Two Attending physicians, student loan debt of 660K, Buy 1st home now or delay?

Home Mortgages and Home Buying Two Attending physicians, student loan debt of 660K, Buy 1st home now or delay?

  • Avatar ConfusedMD2020 
    Status: Physician
    Posts: 30
    Joined: 05/27/2019

    I need some impartial advice guys. My fiance and I are about to finish training and move to Atlanta where the rent for a decent and safe 2bd/2br apartment is about $2300-2800 a month (yeah..that’s alot, but keep in mind the apartment is very convenient to work, virtually eliminates Atlanta traffic issues and is in a very safe area).
    He’ll be renting this upcoming year while I finish fellowship training for one more year in another city.

    Our issue is when to buy our first house. I would like to buy something next year (2020) so we can move into it as soon as I finish my fellowship. To get a decent starter home in the area we want will cost 400-700K. We have about 660K in student loans with interest rates under 7% that we’re planning to pay off within the next 3-5 years. He’ll have a practice buy-in of 250K broken into 3 payments each year starting in 2021. I’ll also have a practice buy-in of 200K starting in 2022 with 50K due initially then the other 150K to be taken out of my pay interest free over the next 3 years. He believes that we should rent for 2-3 years while we save for a 20% down payment. I want to use a physician loan to purchase a home with 0% down (I used one before to buy my house during residency and had no issues when buying or selling my home). My reasoning is that we’d spend over 25K a year each of those years on rent and our monthly mortgage/interest/taxes/insurance in our area would likely be 2.7-4.8K a month. We’ll already be paying 3.5K a month in combined rent this upcoming year while he’s making 250-300K as an attending and I’m making about 75K as a moonlighting fellow. We will gross over 700K once I start working in 2020 and would be paying $2500 in rent at that time. We’re in our early 30s..very early. We plan to get married in the next year. No kids yet but plan to start a family in 3-5 yrs.

    TLDR: We owe 660K in loans that we’d like to pay off in 3-5 years, will make 700K+, have upcoming practice buy-ins of 500K in 2-3 years that we’ll pay off over 3 years. I want to buy a 400-600K house (2.7-4.8K monthly with no down payment), he wants to rent at 2.5-2.8K monthly for 2-3 years, and save for down payment, then buy. What makes more financial sense? Thanks!

    Bonus question: how much or what percentage of our student loan debt is reasonable to have paid off before making a home purchase? 50%? More? Less?

    Edit: I’m thinking of decreasing house range to something more reasonable 400-600k Max limit.

    #217225 Reply
    Avatar nephron 
    Status: Physician
    Posts: 227
    Joined: 05/09/2019

    I would rent and clean up your debt before buying anyything. Most docs don’t stay in their first attending job even if they are intending to and you both will have a lot of unforeseen events in your near future (marriage, kids, new jobs) that will prob make you want to move in 3-4 yrs.

    #217235 Reply
    Avatar Peds 
    Status: Physician
    Posts: 4452
    Joined: 01/08/2016
    My fiance and I are about to finish training and move to Atlanta where the rent for a decent and safe 2bd/2br apartment is about $2300-2800 a month (yeah..that’s alot, but keep in mind the apartment is very convenient to work, virtually eliminates Atlanta traffic issues and is in a very safe area).

    Click to expand…

    gonna stop right there: no.

    i see fiance.

    i see new job.

    i see new city.


    also its not that much. youve never lived in CA clearly.

    CordMcNally CordMcNally 
    Status: Physician
    Posts: 2860
    Joined: 01/03/2017

    You’re falling into the classic “rent is throwing money away” trap. This should get said in every rent vs. buy thread: rent is the maximum you’ll spend on housing, a mortgage is the absolute minimum. You’ve become numb to the debt. I’d focus on getting your debts under control before I’d even start saving money for a house, especially if your student loans are at nearly 7% (you really need to refinance).

