring that you won't default. It's some monthly fee that doesn't seem like a big deal but it adds up and it totally wasted money.

FHA is usually where the low-qualifiers end up, but after I got set up with my FHA, I found that I qualified for the "Doctors Loan" with SunTrust and it was a much better deal.

Bottom Line: You're not getting screwed with an FHA, but you're not getting the best deal either. Classic government.

 

[Sol Rosenberg]

The guidelines that I have always used are that your monthly mortgage payment (Principal + Interest + Taxes + Insurance) should be no more than 28% of your gross monthly income. Also, your total debt payments should be no more than 36% of your gross monthly income.

NOTE: These are old-school numbers, and are quite conservative for today's market (even after the subprime meltdown, I believe.) I KNOW that nowadays, you can be approved with a 50% debt:income ratio, and I don't believe that they distinguish between different types of debt. Therefore, treat my rules of thumb as overly conservative (but if you meet them, you should be good to go.)

RE FHA Loans: In addition to requiring mortgage insurance (IIRC, it doesn't go away when you build up 20% equity like with a Conventional Loan, but you also get some of it back when/if you sell the house -- My first loan was an FHA loan (I was young, naive, and din't have much $$$ for a down payment, and financing packages were MUCH less creative than they are today)) FHA loans usually require you to pay a point (often called an origination fee.) Also, the guidelines for inspection are more rigorous (usually good for first-time buyers, but may prevent you from getting a good deal on a fixer-upper) and the costs to the SELLER are a bit higher making some sellers not want to sell to FHA (or VA) buyers. Dpeending on the market, this may not be an issue.

Also, I don't think too many sellers would want to enter into a deal that only specified "Seller will pay all buyer's closing costs." You could theoretically buy the rate down absurdly low by sticking the sellers with all the points. I would NEVER, NEVER do this, and I'm sure all but the absolute worst seller's agents would advise against something like this. So, the contract would have to say something like "Seller will pay $xxxx of buyer's closing costs." If your closing costs come to > $xxxx, then your trying to make things easier by offloading the costs on the seller didn't work (you will still have to pay out of pocket.) Conversely, if your costs come to < $xxxx, well, you didn't make use of all $xxxx and you would've just been better off negotiating the price lower by $xxxx. If you do your homework and shop around for loans from different sources (Banks, Credit Unions, Mortgage Brokers, etc) I maintain that you will be able to tell a good deal from bad (in terms of junk fees, etc) and you will be better off just negotiating $xxxx off the price of the house. However, to answer the question, I think that many sellers would be happy to sign a deal for their list price, with the seller paying up to $xxxx of the buyer's closing costs. I really think it would be hard to strike an open-ended "Seller pays all buyer's closing costs" kind of deal, for any price, however.

 

[WealthPlanner]

I’m an investor and a mortgage officer. Between my wife and I, we own eight properties and by the second quarter of 2008, will add four more units. The eight we currently own total $3.1 million, the other four about $800. Five of them, as the mortgage officer, personally obtained the rates from lenders and received the commissions for the transactions. So I’ve gone through several rounds of purchases and obtaining mortgages (more for my clients). The first was quit nerve racking; subsequent transactions became easy and fun. The lesson I’ve learned is to put down as little as possible, pay as little monthly as possible, and never try to pay off or down your mortgages (that is what life insurances is for and to pay for the estate transfer). Mortgages are one of the most misunderstood instruments of wealth-building. I do not advocate negative amortizations, but I love interest-only mortgages. I’ve since delegated self-mortgaging to individuals who have more time and passion for it. I now concentrate on wealth planning.

 

[Sol Rosenberg]

I’m an investor and a mortgage officer. Between my wife and I, we own eight properties and by the second quarter of 2008, will add four more units. The eight we currently own total $3.1 million, the other four about $800. Five of them, as the mortgage officer, personally obtained the rates from lenders and received the commissions for the transactions. So I’ve gone through several rounds of purchases and obtaining mortgages (more for my clients). The first was quit nerve racking; subsequent transactions became easy and fun. The lesson I’ve learned is to put down as little as possible, pay as little monthly as possible, and never try to pay off or down your mortgages (that is what life insurances is for and to pay for the estate transfer). Mortgages are one of the most misunderstood instruments of wealth-building. I do not advocate negative amortizations, but I love interest-only mortgages. I’ve since delegated self-mortgaging to individuals who have more time and passion for it. I now concentrate on wealth planning.

Never say never. If your return on savings/investments is less than your mortgage interest (adjusted for tax deduction) it definitely makes sense to pay off/down your mortgage.

 

[WealthPlanner]

Never say never. If your return on savings/investments is less than your mortgage interest (adjusted for tax deduction) it definitely makes sense to pay off/down your mortgage.

My favorite line from my favorite play:
King Lear: Never, never, never, never, never.

You're right. I should better qualify my posts.

Thanks!

 

[lobon]

Hi everyone- I'm hoping for a bit of advice. I am an MS4 and will be making 40-45K next year, my spouse (non-medical) will make 45-55K depending on where we wind up, we both have credit scores around 760, student loan debt of ~100K total, no other debt, and about 10K in money saved specifically for a home. I think its about 50-50 that we will stay in the same city after my 3 year residency. Assuming we decide to buy, what type of mortgage would you recommend? My top choice would be Columbus, OH where most residents own 3/2 homes for 150-170K.

Thanks!

 

[ScooterBanks]

As a physician (especially one with good credit), most banks have plans where you don't have to pay anything down and will loan you 103% of the value of the house. The additional 3% covers your real estate agent costs. Basically, you don't have to have a down payment, which is what I would recommend. Keep the 10K you have saved now and invest it or use it for an emergency fund. At most banks you don't even have a penalty added to your payments for borrrowing the full 100%...that's just a perk of being a doctor!

As far as staying in the same city after residency, that's where it gets a little tricky. You can get a much better rate on a 3/1, 5/1, or 7/1 arm than you can with a 30 year fixed loan. However, the catch is that after those 3, 5, or 7 years, the rate will readjust with what the market does at that time. I would still go the 5/1 or 7/1. Chances are, you will not be in that house in 5-7 years when residency is over. Don't do an interest only loan. While it might slightly lower your payments, you want to build a little equity. You guys can more than afford a house in the range you are talking about given your combined income and given your financial situation, equity is more important that the small savings an interest only loan would give you.

Definitely get a 3/2 home. They are much easier to resell than some other funky combination of bedrooms and bathrooms. Buy with resale specifically in mind in terms of location and how well the house is fixed up. Resale should be your number one consideration in buying. You guys are in a solid financial position. If it comes between a house that is 190K that's in a much position for resale than one that is 175K that is a great deal, go with the 190K...you will not be sorry in five years...the additional 15K on your monthly mortgage payment given what you make will be nothing compared to the benefits in the future.

Don't worry about money at all. With a combined household income of around 90K, you guys will take home approximately 5K per month. A mortgage payment, including insurance, etc will be approximately 1400-1500 on a house in the 175000 range. That leaves you guys with about 3500 after tax income a month to live off of...which is plenty.