Buying a House During Residency

Navigating the real estate market can be tough for medical students and residents. Buying a home is a big step and an important decision to make, as it can have a huge impact on your budget and lifestyle. It’s important to plan carefully to make sure it fits your financial future. This blog will look at what residents should think about before buying a house during residency. We will cover financing options too. Lastly, we’ll share ways to make homeownership a good part of this challenging career path.

 

Should You Buy a House During Residency?

Buying a house can be a smart choice for your money. But, if you are in residency, it might not be the best option for everyone. There are many things to think about before making this decision, including your personal experiences. Your financial situation and if you plan to stay in the area after residency are two important factors to consider.

Take time to look at your money and career goals before you buy a house during residency. If you have a stable income and want to stay in one place for some time, buying a home could help you save money in the long run and avoid paying rent. But, if your finances are shaky or you have a lot of debt, renting might be a safer way to keep from going into more debt.

Why Buying a House During Residency is Smart

Buying a house during residency is a smart choice for medical residents who want to invest well. When you own a home, you might build equity instead of just paying rent. This can help secure your financial future. Plus, if the housing market is good, the value of your home could rise over time. This could be helpful when you sell it later. Making this wise decision also means you can benefit from low interest rates and special loans for physicians that fit your financial needs and future earnings. Using a doctor-friendly physician mortgage, here are the reasons to buy a house during residency:

• Build equity. If you buy a home, you can cash in your equity later or even sell it for a higher price than you bought it for to make a profit.
• Rent spare rooms to fellow residents. Renting out the extra space in your home to other residents can help your home purchase pay for itself.
• You may extend your residency for a fellowship in the same are. If you extend your residency for a fellowship, buying a home during residency ensures that you have a smooth transition into this next chapter of your career.
• Make the space your own. Buying a home makes it easier to customize your space and create the perfect space to relax after a busy shift.

Why Buying a House During Residency is Dumb

Opting for a home during residency might not be a smart choice. Medical training can be unstable. Many residents have student loans and might have to move after they finish their programs. Committing to buy a home can be risky. The time, effort, and money needed to take care of a home might not match the busy schedule of a resident. This could add more stress and financial pressure. Renting can give you flexibility. It can also take away the extra duties of owning a home. Here are the reasons why buying a house during residency is dumb:

• More debt, really? Buying a home will cause your DTI to grow, making it difficult to take on any additional credit in times of need, and lengthening the amount of time until you are debt free.
• Low salary. According to the American Medical Association (AMA), first-year residents make an average of $60,000 a year. It’s easy to get caught up in the anticipation of a large salary, but it shouldn’t be your only driving factor in your decision to buy a home.
• Houses can be expensive. Residents often spend over 80 hours on the clock in a given week. If this is you, you don’t really have the time to mow the lawn, fix the roof or shop around for a new water heater. Houses are money pits, so consider this before buying.
• You may move. If you take a fellowship away from home, or get invited to work at your dream hospital across the country, you will find yourself either as a landlord or needing to sell your home rather quickly.

How Homeownership Impacts Your Residency Experience

While owning a home has its benefits, you need to think about possible challenges from the viewpoint of a resident. Living in a home can take a lot of time and effort. You might have to work long hours and make many commitments. Juggling these demands with home responsibilities, like repairs and management, can affect your well-being and daily life.

As a responsible homeowner, one should also be aware of home insurance and its costs. The cost of home insurance can vary a great deal according to where your home is situated, the size, and the age of your home. It is prudent in planning the budget to allocate money for it so that you can include it in your monthly expense list. As a homeowner, all maintenance and repair costs will be yours, but when you rent, a phone call for any kind of help is always an option.

In addition, stay updated on the real estate market. Changes in property values can influence your investment. It’s important to learn about market trends, do thorough research, and ask real estate professionals for help to make the best choices.

How Do Residents Apply for Physician Mortgages?

Physician mortgages are special loans made for medical professionals. They have some benefits compared to regular home loans. These advantages include lower down payments, higher debt-to-income ratios, and no private mortgage insurance (PMI).

LeverageRx works with just about every physician mortgage program in the country. These loans are forgiving, generous and accommodating to the physician or dentist, or doctor in training. For example, your debt-to-income ratio isn’t a problem because they’ll waive your medical school loans. Moreover, physician loans don’t require you to pay private mortgage insurance, which saves you hundreds of dollars a month. So who offers such mortgages? A few examples are below.