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    Avatar Allixi 
    Status: Physician
    Posts: 112
    Joined: 03/16/2016

    I think you probably already knew what the forum’s going to answer, especially if you’re a regular reader/lurker.


    Why would you prefer to pay a higher monthly amount (4.8K) in mortgage/interest/taxes, and be locked in a location, having to deal with the hassles of owning a house, rather than pay a smaller amount (2.5K) in rent? You will have no equity with a 0% down loan and be “throwing money away” on interest and taxes (though some of it might be deductible)

    Is the 700K in salary guaranteed, if you’re both just joining the practices?

    #217243 Reply
    Avatar Gamma Knives 
    Status: Physician
    Posts: 169
    Joined: 06/25/2017

    Definitely rent. As said above rent is not throwing away money. Rent buys the flexibility to move and fixed housing costs.

    Hopefully both of you love your jobs but if you need to move for any reason you don’t want to be trying to sell a half million dollar house. Renting also gives you a chance to know a new city and figure out where you want to buy when the time comes. Right now I would be looking to refinance your loans and pay them off.

    For the loan payoff I don’t see it in terms of a percent paid off but time to make reasonably sure that you are secure in your practices (and marriage). Having said that I would aim for at least half of the student loan debt before you start looking.

    #217246 Reply
    Liked by hatton1, Peds
    Dreamgiver Dreamgiver 
    Status: Physician
    Posts: 871
    Joined: 03/09/2017
    Splash Refinancing Bonus

    Another vote for renting. Odds are your jobs will change within the first couple of years.

    #217249 Reply
    Liked by Peds
    ENT Doc ENT Doc 
    Status: Physician
    Posts: 3523
    Joined: 01/14/2017

    THIS thread should have been the one with a trigger warning.


    Avatar mapplebum 
    Status: Spouse
    Posts: 312
    Joined: 04/17/2018

    Another vote for renting. Our example: husband took a job at hospital where he did both residency and fellowship. Coming up on one year post training and we are SO GRATEFUL we did not buy. Even though we’ve lived here since 2012 and he’s been at the hospital since 2013. We couldn’t have experienced a smaller transition from fellowship to his faculty position and yet there’s still so much uncertainty in a new job. Knowing that we’re not tied to a mortgage is a major relief. Plus, a mortgage is different but for us (with similar earning potential and less than half your student debt) incurring another 6 figures of debt just doesn’t sit right.

    I know everyone does it. It’s the assumed next step for physician families but if you can tear yourself from the idea that it’s the logical next step you might see there’s more risk than you’d expect with buying immediately.

    #217259 Reply
    White.Beard.Doc White.Beard.Doc 
    Status: Physician
    Posts: 937
    Joined: 02/06/2016

    I would definitely plan to rent for one year.  It doesn’t have to be 2 or 3 years, but it should be at least a year.  That way you have a clearer idea about marriage, the city, the jobs, etc.  After a year you will be in a much better position to understand the risks and benefits of the multitude of changes that each of you will have made over a very short period of time.

    Also, if you buy now you will likely be ready for a better house in about 3 years because the high income jobs will be stabilizing, the student loan situation will be way better, and you will have some savings.  The transaction costs eat up about 3 years of appreciation in the average market, so renting for 3 years so you can buy the long term house works out much better.

    Houses are financially similar to marriages, the longer the better for your financial health in most cases.  If you stay in a house for 20 years, the equity growth and the inflation growth with no transaction costs can contribute to the growth of your net worth.  So don’t buy now, you are going to likely change homes in short order and the market is currently at a high relative to incomes.  I see way more cost and risk with buying than with renting.  That said, it would be reasonable to rent for a year and then reassess the risks and benefits.

    We rented a fairly nice home when I became a new attending.  After one year I knew I loved my job and we weren’t going anywhere.  We bought a forever home and lived there for 22 years, having paid off the mortgage.  Our original 100k downpayment yielded 1.25 million upon sale.  It worked out well because we stayed for a very long time in a top school district and no longer had a mortgage when we sold.

