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to buy a house?

Discussion in 'Medical Students - MD' started by fun8stuff, Aug 6, 2006.

  1. fun8stuff

    fun8stuff *hiding from patients*
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    I will be moving at the end of ms2 (After boards) and i am trying to decide whether to rent or buy a house. I have seen a good selection of 2 bedroom houses between $80-120k. I am tempted to buy because rent would be around $700-$1000/month for a 2 bedroom + utilities. A friend of mine bought a $100k house and pays $700 mortgage/month + utilities.

    I am not necessarily looking to make a profit, but if I can sell it in a couple years for the same price I bought it for I would still come out ahead of where I would be if I had rented. Also, there is a good chance I will stay in the same city for residency...

    The only downside is that I won't have much of a downpayment. Any advice?
     
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  3. Northerner

    Northerner Coquettish Haberdasher
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    That's not the only downside.

    You have to pay taxes, realtor fees, ALL upkeep, ALL appliances maintenence, ALL utilities, ALL services, you are a student yet and thus have a high chance you'll be moving in a year or so. If you do move after 2 years, you will ahve to go through all the work of selling it or renting it out.

    Lots of young people these days are trying to buy houses because they're "sick of renting", but that doesn't make any sense. I knew a guy who worked at Blockbuster Video who bought a house for that reason. Just because some bank is stupid enough to give you a mortgage, doesn't mean you should take it. It's not a like a 90-day T-bill, it's a HOUSE. You don't just get a check for what you put in plus the guaranteed interest. There is a great deal of time, work, and money you have to put in outside of mortgage and bills. The greatest advantage to renting is convenience.

    Just because the media says "the real estate market is booming!" doesn't mean medical students without income should buy them. Over 2 years (up to several years), you will not get any profit from selling a house, and will probably be in the red. If you are married, are financially independent (i.e. wealthy), or have children, trying to buy a house is a good thing to look into. But if you're just some single med student I wouldn't do it for all the tea in China.

    And there's a lot of tea in China. And I'm a man who likes my tea.
     
  4. fun8stuff

    fun8stuff *hiding from patients*
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    well, i am married, but my wife won't have a job until she graduates in april. hmm, you pose some good points. it is a tough decision. i definately wouldnt be doing it for a profit... just in hopes i could get some of the money back...
     
  5. Wednesday

    Wednesday Senior Member
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    I've heard that you shouldn't buy a house unless you're sure you're going to be in the area for at least 3 years (and preferably 4-5) because of all the things the previous poster mentioned that are just throw away costs. You just don't recoop the costs by appreciation in such a short time. Unless, of course, you are just extremely lucky and happen to buy right before the market skyrockets. Likely not going to happen right now and prob not something to count on. If I were you, I would save up for a nice downpayment now (wife with job) and buy once you match.
     
  6. WhoisJohnGalt

    WhoisJohnGalt NYC Psychiatrist
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    Ditto what this poster said. 3 years is the general rule for absolute MINIMUM amount of time you're guaranteed to stay there, and you're definitely not guaranteed to get your $$ back even then. Even that assumes that nothing major goes wrong with the house in 3 years, and that's definitely not a safe assumption. There will be plenty of time to buy a house when you actually have an income ;)
     
  7. LucidSplash

    LucidSplash Bloody Plumber
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    It definitely depends on where you are living and how long you will be there. I just bought a house as an incoming MSI for a couple of reasons. 1 - My husband is a realtor. 2 - In the area we are living in, we get a tax credit for buying a house. 3 - Because I am married, its not like I'm splitting rent with 2 or 3 or 4 classmates and will end up saving money in the end. 4 - Because my husband is considered self-employed, and because he hasn't been in this particular line of business for 2 years yet (for a no-doc loan for the self-employed), we would not be able to buy a house during med school at all if we didn't do it now, because its much riskier to buy the house (as other posters have stated) if you're only going to be living there 2 or less years. We used my income only to secure the loan. 5 - We found a house that was a brand new rehab with a home warranty, so we are somewhat covered if something breaks.

    Those reasons are in no particular order. If you are even considering it, the best thing to do is to get in contact with a lender (preferably one you can get recommended to you so you have some confidence in them) and have them run a rent vs. own analysis for you. I'd recommend mine, but he's only good for you if you're in Maryland.