First National Bank

First National Bank accepts a wide range of designations for their physician mortgage. The bank offers 100% financing up to $1.25MM and the loan is eligible for primary residences and vacation homes. Learn More: First National Bank Doctor Mortgage Review

TD Bank

TD Bank’s physician mortgage is a popular choice among LeverageRx readers for its low rates. The bank provides 100% financing up to $1MM for both residents in training and those in attending. The loan is for primary residence only. Learn More: TD Bank Physician Loan Review

Huntington

Huntington Bank offers physician mortgages to veterinarians, as well as physicians and dentists. They provide up to 100% financing of up to $1 million, 95% up to $1.25 million, and 90% up to $2 million. Like TD Bank, physician loans apply only to primary residences. Learn More: Huntington Bank Physician Loan Review

Buying a Home Without a Physician Mortgage

While a physician mortgage might look like the best choice for residents, it’s important to think about all your options before making a decision. There are times when getting a traditional mortgage or trying other financing methods could be better for you.

For instance, if your spouse has a good income or a lot of savings, combining your financial resources could help you qualify for a conventional mortgage. This could come with better terms than some physician loan programs. It’s essential to take a close look at your options and pick the best financing choice based on your situation.

The Resident Uses a Spouse’s Income

Using a spouse’s income can help a medical resident buy a home. This can make it possible to get a larger loan and a better property. This can also lessen the issue of the resident’s lower income. Lenders will look at the spouse’s income, debt, and credit score when reviewing the loan application. Working together on the mortgage can mean a bigger investment and share the financial responsibilities. It’s important for both partners to be open and on the same page for an easy buying process. Taking advantage of a spouse’s income can be a smart choice during residency.

The Resident Built Up Savings

During your residency, saving money is very important if you want to buy a house. As a medical resident, you should manage your personal finances carefully and save as much as you can. This will help you build a stronger financial future. When you save money, you can put more down for your house. This may help you get better loan offers and lower the total cost of owning a home. Being disciplined with your savings shows lenders that you are trustworthy and can manage long-term finances. Saving well during residency will help you have a solid start when it’s time to buy your future home and will also improve your financial well-being.

Family Helped the Resident Make a Down Payment

Family support can be very helpful for medical residents who want to buy a home while in residency. Sometimes, family members might give money for the down payment. This can reduce the financial stress for the resident. Having this help can improve the chances of getting a mortgage and buying a home sooner.

When residents work with their family, they can find better deals and invest in property that fits their long-term money plans. In this case, you will want to ensure that you and your loved ones understand the tax implications of a large financial gift. This tax is called gift tax and applies whether or not the help is meant to be a gift.

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What to Consider when Buying a House as a Resident

Buying a house while you are a resident has some special things to think about. First, you need to look closely at your finances and what you need as a resident. Ask yourself if now is the right time to buy, or if it would be smarter to wait until you become an attending, earn more money, and have a steadier job.

Next, think about your lifestyle and what matters to you. Check how close it is to your work, what services and shops are nearby, and what the neighborhood feels like. Keep in mind, this choice is not just about money; it also affects your happiness and well-being.

Your commute

When you think about buying a house during residency, it’s important to think about your daily commute. A long commute can lead to more stress and expenses. This can hurt your quality of life. Choosing a home closer to your job can save you time and money. It can also improve your work-life balance. Plus, shorter commutes give you more freedom in your schedule and can help you live healthier. So, focusing on how close your new home is to work can be a good way to support your well-being and convenience.

All of the costs

It is very important to think about all the costs that come with owning a home before you buy. The monthly payment includes several parts. These are principal, interest, property taxes, and homeowners insurance. Make sure you understand each part of your mortgage payment and how it may change as time goes on, including any additional costs that may arise.

Also, remember that when you own a home, you are responsible for repairs. Don’t forget to include extra costs like closing costs, property taxes, homeowners insurance, and possible maintenance or repair costs. These surprise expenses can greatly affect your budget. So, it’s key to be ready for these unexpected situations.
Here are a list of costs that you will want to keep an eye out for:

• Closing costs.
• Property taxes.
• Homeowners insurance.
• Increased utility usage.
• Cost of replacing broken appliances.
• Cost of home improvement.
• Realtor fees.
• Earnest money.

Down Payment

The down payment is an important cost you pay at the start that can affect your total home costs. By making a down payment, you are lessening the amount of money that will be subject to interest overtime and therefore, saving yourself money in the long run. Saving up for a down payment can be hard, especially if you have student loans or other bills. Fortunately, physician mortgages (which are available to residents) have very low or no down payments.

