bla_3x

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I talk to many friends (not physicians) in my area about home mortgages and the fact that I am considering an 80/20, 100% loan with ARM/interest only/etc. and I get nothing but cringes. Now, I understand that these may not be the "ideal" methods of financing, but isn't our situation, especially one where I will be starting residency and our in 3 years with drastic rise in income, much different?
I seems that our situation is taylor made for such a route. now, I have not yet sat down to talk with banks/etc. for approval as i am just trying to get a general feel for the process before I tackle it after the match.

The numbers I was thinking were:
340-350K home price after all is said and done (upgrades, fees, etc.)
8500-9000/mo income combined
zero available for down payment 9used all funds to rid ourselves of cc debt)
residency for three years (EM...crossing fingers)
This would be for a house we would like to stay in for some time after residency, new home in good appreciating areas of cities that I hope to be in.
Any thoughts???
 

The White Coat Investor

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I talk to many friends (not physicians) in my area about home mortgages and the fact that I am considering an 80/20, 100% loan with ARM/interest only/etc. and I get nothing but cringes. Now, I understand that these may not be the "ideal" methods of financing, but isn't our situation, especially one where I will be starting residency and our in 3 years with drastic rise in income, much different?
I seems that our situation is taylor made for such a route. now, I have not yet sat down to talk with banks/etc. for approval as i am just trying to get a general feel for the process before I tackle it after the match.

The numbers I was thinking were:
340-350K home price after all is said and done (upgrades, fees, etc.)
8500-9000/mo income combined
zero available for down payment 9used all funds to rid ourselves of cc debt)
residency for three years (EM...crossing fingers)
This would be for a house we would like to stay in for some time after residency, new home in good appreciating areas of cities that I hope to be in.
Any thoughts???


Yes. But you must realize what you are stating is MUCH different from the average resident. Most residents go elsewhere or buy a larger house after 3 years, thus in general, especially because they have to get a lousy loan because they have no money to put down, renting is about as good as buying. But if you're really going to stay in this house 5-10 years, I'd go ahead and buy with an 80/20 FIXED (you can't afford for payments to increase with a fixed resident income.) If you need an ARM or you need an IO loan you are simply buying more than you can afford. Those who buy an ARM wisely are those like me who know when they are moving out...and that date is before the ARM rate changes. (I have a 5/1 ARM and I'm leaving in 4 years). An IO is rarely a good idea, except in a wildly speculative, rapidly appreciating, housing market. I don't know where one of those is right now, except in Shanghai.

If you are going to make $9K per month (I assume the spouse is making most of that), and you are putting no money down and have no other debt that you'll be making payments on, you can probably afford a $300-$350K house. (Monthly payments ~$2300 for P&I)
 

bla_3x

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Very true, I think my situation is not like many. I am fortunate to have a spouse that works and that really helps.
I'd go ahead and buy with an 80/20 FIXED (you can't afford for payments to increase with a fixed resident income.) If you need an ARM or you need an IO loan you are simply buying more than you can afford.
Regarding you comment above, with my wife making good $$ with me, and the fact that in 3 years I will get a "real" job, wouldn't that kind of alleviate the concerns you mentioned?
 
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Very true, I think my situation is not like many. I am fortunate to have a spouse that works and that really helps.

Regarding you comment above, with my wife making good $$ with me, and the fact that in 3 years I will get a "real" job, wouldn't that kind of alleviate the concerns you mentioned?

Yes, the fact that you'll triple your income in 3 years means you can afford to take more financial risk than the average American; just recognize that you are. I have friends making a physician like income who are so house poor they can't even fund an IRA each year; you don't want that.