    Just FYI, the buyer of a house usually pays nothing in terms of realtor fees. The seller of the property pays those fees, for both buyer and seller. You'll have to worry about closing cost. but if you have a smart realtor who knows how to write a contract/bid to your favor, you should be able to minimize those. Additionally, if you decided to rent out the house in 2 years, as opposed to selling it, you could always turn it over to a rental managment company; they usually charge between 8-12% of the monthly rent payment, but they take care of finding tenants, responding to maintenance issues, and evictions, etc.

    Summary: 2 years is a short amount of time, but it depends on the area you're living in and your personal situation. Contact a lender to run the analysis for you; you may find it isn't worth it to you to buy a house financially, but there are definitely the "hassle" factors to consider. It was best for us to buy our house, but its definitely not for everyone.

    I do have one incoming classmate that bought a sweet property that has basically an entire separate apartment attached. She is renting that out and paying half her mortgage and utilities while in med school, and acquiring equity in a hot housing market. She's single, so her situation is different, but my point is just that being married (or living with a significant other) is not the only type of person that can buy a house in med school.
     
  8. t33sg1rl

    t33sg1rl Senior Member
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    If you do want to buy, don't buy a 2 bed-they are very difficult to sell. You seem cavalier about just "selling the house in 4 years" but I can tell you, it's hard for normal people and worse for med students, because you HAVE to sell by the time you start your residency-meaning, you might get less than what you paid for it because you basically have to take any offer that comes your way. Also don't forget that 7% commission you have to pay, plus about $3000 closing costs when you buy, meaning you're out about 10K in buying/selling fees on a 100K house right off the bat.
    Your mortgage is also going to be more expensive than if you had at least 10% down-they will jack up your interest rate, plus charge you "PMI"-private mortgage insurance. Since you don't have any equity, it's just insurance in case you default on your loan. On a small mortage, it's generally only about $50/month... times four years, another $2400.
    Plus, don't forget that you'll need to buy a stove, refrigerator, washer, dryer, , lawn mower, snow blower... and a kitchen snake for those plumbing emergencies when you realize that you're on your own-no landlord to call, and the plumber charges $200 just to walk in your front door.

    Anyway, obviously I'm bitter, but I did love owning our house. It was a great feeling to pull into MY driveway... until you notice a shingle popping up and realize that you're going to spend Saturday on the roof.
     
  9. cbennett

    cbennett Membership Revoked
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    You ever hear of something called the housing bubble??? Might want to look this up before you but not to mention tax alone would be 6k plus and then realotor fees probably around 5k(when selling). No way youll come out on top.........
     
  10. Highclimber

    Highclimber Senior Member
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    My parents are thinking of doign this, thoguh they will buy a place that can probably be rented to help cover the mortgage... I have no idea the mathematics, but my mom is a CFO and she calculated it out such that assuming a conservative appreciation, and taking aforementioned factors into consideration, a profit can be turned or at least you will essentially live for free assumign living there at least three years... Anyway jsut do your homework and study your options...

    we are actually think ing of buying a place from a fourth year I know who will be selling in February and she definately made it work...
     
  11. vtucci

    vtucci Attending in Emergency Medicine
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    I bought a condo for 147,900. I will have it for all four years of medical school. There are taxes and HOA fees (which you may have if you are in a gated community anyway with a house). You can get an 80/20 loan to cover the mortgage and downpayment if you do not have enough to put down. It is best to research your options and find a trustworthy real estate agent.
     
  12. Rex

    Rex Junior Member

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    you have to be careful, you have to put up 20% (not 10) if you don't want to pay PMI, thats why some ppl have to take out two loans, one for the house, and another to pay a 20% downpayment, so they don't have to pay PMI
     
  13. fun8stuff

    fun8stuff *hiding from patients*
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    i know it wouldnt be a given i could sell the house right away, but i have been told (perhaps falsely) that med students don't have that hard of a time selling houses. At my school, we have access to advertise to all med students, residents, fellows, and hospital staff. With so many new residents and students coming in each year, it becomes easier to rent or sell because a lot of them prefer to buy from previous med students/residents/etc. Have you found this not to be true?

    Good point though about losing ~$10k in fees. That is definately a downside to factor in...
     
  14. Johnnyc

    Johnnyc Junior Member
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    To buy, you basically need two out of three

    1. hefty downpayment (>20%)
    2. sterling credit scores
    3. high documented income

    You can probably swing #3 with a spouse. You can do it with only #2 when you have a residency contract around 4th year.