Your Debt

As a medical resident, managing your debt is very important if you are thinking about buying a house. A lot of student loan debt from medical school can make it harder to qualify for a mortgage or keep up with monthly payments. You should check your current finances. Think about how a mortgage payment will change your overall debt-to-income ratio.

The Housing Market

Understanding real estate market trends is important for making good decisions, especially when you want to buy a home. You should research the local housing market trends. This will help you learn about property values, how many homes are available, and the demand for housing. It is also a good idea to work with an experienced realtor who knows the market in your area.

Keep in mind that real estate markets can change, and your situation as a resident may also change. Think about whether property values might go up or down in the area. You should also consider renting instead of buying. Renting can offer you more freedom to move if you need to, as you won’t be tied down by a mortgage and can easily finish a lease on an apartment.

Your time

Time management is very important, especially when you are busy with residency. Think about how much time it takes to own a home. This includes doing maintenance, repairs, and yard work. Ask yourself if you want to spend personal time on these jobs or if you have enough money to pay someone else to do them.

If you think you will have little free time or want a living space that offers more flexibility, renting could be a better choice during this time in your career.

Use Extra Money to Build Short-term Equity.

It’s a good idea to make a financial plan to help you meet your money goals. If you want to build up short-term equity, think about putting extra money into your mortgage payments. Even small extra payments can really help lower your principal balance over time. This can speed up your equity growth and might even shorten your loan term.

Don’t forget that any unexpected income, like bonuses, gifts, or tax refunds, can also help with your short-term equity plan. By planning ahead, you can use your money wisely to create a strong base for building wealth in the future.

Think About the Home’s Next Buyer.

When you buy a house for your residency, it’s smart to think about how much you can sell it for later. Things like where the house is, its condition, and what is happening in the local market can affect its value to future buyers.
Also, think about what future buyers in your area might want. Good school districts, closeness to stores or parks, and the feel of the neighborhood are all important. By looking at these factors, you can make sure your investment stays valuable and that you can sell your home at a good price when it’s time to move on.

Enhancing Your Home’s Appeal to Future Buyers

Enhancing your home’s appeal doesn’t always mean you need to spend a lot or do major renovations. You can focus on smart improvements that offer good value for your money. Look for projects that make your home more functional, nicer to look at, and easier to live in. These changes can really make a big difference.

One way to boost your home’s curb appeal is to improve its exterior. First impressions count in real estate. A tidy outside can attract more potential buyers. Simple upgrades, like new landscaping, a freshly painted front door, or better outdoor lighting, can greatly improve your home’s look.

It’s also important to keep up with what’s trending in real estate. Notice what buyers want now. For instance, many people today want energy-efficient appliances, smart home features, and updated kitchens and bathrooms.

Minimize the Home’s Time Commitment.

As a busy resident, it’s important to find a home that doesn’t take up too much of your time. This will help you balance your work and personal life. Look for homes that require less maintenance. Features to consider are a small yard, strong outside materials, and modern appliances.

Choosing a home with these things will help you spend less time on chores. Keep in mind that residency is a time when you really focus on your medical training. It is okay to focus your time and energy on growing in your career. You can still enjoy a comfortable and easy-to-care-for home.

Low-Maintenance Home Choices for Busy Residents

Condos or townhomes are great because they require less work. The homeowner’s association (HOA) usually takes care of things like the outside. This means you can own a home without losing your free time. As a med student, you won’t have to handle yard work, snow removal, or roof fixes. This lets you spend more time on your studies.

You might also want to think about newer homes that need less work. Newer places often have modern tools, better systems, and energy-saving designs. This cuts down the chances of needing repairs or replacements right away.

Don’t forget to check the neighborhood and what the community offers. Things like swimming pools, fitness centers, or playgrounds can save you some upkeep. They also give you fun options to enjoy with friends and family.

Key Takeaways

Buying a home during residency is a big decision. It needs careful thought and planning for the long term. Take a look at your personal finances and career goals. Also, check the local real estate market. Don’t forget to consider all ways of financing, be it through physician mortgage programs or regular mortgages. And don’t forget the transaction costs, which can be as high as 15% of the home’s value and therefore must be quite well pondered and budgeted for in the decision to buy a home.

Work With a Physician Mortgage Broker to Find Your Options

Consider working with a physician mortgage broker like LeverageRx when looking for your physician mortgage. A broker can connect you to lenders that provide physician mortgages for the specific property you are looking at. They have great knowledge of the real estate market and understand your needs. This can make it easier to find the right mortgage for you.