Alternatively, you can rent a cheap place for a couple of years, save up a down payment, and then buy your dream house. Here's a good calculator where you can run the numbers and decide what works best for you and your family.

http://www.decisionaide.com/mpcalculators/MPBuyVsRent/MPBuyVsRent.asp
 

bla_3x

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Rent, for a couple of reasons for us isnt the way we want to go.
One is tremendous family pressure (inLaws)...pretty much sick and tired of daughter living student lifestyle..sucks but thats how it is. No matter how much you talk to them they will not realize the reality of medical training in "this country".
We also really could use that money that we could get back from the sale/refi/heloc of a house, particularly if we stay in our number one place for the match...want to knock thsose private loans out.
 

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Rent, for a couple of reasons for us isnt the way we want to go.
One is tremendous family pressure (inLaws)...pretty much sick and tired of daughter living student lifestyle..sucks but thats how it is. No matter how much you talk to them they will not realize the reality of medical training in "this country".
Renting isn't the student lifestyle. You could probably rent a nicer house than you could buy. I couldn't buy a house in the worst neighborhoods of Miami for what I pay in rent.

We also really could use that money that we could get back from the sale/refi/heloc of a house, particularly if we stay in our number one place for the match...want to knock thsose private loans out.
You assume that you will make a lot of money. Four years of medical school in a flat market (AS MANY ARE NOW) will probably get you a net loss after bank fees, realtor fees, etc after only four years. That is less likely after seven, but you are making a BIG assumption that you will match at your home institution. If you rent a similar house for less money and put the difference into some short term investments, you will probably come out ahead. You will also not be at the same risk in terms of housing expenses. A roof could set you back $30k.
 

bla_3x

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You assume that you will make a lot of money. Four years of medical school in a flat market (AS MANY ARE NOW) will probably get you a net loss after bank fees, realtor fees, etc after only four years. That is less likely after seven, but you are making a BIG assumption that you will match at your home institution. If you rent a similar house for less money and put the difference into some short term investments, you will probably come out ahead. You will also not be at the same risk in terms of housing expenses. A roof could set you back $30k.

Well said, and all this is at this point is info fishing for me as I am not 100% sure as to my future area of residence.
If I get to go to Las Vegas the market is sustained for newer homes and Vegas has and is projected to have a higher than average appreciation rate in the future. There is even still the whole lottery system for several developments and the majority of the houses are selling fast or sold out in the newer developments.
So, a lot of my speculation is based on my dreams of staying in Vegas.
Renting isn't the student lifestyle. You could probably rent a nicer house than you could buy. I couldn't buy a house in the worst neighborhoods of Miami for what I pay in rent.
And I personally agree. I was just making a reference to my in law's frame of mind. To them, you are not anything until you at least own your house....Gotta luv em!
 

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Well said, and all this is at this point is info fishing for me as I am not 100% sure as to my future area of residence.
If I get to go to Las Vegas the market is sustained for newer homes and Vegas has and is projected to have a higher than average appreciation rate in the future. There is even still the whole lottery system for several developments and the majority of the houses are selling fast or sold out in the newer developments.
So, a lot of my speculation is based on my dreams of staying in Vegas.

And I personally agree. I was just making a reference to my in law's frame of mind. To them, you are not anything until you at least own your house....Gotta luv em!

I'll just point out that Vegas is one of those scary places like here in Miami or Phoenix that essentially tripled in value over the last 5 years. These markets could shoot up or down, but they are anything but predictable. A drop to 1/2 price would signify a return to normal price appreciation in your market if you averaged it out with the last 5 years. Be very careful. Good luck.

In terms of growing up and the house and all of that stuff, (maybe a story for the in-laws) I have an uncle that buys and sells homes in the DC area. He buys them, rehabs them, and then sells them for a profit. He does quite well and maintains a pretty good income. At any given time, he probably owns a number of houses. However, he RENTS his own home. He pays $1600/month for a house that would sell for $450k. He takes the extra $1.5-2k/month (yes that much) that he is not paying in mortgage, taxes, insurance, and maintenance and invests it in other business ventures. Most of my family is poor, blue collar, and the proud owners of their own homes. My uncle is the exception on both counts. Again, good luck.
 
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