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First time home buyer.. doctor loans vs current low rates?

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  • First time home buyer.. doctor loans vs current low rates?

    Hello, I'm a first time home buyer in my last year of fellowship. I'll be moving to a new state with my family and I plan on purchasing a home from a family member (no agent involved). The cost is low relative to my income. I'm just wondering how to figure out if it makes sense to pursue doctor loans with no PMI and no down payment but higher fees and rate vs the historically low ~3% conventional rates right now?

  • #2
    Save up a 20% down payment before you buy and get the best mortgage rate/terms you can find. Otherwise, rent.

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    • #3
      Depends on the price of the house, how much savings you have, and how much you have in investment accounts.

      However, for the first year or two as an attending, I would most likely rent, no matter what.

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      • #4
        Renting at a new job is typically a good idea, especially your first job.

        When you're ready to buy, I'm not opposed to a physician loan. I was recently quoted 3.2% on a physician loan - 30 year fixed, 10% down. In my opinion it would be silly to pass that up just because it's not a conventional.

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        • #5
          Originally posted by Gavanshir View Post
          Hello, I'm a first time home buyer in my last year of fellowship. I'll be moving to a new state with my family and I plan on purchasing a home from a family member (no agent involved). The cost is low relative to my income. I'm just wondering how to figure out if it makes sense to pursue doctor loans with no PMI and no down payment but higher fees and rate vs the historically low ~3% conventional rates right now?
          well you need to compare the rate differences between them and value of your money.....
          hint: right now it makes no sense to use conventional.
          2nd hint: just make sure you should buy.

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          • #6
            Thank you. I have heard loud and clear about the general recommendation to rent vs buy.. and in all likelihood it is the best way to go but my wife and I have decided to buy. She will be in fellowship for 4 years so we will definitely be in the area for that time and perhaps longer. We feel the fact that our monthly costs will be same as rental costs to push us toward buying, we also just absolutely hate the idea of renting just as much as we hate the idea of leasing a car vs buying a used reliable one.

            Some more details:
            My current fellowship income + moonlighting is $~220K/yr. My wife's salary will be $70K/yr. (She has around $50K in savings account and her own Roth IRA maxed)
            I have around 25K in Roth IRA and another 65K in stocks in a brokerage account.
            The asking for the house is $285K.
            We have 2 children who will go to public school.
            I will be working from home mostly (telepsychiatry) and have relative freedom in terms of how much I work and who I work for (also can choose to be W2 vs 1099, currently doing a mix of both). I will most likely continue my current moonlighting positions and just work during week day hours instead of what I'm doing now (evenings and weekends).
            As I mentioned, we will be purchasing from a family member so the home will be furnished and we trust that it wont have any major surprises.

            Based on the responses so far, it seems that there is no absolute answer and I have to compare the rates/terms of the doctor vs conventional loans to decide.

            Peds, can you elaborate further about why it makes no sense to go conventional right now? Is that because of economic uncertainty and value of holding onto your cash by not putting anything down?

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            • #7
              I'm ashamed to admit but I've just learned about mortgage amortization schedules and despite the current low rates, it's hard to watch all that interest go away every month. Wouldn't it make sense to pay as big of a down payment as possible? I can cash out the brokerage account and my wife' savings to put down around 100K, would that not be the best way to go?

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