    Avatar StarTrekDoc 
    Status: Physician
    Posts: 2055
    Joined: 01/15/2017

    Trigger Warning indeed — ‘It’s A Trap!’

    @peds said it best.

    Take your time, assess when all the pieces are together and then make a sound, logical choice once the dust settles.   Too many moving pieces until then.  No need to light the balls on fire while juggling them.

    #217267 Reply
    Avatar GoBlueMD 
    Status: Physician
    Posts: 80
    Joined: 05/27/2017

    Crush debt, buy $700k-1M+ house (including reno costs) you can really be happy about. Sneaky suspicion a 400k house won’t cut it.

    #217274 Reply
    Avatar Kamban 
    Status: Physician
    Posts: 2490
    Joined: 08/01/2016
    We owe 660K in loans that we’d like to pay off in 3-5 years,

    Click to expand…

    Not going to happen if you have practice buy in(s) and also a mortgage.

    Rent while you start paying down student loan debt and pay for the buy in and also put money towards retirement and future expenses that are inevitable post marriage.

    But I bet the practices will be very happy if you buy right away, since it will lock you to them and they have the upper hand in future negotiations.

    #217282 Reply
    Avatar Budgetmaestra 
    Status: Attorney
    Posts: 41
    Joined: 04/30/2019

    Nope nope nope. You have a staggering amount of student debt, and you have huge buy in ahead of you as well. If you could buy an apartment and pay $1,500 I’d say maybe. But not the amounts you are talking about. Between you those student loans accrue interest of something like $3,500/month. That is insane! There are many families with 2-3 kids who live just fine on your monthly interest payment alone.

    Take 2-3 years and knock out those student loans. To pay them off you are looking at putting around $20k per month toward those loans every month for three years. That’s a lot. But it is doable since you don’t have kids.

    Also, why a 2br? Get a one br since your husband will be there by himself for a year. If a 2br is $2,300/month the 1br is probably around $1,800. Then live in it together for 1-2 yrs while you finish paying off those loans. That’s easily $18k in savings in that time.

    And you still have to come up with a buy in.

    Once student loans are gone, you can buy a house with 100% financing. You can even buy the $1m house at that point if you want to. We bought the $800k house within 2 months of paying our student loans off.

    Treat the debt as a challenge and use the Dave Ramsey snowball method to pay it off. Live on a budget. Drive paid off cars. If you buckle down for 2-3 years your financial life will change forever. If you just bump along and pay $7-$8k per month on those loans it will take you 15-20 years to get rid of those loans. And kids, college savings, a house will come along in time. I promise that the $20k per month now will feel a lot less painful than paying $8k a month in six years when you have 2 kids, $36k in yearly daycare payments, a $5k mortgage and are starting to look at what college is going to cost for your little ones.

    #217293 Reply
    Liked by hatton1
    Avatar PreCancerDoctor 
    Status: Physician
    Posts: 18
    Joined: 01/06/2018

    Congratulations on the wedding and the job!

    You should know: you have made your peace with these debt numbers, because they’re part of your life, but two million (student loans + practice loans + mortgage) is super-high for all of us meeting you for the first time. That colors the previous posters’ advice.

    I would recommend renting.

    We had a no-money-down physician mortgage.  I’m glad yours worked out, but many people (including me) ignored the risk of highly leveraged real estate at their peril. If the hot Atlanta real estate market softens, you could easily be 120K upside down (10% drop in value + 10% commission/sales costs).  That’s on top of the rest of your debt.

    Your budget will show that the 700K really starts to disappear after at least 1/3 to taxes, then maxing pretax accounts, then lots and lots of debt payments.

    My gentle advice is slow down and enjoy the ride.  You don’t have to listen to the other people (or internal voice) telling you to BUY RIGHT NOW.

    I like your fiance’s approach.  Slow and steady wins a lot of races.

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