Physician Mortgage Question: Should I Buy a Home During Residency?
Residency Could Be the Right Time for Your First Physician Mortgage
5 min read
Residency is one big step towards that final achievement: your specialty license, with full acknowledgment and board certification in your chosen medical specialty. Be it in neurosurgery, internal medicine, or even urology, you are considered a medical doctor, with all the rights and responsibilities inferred upon you.
Bearing a substantial amount of debt may scare you from the idea, resigning yourself to even more years renting. However, just because you are just completing the final step in your training doesn’t mean you have to live your life as a student. Depending on your financial situation and your immediate plans after residency, home ownership may be in your sights. Let’s delve into some of the questions you should consider when thinking about investing in a physician mortgage now:
Your Current Financial Situation
- How much money do you have available for a down payment?
- What is your credit score?
- How much debt load are you carrying?
We start this evaluation with some pretty personal questions. These will vary greatly between candidates, so it’s important to take a serious look at your individual finances. Do you already have a contract for a permanent position? This is usually required by most lenders; they want the assurance that you are employed. A debt-to-income calculator can give you a general idea of how you look on paper. Further, you can experiment with some different options in down payment and length of loan term.
If you feel confident in your ability to manage your finances and are about to enter a permanent position with some stability, lets dig deeper into some potential home ownership questions.
Length of Home Occupancy
- Are you ready to commit to one location for a while? Do you want to be tied to the home for only 3-4 years?
- Do you mind the work involved in selling the house when you move to another practice or hospital?
- Will you gain any value (equity) in the home during your ownership?
It is not financially wise to expend money in purchasing a home, only to turn around and sell it for a comparable price in only a short period of time. The costs involved in the buying process are a loss, not to mention the paperwork and time spent moving in and decorating it. If you know now that you intend to move out of the area within the next few years, you may want to save your money for your first long-term employment.
- Do you have confidence in the current housing market? Is it a “Buyer’s” or “Seller’s” market?
- In similar fashion, what is the rental market like? Are rents increasing?
If the market is growing, you may be able to realize some profit in selling the home. In contrast, if the rental market is slow, your money may go farther by renting a home. If it is competitive, you may find that investing in a home may save you money AND provide some equity.
Additional Expenses: Property Taxes, Insurance & Utilities
- How much are property taxes in your city?
- How much will property insurance cost you?
- What are the utilities for the size of property you are considering?
These additional expenses need to be figured into the total cost of home ownership, on an annual, or even monthly, basis. Some rental properties (and a few homes governed by HOAs) include a variety of utilities, including electricity, sewer, trash removal, parking fees, and even satellite TV. Find out before purchasing what expenses you will be responsible for in a purchased and rental property. When comparing the cost of buying vs. the cost of renting, you really need an “apples to apples” approach.
- Are you buying a property which needs some renovation?
- Will your home have landscaping, a pool to maintain, or other unique amenities?
- Do you have the skills (and time) to do minor maintenance like plumbing, furnace, air conditioning, and hot water maintenance?
Home ownership also comes with unplanned and unforeseen expenses. In most cases, the additional costs are negligible, costing the homeowner more in time than money. However, first time homeowners don’t always know what to do the first time an issue arises. It would be ideal to have some “padding” in your budget for potential repairs.
Time—It is Worth a Lot
- Do you have time to search for a home, including the legwork in obtaining a physician mortgage?
- If you are purchasing a home in another city or state, do you have a real estate agent assisting you in the process?
- Are you prepared to furnish your home—purchasing furniture, moving in, and generally making the new purchase YOURS?
The process of home ownership begins with the search for the right property, and an agent can make the progression MUCH smoother. As your representative, they can help you find the right home, execute the contract, and work with your potential physician mortgage lender. But there will still be time which YOU need to commit to it as well. Once you buy your first house, you will be excited to make it yours, to decorate it in a manner that expresses who you are. No matter what you do, whether it be purchasing a starter home or upgrading to a larger residence, you will have to move in and set yourself up. In a crazy new physician’s schedule, be sure you plan for the time commitment.
The Final Decision
Purchasing your first home is a big decision, no matter what stage in your life. However, while completing your residency, you may find this even harder. Should you choose to pursue it further, remember that home ownership offers the chance to build your credit, establish good budgeting habits, and build equity in property. As you transition from resident to licensed doctor or dentist with a permanent position, experienced physician home mortgage lenders are skilled at helping residents navigate the home purchase process. Contact us to find out if a physician mortgage is right for you!
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