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How and When to Get a Home: A Spin on the Residency Question

Home Mortgages and Home Buying How and When to Get a Home: A Spin on the Residency Question

  • Avatar bullsdoc 
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    Dear all,

    Thanks to all for the help and support in this forum.  I’ve truly learned a lot here and have many to thank. I have a question about home buying, similar to the usual “should I buy in residency” but with some changes.  I am currently in residency and have no intention of buying during residency, but will be going on to fellowship which will be another 3-4 years.  My income will go up minimally during fellowship, basically unchanged from residency, but I know many in this position are thinking about buying houses.

    Currently saving during residency, doing the usual Roth and 401k employer match thing, but it’s not like I’ve been able to put away 100K in liquid saving for a downpayment.  Is this the right time to do so assuming planned to stay in area of fellowship, or wait until becoming an attending? Tough to think about another 3 years of hustling during fellowship and not getting any any real traction on housing, but understand if this is the right road.  Thanks for any thoughts

    #214050 Reply
    ENT Doc ENT Doc 
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    Wait.

    #214051 Reply
    Avatar bullsdoc 
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    Thanks for the response. As a follow-up, can I ask a question here about the relative cost of renting versus mortgage payments?  Granted as the homeowner you have a number of additional costs, but what I’ve noticed in my area and others is that rent for a decent, not even great, two bedroom apartment is as much as the monthly mortgage payment on a three bedroom house.

    And with renting you are of course not making any progress on equity.  How does this factor in? Am I missing the mark here?  Thanks again

    #214052 Reply
    Avatar wa2106 
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    Do you need 3 bedrooms?

    It’s true you’re missing out on some equity but look at loan amortization schedules (easily found online) – for the first third of the loan the vast majority of the payment is going toward interest, taxes and insurance rather than building equity.  That money is gone.  Plus you will lose out on transaction costs coming and going – realtor commissions, title, attorney fees, moving expenses, etc.

    Rent is the maximum you will pay on your housing per month.  Mortgage is the minimum.  They’re not comparable.

    Very unlikely you should buy.

    #214055 Reply
    Dreamgiver Dreamgiver 
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    Rent is a ceiling on housing expenses, mortgage is the floor

    Avatar Tim 
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    Rent.
    You asked two questions, not one.
    a) Lease vs Purchase
    b) Resident/Fellow vs Attending
    Until you are at least a year into Attending, rent.

    By the way, would you buy the same house two years into attending pay? Rent.

    #214058 Reply
    Avatar MaxPower 
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    One other thing to consider, although speculative, is that there has been a tremendous run up in housing prices. Some would consider it to be unsustainable. So what happens in 3-4 years when housing prices tumble and now your equity, which as @wa2106 said above, would be minimal due to more money going towards interest in the early part of the loan, is gone and you owe more than the house can be sold for? I’m doubtful you would be able to come up with the money on a fellow’s salary to get out from under that loan.

    The smart play here is to rent and then look to buy a house once you’ve become an established attending and are sure you want to stay where you end up. Could it work out and you buy a house during fellowship, have no major maintenance issues that come up, and sell it for more than you bought it for? Sure it could happen. But it’s just a lot of things that have to happen and fall in your favor to come out ahead, whereas it only would take one or two things to go against you to turn this into a financial disaster.

    #214059 Reply
    Avatar bullsdoc 
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    Really appreciate the perspectives here.  I suspected this would be the case, but very much helps to hear so resoundingly.  Having been in training for so long, definitely understand now the fatigue and desire to move on with things, but I see the benefits of waiting likely outweigh the risks.

    #214060 Reply
    Lordosis Lordosis 
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    If rent is the same then renting is a deal. If rent was double mortgage payments then I would consider.
    Transaction costs, taxes, insurance, furnishings, maintenance. All these things favor renting. So you have to be in an awfully high rent situation to make buying worth it. Or very lucky.

    “Never let your sense of morals prevent you from doing what is right.”

    #214061 Reply
    Avatar Peds 
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    How is this question any different than the other hundreds of same questions?

    Avatar bullsdoc 
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    Well I searched for how people felt about this during fellowship and didn’t find a lot of great information that’s how.

    It’s easy to keep on keeping on in residency in yours 20s, but the game changes in fellowship in nuanced ways in your 30s with kids, etc.  Similar questions no doubt, but it gets harder and more complicated.

    #214073 Reply
    Avatar Peds 
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    In hindsight I should have bought a house in college…..the time frame was perfect. I also didn’t have an income….

    #214074 Reply
    Liked by Lordosis
    Avatar bullsdoc 
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    This is not a relevant comment.  Peds I very much appreciate your previous comments and ongoing help in the forum, but this is not one of them (Though I understand you’re making a joke). LOTS of people buy houses in fellowship. Is it a great idea? Sounds not based on the feedback above, and I very much appreciate the opinions provided. But it happens, a lot, and its important to hear the plus/minuses.

    #214076 Reply
    ENT Doc ENT Doc 
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    You are forgetting about:
    -most of your payments in the early years are interest, not equity
    -capital reserves for upkeep
    -frictional costs of a sale, which are substantial (you instantly lose money when you buy a home)

    #214077 Reply
    Liked by EndoRobert, Peds
    Lordosis Lordosis 
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    Yes fellowship offers some advantages. But the short timeframe is the same and that is the most important factor.

    “Never let your sense of morals prevent you from doing what is right.”

    #214078 Reply

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