With all these loans, can I ever be a homeowner?

Hello all!

Hope you are doing well. Now the answer to this question is: YES! Now that match results are out, many of us will be going to new places for a few years. I’m sure most of you are aware of this – renting comes with a lot of benefits: your landlord will fix things that go wrong, you can pick up and move when needed, usually cheaper than a mortgage, etc. However, for 3+ years, we’re going to be in one place, be earning real money for the first time, not be dependent on parents (for those of us who have been), and start to really think about our finances. Which is why the idea of owning a home is so appealing – especially in a coveted area – enabling the home to become a great investment. Now, if you are moving forward as a single person, meaning, not married, don’t have children, etc., owning a home is all on you – the payments, upkeep, etc. So it’s a BIG decision! So, here are a few things/tips I’ve found in my search to help me navigate this:

  1. Contact the current residents at your program and ask them what they did and what they recommend
    1. Realize that some are married, have kids, or are single – find residents that are similar to you and your housing needs
  2. Rent VS Buy: Weigh the pros and cons! Look into the area, where housing is in relation to the hospital, where the other residents live, how feasible it is to buy a home, etc. What is the cost of renting vs buying? Can you head over your residency area beforehand to do some physical legwork over there before starting? If you’re in a really big, expensive city with a ton of traffic and without many housing options close by, you might need to rent.

If you’ve decided to buy…

  • Make a list:  What’s important to you? How many bedrooms? Full bathrooms? Attached garage? Backyard? Location – suburbs, city, rural?
    1. A FOREVER VS SELLABLE home: Do you want to settle here? I know it’s a very long term question, but it will dictate what/where you choose to buy. For example, if I don’t plan to stay where I do my residency, I need to make sure that my home will sell easily once I’m done with my residency. So, I need to think about the area I’m going to buy in and how easy the homes there resell. Is there a good school system? Historically, how has the resale market been in area?
    2. Parts of a home: If I don’t have a family, do I want to have enough room to host medical students that come to the program for audition rotations? That probably means needing 2 bedrooms and at least 2 full bathrooms. As a resident, I’ll probably be coming home really late sometimes – an attached garage may make me feel safer. Also, if I’m looking to have a pet, a backyard would be fantastic.
    3. Types of homes: Do I want to have a stand alone single family home? But that entails mowing the lawn, taking care of the roof, shoveling snow, etc. Or do I look at condos or town homes or apartments? There will be an extra monthly HOA fee associated with this, but my snow will be shoveled and I only worry about the inside of the home. Plus the insurance is much cheaper.
  • Figure out your timeline: When is graduation? When does your program start (usually July 1)? When is orientation? When can you move in? You’ll need to get your loans in order at least 30-45 days prior to closing.
  • Get in touch with a realtor: the residency program I’m joining provided us with a list of realtors and a few housing options in the area
    1. One realtor is part of a program that works to help physicians buy homes, a program that gives back a portion of her commission to you (in terms of your closing fees)
    2. The realtors from the program will have dealt with a ton of other residents and know what’s important to you – distance to the hospital, upkeep, etc. Ask current residents for recommendations too!
  • Get in touch with a lender: your realtor may have some suggestions. Look into physician loans – a lot of banks offer these. Call and compare them. Different banks will have different restrictions. I’d suggest looking at 2 and comparing them to make sure you get the best deal. Will it cover your home fee 100%? Do you need a certain percent to make a down payment (5%? 0%?), and if not, will it help your loan if you do? What’s their interest rate? For how long will it be fixed? Some loans provide you with a fixed rate for 5,7,10,15,30 years – others don’t. What is the loan rate?  If you’re moving in 4 years after residency, it will be cheaper to choose the lowest one! If 5 and 7 year ARMs are the same, get the longer one just in case! Is there a prepayment penalty? Make sure the lender you work with is accessible and easy to talk to!
    1. Physician loans can offer the following:
      • 100% Financing – No Money Down
      • No PMI (Private Mortgage Insurance)
      • No Pre-Payment Penalty
      • High DTI (Debt to Income) ratio
      • Student Loans treated in a special manner – Making it much easier for you to qualify.
      • Close on your home up to 60 days before beginning residency. No need for a pay stub.
      • Up to 3% Seller contributions are allowed.
      • Flexible Terms – Select from our PhysicianLoans Adjustable Rate Mortgages (3-Year ARM; 5-Year ARM; 7-Year ARM; 10-Year ARM; or 15-Year ARM)
      • Competitive rates
  • Start looking at places: Your realtor will set you up with homes that you can view. Compare locations, prices, square footage, updates, etc. Send prices and addresses to your lender – they will do a monthly breakdown of how much you’ll need to pay – including the principle and interest of the loan, taxes in the area, insurance, and HOA fees! Ask your realtor, residents, friends, family about the places you’re checking out. Look at websites like Zillow to check their financial forecasts/ previous home rate patterns.
  • Check it out: Do a video tour with your realtor if you can’t view the place yourself. Make sure your realtor is someone you trust, and have them take pictures of everything that seems off at the place. Here are some questions to consider:
    1. How many offers have been made?
    2. How stable has the price been?Is it flexible? Can you keep us in the loop if there are other potential buyers?
    3. Why do the sellers want to move?
    4. What issues does the house come with?(take pictures of these)
    5. When was the house last updated?
    6. What is under the carpets?
    7. What does the HOA fee cover? Are there any HOA requirements to know about?
    8. How much do utilities cost? (Should we see a copy of a utilities bill?)
    9. What’s the seller’s timeline?
    10. What are the neighbors like?
    11. Has the fumigation been completed? Timeline for this?
    12. Diversity in the neighborhood? Age group of people?
    13. How’s the housing market in the area? Will it increase? Rate of increase?
    14. What kind of fireplace?
  • It’s a match: When you think you’ve found the one, and you’ve looked into it, make an offer. Talk to your realtor about this – do you make a standard offer (at retail listing price with a home warranty, etc)? Or do you up your game and bid more for the home? Sellers are looking for the “highest and best” offer… so if there are other offers on the table, you might need to increase yours…. again, talk to your realtor, they will guide you (and probably know the listing realtor too!). Your realtor will put together your offer, including move in dates.
  • Lock it down: Once your offer is accepted and things look as though they are moving in the right direction, you need to write a few checks…asap! Now there’s a pretty set timeline. You’ll need to write a check for an inspection, radon testing, and an “earnest” check to say you’re in contract with the seller. Not sure how much this can range from, but from what I’ve heard, it can be about $1,500. You should get your earnest money back at the end of closing if everything goes to plan.
  • Negotiate! After the inspection, a few things may need to be fixed up. Your realtor is your advocate and will come up with a contract that should ask for most (if not all) of these things to be fixed by the seller. Now, they may not want to fix everything and both parties may go back and forth for a bit…. But remember, unless you can go early to get things set up, you want to move into a place that is READY to move into!! You’re a resident! You don’t have time to be fixing things up – so most everything needs to be in place! Again, your realtor will help you with this.
  • Loans, loans, loans! In the meantime, your lender will be drawing up your loan paperwork as well. You need to look into homeowner’s insurance in the meantime. Also, your home loan won’t affect your student loans. Both should help with the amount of taxes you pay yearly.
  • Work, work, work, work: You may have to pay for a few things getting fixed up, you may have to pay for a month of mortgage before you officially move in, you may get to go and take care of these things in person as well. Start to budget as well, think about expenses. Make sure you have enough money in the bank to close ($2,500-3,000). Keep in touch with your realtor, they will be your advocate!!

I hope this helps  and is relatively complete. Please add as you see fit! Thank you!!