Resident Mortgage Loans

keep in mind that interest paid on a mortgage is TAX DEDUCTIBLE (taxes are the things that the government charges you when you have a job, a concept foriegn to many career students like ourselves), so the financial implications of home ownership are not always immediately apparent.

a word about new homes - i have just sold the house we bought brand new before med school, and am moving to a 24 year old house for residency, and couldn't be more stoked. remember that the vast majority of new homes come with little or minimal landscaping, which is way more expensive than you probably think. and even if landscaping is included, think charlie brown's christmas tree. i am leaving scorched earth behind and moving into large mature trees and shrubs with actual roots. personal prefernce of course, but keep it in mind.

also, new houses invariably have problems of their own because they settle. wood dries and twists, foundations sink into the freshly graded earth, etc. also, tract homes (assuming that we are not talking about fat custom homes just yet) cut every possible corner behind the drywall. it's the american way, and we all know it. of course the appliances, wiring, water heater, AC, etc are new and not likely to give you problems like in an older house. just know that there are just another set of problems to consider. 3 doors in the house we just sold have not shut for 2 years, plaster cracks, cheap vent fans, to name a few.

lastly, the deferment rules only apply if you are going fha, which is not necessarily everyone. otherwise, if you are in deferment or eligible for forbearance for 12 months from loan application date, they do not have to count it into your debt to income ratio. and a word of caution about deceiving mortgage brokers about where the down payment came from - mine wanted a paper trail. they often don't mind gifts, but tell them up front if that's the way you are going. remember that you have an MD and a job now - get out of the unemployed student mentality that is trying to pull off a fraud to get you the financing you want.

cheers

chee68....are you looking to rent or buy when we get out there......i am doing my homework now.......any leads on mortgage programs.....and FHA is federal housing authority......

FHA??? not sure what this is?
also, if you are disciplined to pay on the prinicpal with an interest only loan, it seems to me a good way to go. this is all new to me, but like what was said above....don't forget about the taxes, etc. that you are paying. So at the end, if all you pay on is the interest, then you lost all that money to taxes, etc. and still haven't paid anything on the principal. I have found with interest only loans, the monthly payments are pretty good, so throwing some more money in per month to go against the principal is probably a good idea.

I think that the restrictions you mentioned on the FHA loan may differ between states. My wife and I are both students and are in the process of buying a townhouse with an FHA loan. We had the option of a 30-year fixed at 5.5%, or a 1-1 ARM at 3.5. We chose the ARM because even if interest rates raise the max each year, we will just be at 5.5% during my fourth year when we will (hopefully) be moving to whatever program was nice enough to take me. I agree with everything else you mentioned. Our townhouse is one of 8 remaining in a brand new development, so the builders took $12,000 off of the price to move the last units. We used part of that discount to cover all closing costs and the rest to lower the cost of the house. The best part of the FHA is that you only need 3% down, but you will still be paying the PMI. I'm not sure if you can do an 80-10-10 with an FHA.

I'm in the process of getting a loan right now - not the easiest thing to do..

It was explained to me that very recently, policy has changed and student loans, even if in deferment are included in calculation..

I got approved for a FHA loan - very easy to do - but you cannot do a 5-1 ARM; only 30 year fixed - nor can you use a FHA loan to buy a townhouse/condo - so I am looking elsewhere.

The best thing I have found is to get a 5-1 ARM for around 4.1% interest rate, 0 points. If you are going to do 20% down - than you are all set. If you are going to do less think about doing a 80-10-10. Meaning 80% of the price of the home is the "main"/first mortgage; 10% is on a second mortgage and 10% down. Some people even do 80-15-5. This lets you avoid mortgage insurance. Why is this important? Becuase its around $50-75 a month and NOT tax deductible. While your interest on a 80-10-10 is.

Also, for those of you who haven't heard of a checking account - now maybe time to open one...if someone is going to help out with the downpayment - have them deposit at least 50% of the down payment in YOUR account. Most banks want to see that at least half of the down payment comes from the buyer themself. If they ask you how you all of a sudden have this account...say that you earned money in college and med school in odd jobs - your parents were holding onto your savings and you thought it was about time to open an account since you will finally be getting regular pay checks. Bottom line - pamper your overall balance
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If you are in a six year program think about a 7-1 ARM. Rates being so low right now - its good to get it fixed for the duration you will 'own' the house. If you plan on settleing in the area and keeping your home you are buying for sure - than definately lock in a low rate (30 year fixed).

Also, buying a house is not the best thing for everyone. A important thing to remember in this market - your bottom line - monthly mortgage payment may seem resonable (around $1000-1300/month);
however, this is mostly due to lower interest rates...most people selling homes know rates are low and you are willing to pay MORE for a house. So they price a $150,000 townhouse from 2 years ago at $195,000! Becuase montly payments with a 7.2% interest rate vs. a 4.1% will come out around the same. (using rough numbers). So be careful of price inflations due to current rates. If in five years rates climb - which they will - potential apperciation values ofthe home may drop - and now you may end up selling your house for lower than you had inticipated - not good news. Where is that equity everyone keeps talking about?

The best thing to do is whatever area you are buying in - get a buyers agent. As far as a buyer goes - this is a free person to help find a new home - and knows the area etc. They can show you any house - listed by any agency - and they split the commission most off 50/50 with the seller agent.

Lastly from my limited experience I have noted one other avenue is worthwhile to look at - new developments. Being who we are - we have little time for home maintence. So this is ideal. I was shocked to know that new homes being built right now very close to other older houses (30-40 years old) were priced almost the same! AND most very big builders for new developments offer AWESOME low interest rates like 2-3% to draw in buyers!! This is what I am looking into now - and ready to put in an offer any day now.

Everyone should pick a bank and use there website for mortgage calculators. Turst only your own math. Don't be fooled by mortgage brokers - they want you to get the loan from them - they just don't want you to know that. For people in very expensive places - it may be worth renting - do the math and figure it out. Most people think they buying is definately the way to go becuase they are building personal asset - however, first five years of most loans you are paying mostly interest! Paying off very little of the principal. So what is the difference in paying interest and paying rent?! Not much...so buying is not for everyone.

Take care everyone and good luck!

Peace.

Although, I didn't do a interest only loan, the bank was more than happy to do a five year balloon with a competitive interest rate. The house also appreciated over the five years a well. So it helped in the end to have a little money to put down on another house. If you do an interest only loan, you will not gain much equity in your home, so avoid it if possible. You may lose money in the end if it doesn't appreciate enough when you consider taxes, maintenance, realtor fees, and interest paid. I think this is easier if you have a spouse that is working as well.

Try Countrywide Home Loans. I took out a fairly good size loan to buy a place in Chicago. The option I have is interest only payments, 5 year ARM. Good deal if you want to own and still a great investment potential as long as the place appreciates.

thanks......i will be doing my residency in pennsylvania so looks like that is out.....i'll look into physician lender......thanks again

I have researched this to the hilt, talked to mortgage brokers from Wells Fargo, Washington Mutual, Physician Lender.com.... All of em. What I have heard from every lender was the same: If you are eligible for the Bank of American "M.D. Loan" take it, there is nothing better for people like us: cash poor, high loans hanging over our heads, but usually good credit rating and earning potential. Unfortunately, it is offered only in 22 states. Look into it. I couldn't do it in Pennsylvania, so I took the Physician Lender.com loan. Owner is a guy by the name of Mike Smela. He's awesome.
Hope this helps.

bank of america too, so i hear

thanks noskis..........i'll look into it.....also found out washington mutual has some sort of mortgage plan specifically for residents......

physician lender () has some pretty sweet programs just for residents.