    100k for a house sounds dirt cheap but then again Im on the west coast and its probably the most inflated market on earth.
     
  15. LadyWolverine

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    I am LucidSplash's classmate, another incoming MS1 who just bought a house ~3 months ago. Home ownership is certainly not for everyone. But, if you've had a few years off, worked a full-time job, are fairly independent, and know how the real world works, it's definitely manageable.

    I managed to land a great mortgage with:

    1) NO downpayment
    2) A job that I had been at for less than 1 year that made decent money, but not what I would consider "high income," especially for the area that I was in at the time
    3) NO spouse/partner/parents/other investors to help (this certainly would have made it easier, if not for the financial reasons, then just having somebody else to help with the process - it's really hectic making 20 phone calls a day to your lender and realtor, finding a home inspector, going to look at properties, going to closing, etc. by yourself, all while trying to work full-time!)

    However, I'm living proof that all of this CAN be handled on your own, if you're willing to take the initiative. If you're interested, start talking shop with people. Learn the lingo. Read everything you can get your hands on. Haggle with some lenders. Meet some other home owners. Find a home that will suit your needs, and then make sure it's a sound choice. And, whatever you do, trust yourself - don't necessarily listen to what your parents/friends/boyfriend/girlfriend/assorted family members/whatever tell you. It's your investment, not theirs. And they are NOT experts - talk to a real expert if you need guidance.

    I selected the right property for my situation. I found a roommate in a matter of DAYS who is also a student at my school and pays half my mortgage and utilities. We each have our very own large apartments, and don't have to share anything. We're a 10-minute drive from campus. Renting the same-size apartment in downtown Baltimore with the same amenities as what I have now would easily cost nearly twice as much as I am paying in monthly PITI.

    Granted, I've only been a homeowner for 3 months, so I'm sure the worst is yet to come. But I've already been through a torrential downpour that caused my window to leak and basement to flood, a washer/dryer fiasco that would have upset the most even-tempered individual, utility bills that keep getting higher, inept phone and cable repairmen, and many other home-related mini-disasters. And I've managed to get through each one.

    So don't listen to people who say "you can't get a mortgage without X, Y, and Z," or who tell you that you'll never sell it "because of the current market", or who say "There are so many costs associated with buying a home, like taxes/insurance/closing costs/etc," or who have never bought a house and have no experience owning a home. I paid all of those "associated costs" by myself, and I still have enough money left over to buy whatever else I need. I haven't really worried about any of this stuff, and I'm pretty confident that I got a SWEET place to live for the next few years, and will most likely make a few buck in the process. Like I said, it's not for everybody, especially if you don't have a high tolerance for dealing with adverse events, and/or if you get frustrated easily. But, quite obviously, it can be done.

    I look at it the same way as I do about getting married, or having children, or moving to a new city, or starting a new career - when you're ready, you'll know you're ready. People will then give you a hundred million reasons why you shouldn't. Don't listen to them. Listen to you.

    Good luck. :luck:
     
  16. cbennett

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    Ha after reading theses posts i cant believe some of these people got or are planning to get into medical school. Do the freaking math. If your buying a house and taking a loan/mor out you will not be saving money. For example the interest rate alone on a 100k house would be like 4k+ a year plus sales tax when you buy the place pluse property tax 2k/yr plus realestate fees 2k plus fees when you sell the place with a grand total of about 30k or more for the four years. You could rent a hell of alot nicer place for that money. Not to forget buying a house in the market right now is very risky. If you havent noticed the housing market is ready to crash due to rising interest rates which will make more expensive houses impossible for the common person to buy making it a buyers market and homeowners will have to sell lower inorder to sell.
     
  17. cbennett

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    Or what people in forums tell you who dont know what there talking about :D
     
  18. LucidSplash

    LucidSplash Bloody Plumber
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    cbennett,

    Again, neither LadyWolverine nor I is saying that it is best for the OP to buy a house. We're just saying that he won't really know until he speaks with a few people who are in the business (ie trustworthy, recommended lender(s) and real estate agent(s)). I'll be the first one to tell you that there are craptastic lenders and agents out there, which is why I specify trustworthy.

    Despite the fact that the market is overinflated in some places, it is not in others. Hence the phrase "national average" which you hear used on the news, etc. This is why I said that where you are located is a large part of where you buy a house. In Baltimore (where LW and I are about to begin school) the market is actually still a good market to buy in in several neighborhoods.

