Using Student Loans for downpayment

[BobBarker]

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4th year med student who will be buying a home after match day. I've only taken the subsidized loan amount throughout med school. We do not have very much available for down payment, if we are lucky we would have around 8% for down payment+closing. I could take out more student loans, to bump our down payment amount up to 20%. I'm just not sure if that is a good idea... When they pull my credit report for my mortgage, what would they think about the recent student loan? It would be pretty clear that that was where my down payment money was coming from.

 

[mx_599]

it's none of their f'ing business where you got the money from. maybe you needed more for school this time around. don't think twice about doing it or feel guilty at all.

there is very little sentiment that goes into any of this anymore. just an equation that is dubious and secretive at best. if you qualify you qualify. who cares if you were pimpin' out ho's or selling crack on the corner or took out more in student loans.

I am not saying the house is a good move, that is your decision. if you decide you want it, than use the money

 

[mx_599]

also, who says the loan will even show up right away? are they reported instantly or quarterly?

 

[edmadison]

Make sure you check with you lender: many "conforming loans" (i.e. those requiring a 20% down payment) require you to state that the down payment is not coming from any borrowed source.

Ed

 

[mx_599]

Make sure you check with you lender: many "conforming loans" (i.e. those requiring a 20% down payment) require you to state that the down payment is not coming from any borrowed source.

Ed

I would tell them straight faced I have been saving or it was a gift from the in laws

😀

 

[edmadison]

I would tell them straight faced I have been saving or it was a gift from the in laws

😀

You can do that if it's the truth. If you lie and get caught (which could happen if there was a default), you'll go to jail for bank fraud.

Ed

 

[mx_599]

You can do that if it's the truth. If you lie and get caught (which could happen if there was a default), you'll go to jail for bank fraud.

Ed

🙄

fraud, right.

there is no fraud in our current government

I would like to see them prove it...even with default.

I understand your concern though

 

[Mtloomis]

You may want to think about getting a Student Doctor home-loan or FHA which doesn't require 20% down.

If you are doing it because you can get a better rate on the student loans remember that the unsubs will accumulate interest while in deferment and the compounding interest may likely be more than what you would take on the house. Especially with most interest rates on homes being in the mid 4-5% range right now.

Also as you take out student Loans you effect your debt to income ratio. If you take a conventional mortgage the bank will consider your student loans when figuring out what to lend you. They will allow around 40-50% of your monthly gross income to be spent on debt. So every dollar you take out in student loans is a dollar less the bank will lend you for the purchase.

The only way that this would be worthwhile is if you are getting an FHA which ignores deferred student debt and you are trying to put 20% down to avoid PMI.

In that situation what you are looking at makes some sense. However FHA loans are going to require some income history and won't lend to you based on your contract.

If you can find a lender who does Physician Loans that is the way to go. And if you do you won't need 20% down.

Lastly remember to consider closing costs which will be in the neighborhood of 3% of the sales price.

 

[mx_599]

If you can find a lender who does Physician Loans that is the way to go. And if you do you won't need 20% down.

Good advice

I thought these have all but disappeared in the last few years?

 

[Mtloomis]

Good advice

I thought these have all but disappeared in the last few years?

No they haven't I know of 2 lenders I refer clients to here in Cleveland who still do them.

I don't want to post the names here because that violates the forum rules. But I'm always willing to help anyone who PMs me.

 

[mx_599]

No they haven't I know of 2 lenders I refer clients to here in Cleveland who still do them.

I don't want to post the names here because that violates the forum rules. But I'm always willing to help anyone who PMs me.

That's encouraging

What about benies to residents?

In the past, I thought I had heard that is was much easier for residents to get mortgages etc because they were supposedly good for the money. I they even had designated ones for residents??

In more recent years, I thought a lot of this stuff had been done away with? No special treatment any longer.

I apologize, I do not know if there were special names or if it was just something on the DL that physicians knew about and lenders understood?

 

[Mtloomis]

That's encouraging

What about benies to residents?

In the past, I thought I had heard that is was much easier for residents to get mortgages etc because they were supposedly good for the money. I they even had designated ones for residents??

In more recent years, I thought a lot of this stuff had been done away with? No special treatment any longer.

I apologize, I do not know if there were special names or if it was just something on the DL that physicians knew about and lenders understood?

The only thing my clients have used is some sort of Physician loan structure from a bank or lender who had specific programs. I haven't heard of lenders who don't do specific programs giving preferential treatment to residents specifically. They may take the earning potential into account in underwriting when considering additional factors on loans that are close to meeting criteria.

Still if this type of thing exist and someone knows about instances I certainly wouldn't call them a liar.

 

[mx_599]

The only thing my clients have used is some sort of Physician loan structure from a bank or lender who had specific programs. I haven't heard of lenders who don't do specific programs giving preferential treatment to residents specifically. They may take the earning potential into account in underwriting when considering additional factors on loans that are close to meeting criteria.

Still if this type of thing exist and someone knows about instances I certainly wouldn't call them a liar.

I wish I better recalled the name or described it better. at any rate, I had heard it was essentially no more since all the crap has gone down with lending.

 

[medicinesux]

This is a horrible idea. Student loans are one of the most toxic debts to carry. They are non dischargeable and will follow you to your grave. If you cannot come up with the money for a down payment you have no business taking out a mortgage for a home at the present time.

 

[dotdash]

Respectfully, there is an ethical issue here. Those loans are offered -- at taxpayer expense -- to allow you to get an education at a reasonable cost; if you don't need them for that purpose, you should probably bypass them. Taxpayers probably do not want to subsidize (even for the length of the grace period) your new home downpayment. It's not a big amount of money you are saving -- why not do it straight?

Also -- The mortgage companies ask about your debt and calculate your ability to repay on the basis of all debt, so you may actually be hurting your chances of getting a good mortgage. You can hide the fact that the loan is where you got the downpayment (maybe) but you can't hide the fact of the loan.

I agree with Medicinesux: this is a bad idea.