    As for "the math," the national average for appreciation in real estate has not dropped below 3-4% a year in the past decade or more. If you'd like, I can get the real statistics for you, but my husband isn't home right now, so he can't look it up for me. Again, some areas more, some less. In Baltimore, in the areas which LW and I purchased our homes, it is actually quite a bit higher. When you do a full on rent vs. own analysis, you include appreciation. LW and I can figure in tax benefits as well, due to the areas we bought in, but no everyone can do that. Because my husband works (and therefore pays taxes) we can deduct our mortgage interest from our taxes, which is a nice added benefit we wouldn't get from renting. As for a down payment, I put up $1000 in earnest money when I put my offer in on my house, and I put in a full price offer but asked for $5k in closing cost help from the seller as a contingency on my contract. Therefore, my actual out of pocket expense at the closing table was around $1500. NO downpayment.

    Basically, the OP really really needs to speak with a lender who can provide them with an actual rent vs. own analysis before they can even begin to make this decision. Speaking with people on SDN, they will get completely opposing opinions with very little "hard math" to back them up. Trust me, I am generally a very fiscally conservative individual and I would not have purchased my home if it did not make sense "by the numbers." For me, having spouse was a big part of this decision, because I prefer to have a minimum of "home owner" type stuff to worry about in terms of maintainence problems, etc, to worry about during school. My husband can take care of most of it for us. That wasn't as big an issue for LW. Just goes to show you that everyone's level of comfort is different. You have to figure out what is right for you, which depends on your personal situation, personal psychology, and location, among other things.

    fun8stuff,

    if you'd like to get an idea of what a professional rent vs. own analysis looks like, PM me your email address and I will e-mail you mine, so at least you know what I'm talking about. You can find a ton of online calculators that will do this for you, or you can find a lender who will do it for you (for free) that will be a bit less of an estimate. In short, cbennet is correct that you ought not take anything that anyone says on here as straight up fact. Speak to a professional (probably more than 1) and get the facts that apply to your situation. Good luck!!!
     
  19. Bobblehead

    Bobblehead Senior Member
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    Here are some interesting links for a little bubblicious fun:

    http://forums.studentdoctor.net/showthread.php?p=3996103

    I'm personally living in the middle of an overheated market and I'm just waiting until those several billion dollars worth of ARMs begin adjusting next year. Plus I won't have my 20% down payment for a while anyway so I can watch the fun and fur fly in the next few years.
     
  20. LadyWolverine

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    LS, you rock. I'm so happy that we're going to school together. It's nice to know that I have intelligent, rational classmates.

    What makes me laugh the most is this - even if I did lose 30K over the next 4 years (which will not happen), I'd STILL spend less money than I would if I was renting a comparable place downtown. Wait, who am I kidding? There really isn't any comparable place downtown. :)

    To the OP: My point was that you should do your homework. A great deal doesn't fall into your lap. You have to make it happen. But don't take my word for it. :)

    P.S. Don't get an ARM. I got a 30-yr fixed at a low, low rate. It takes a little hardball, but you can get it if you are persistent.
     
  21. Rex

    Rex Junior Member

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    sometimes if your credit is good enough you dont need much of an income (this especially works with SO income if not high enough to qualify) they can sometimes do no-doc loans that rely only on credit history (this is what i did since my husband has no credit and i have really good credit so we put the house in my name) they can basically say you do anything (so for example if doing summer research rotation they put you down as lab tech) with a no doc because there is no proof on income required. if you have a so with great credit this is an even better option. However this is best to do before you take out med loans since they look at all your debt in the process
     
  22. mshheaddoc

    mshheaddoc Howdy
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    Wow, there is alot of mis-information about buying houses and mortgages on this thread. We started a thread about this in the new finance and investment forum on SDN . Rent vs. Buy is a hot thread, there are 2 threads on this topic. Alot of decent advice from people like myself who were in the banking/mortgage business in previous lives. I'd suggest you check it out.

    LadyWolverine and LS have some great points. And whomever was talking about the housing bubble needs to do a little more research. The bubble is more area specific. Area is a huge factor in the housing market right now. Some are hot, some are not. Overall the housing values in the US are not expected to drop drastically. They've been calling this a bubble market for about 10 years now ;)
     

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