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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 ZZZ 
    Participant
    Status: Spouse
    Posts: 706
    Joined: 06/18/2018

    “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). ”

    So, if buying is better than renting, and your previous 0% down low was such a sweet deal, what happened to all the equity from that?

    Is 700k what you two will start at with upside far beyond that, or us 700k where you two will start out?

    Either way, are you really going to be happy for 8, 10, or more years in a 500k house? Or do you think you’ll always want to live in as much house as you can qualify for a mortgage on? Buying now just to sell and buy again 5 years from now will likely be suboptimally financially. What happens to your combined income if you have a kid?

    Just wait until you make sure you get married, can tolerate ATL, and your jobs actually work out.

    #217309 Reply
    Liked by CM, Peds
    Avatar AR 
    Participant
    Status: Physician
    Posts: 850
    Joined: 03/10/2016

    If I were you I would not only rent, but I’d rent for at least 5 yrs.

    Avatar highdoseamox 
    Participant
    Status: Physician
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    Joined: 05/18/2019

    I don’t have a higher earning spouse and am a pediatrician so I’ll never know what that income is like, but I have seen 2 people very recently who bought upon joining our group and relocating and they probably are not going to last with us. One had to get out of the mortgage fast. No idea how much they ate on that (had the home for only 2 years). Another colleague realized a couple years after buying that their home was in wrong school district by a couple blocks. I think it’s really hard to pick the right home until you really have a sense of the career trajectory and life trajectory.

    #217328 Reply
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 1862
    Joined: 02/11/2019

    I usually say buy but in this case renting is clearly the better option. At least until you are both sure you like the jobs and the area. It might be as little as an extra year of renting and you can really get a chance to knock down the loans. Remember you should be living like residents until the loans are gone.

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

    #217332 Reply
    Avatar Brains428 
    Participant
    Status: Physician
    Posts: 400
    Joined: 11/09/2017

    All the reasons have been stated above. Just felt like I should get the counter on the rent vote up.

    I’m almost 1 year into being an attending in a LCOL area. I put about 10k to student loans a month. I still feel pretty free to do as a please even after that payment. Rent is ridiculously cheap where I am, and so is the housing. With all that, my pay is going up 50% and my rent is going down 50% (moving in with the gf, going from luxury apartment in LCOL to regular apartment in LCOL). There are few days where I feel deprived from not having a home. If anything, I wish I hadn’t listened to doctor friends about renting the luxury apartment because “I’m an attending.”

    Atlanta is a cool city. Good luck!

     

    #217345 Reply
    Avatar Panscan 
    Participant
    Status: Resident
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    Joined: 03/18/2017

    You guys are going to be a million in debt with just practice buy ins and you want to buy a 400-700k house (which is a huge range btw)? Scary to say the least

    Rent for 2-3 years while crushing debt then re evaluate situation.

    #217358 Reply
    Liked by Tangler, ddswifey, Peds
    wonka31 wonka31 
    Participant
    Status: Physician
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    Joined: 03/24/2018

    You should rent. You also must account for costs of decorating, furniture, etc. you won’t want your nice house to have shabby furniture/decor. Don’t forget about the repairs that will inevitably come up in the first few years when you could be renting.

    I know this isn’t what you wanted to hear, but when everyone tells you the same thing you need to reassess your purchase timeframe.

    #217366 Reply
    Avatar BCBiker 
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    Status: Physician
    Posts: 235
    Joined: 01/10/2016

    I don’t think you have done the math. You may have combined income of $700K but you should calculate what a conservative amount of money you will have each month for debt paydown after you have paid taxes, 401(K) contributions, and living expenses including rent(s). I have a feeling you will understand how overwhelming this level of debt will be to pay off after this exercise. I think that when physicians are in training, they think that that big attending salary will conquer all monsters so no one sits down with a spreadsheet and figures out exactly how long it will take to pay off debt, save for a down payment, and buy into a practice. That is a pretty good combined income but it won’t do all three of those things in three year,s I can assure you this.  If you keep expenses down, you might pay down $300K per year. So to get loans plus buy in you are looking at 5 years plus and another year to save decent down payment.

    The act of forcing yourself to save a 20% down payment is a good lesson in understanding what it takes to put $200-300K in the bank, especially while paying other major expenses. I told my spouse we are not even going to think (well move beyond thinking…) about buying another house until we can make a 20% down payment, not including equity in our current starter home since we are going to hold and rent that one. This policy helped us not jump into the “doctor trap” -> buying a big stupid doctor home. 🙂 At least so far…

    Avatar wideopenspaces 
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    Status: Physician
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    Joined: 01/12/2016

    Yikes. That is so much debt. So much. What you would be doing is drowning in 1.5 million in debt, right around the time you decide you want to have kids. If you really want kids in the next few years, pay that debt down ASAP so you are in a position to take whatever time off once you are pregnant and after delivery. Also what you want in a house now vs once you have a kid or two will change. You would buy now and then decide you need a totally different house once kids came along. Plus if you are some one that just wants a 500k house on a salary of 375k and debt of 650k, for sure you will want something nicer once the salaries are 700k and debt is 1M. Just try and be patient. If you guys can dedicate 250k/ year to debt over 4 years, you will be in a sweet spot to start a family and buy whatever house you want.

    #217375 Reply
    Avatar EndoRobert 
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    Posts: 70
    Joined: 01/12/2019
    Earnest refinancing bonus

    Tldr answer- No.

    Longer answer- wait at least until you’ve been in the same city a year. Between buy ins, which have to be serviced in a reasonable time frame, and the loans, which you’ll want to service in 3-5 years, you’re gonna be writing five figure checks for several years. Don’t add a mortgage on top of that.

    edit: will your salaries go up once fully bought into your groups?

    You *should* still wait, but if your household income is 7 figures in three years buying won’t be the unmitigated disaster it could be if you buy in this next year while living apart and still in training.

    #217388 Reply
    Liked by MaxPower, Peds, ENT Doc
    Avatar hightower 
    Participant
    Status: Physician
    Posts: 1485
    Joined: 12/07/2016

    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.

    Click to expand…

    Whoa, whoa, whoa…I haven’t even looked at the other replies yet, but let’s step back and summarize your first couple paragraphs.  You have 660k of student loan debt and you’re both about to sign up for over 500k of practice loan debt, which brings your total debt to well over $1,000,000!

    And you’re thinking about “buying” a home next year?  I put “buying” in quotations because you’d technically be “borrowing” a home. If you do that, you’ll be somewhere around 1.6+ million in debt within 1 year of starting practice.  And I’m going to go out on a limb and assume you don’t have much in savings so far?

    It’s time right now to stop thinking of your money in terms of what your payments are each month.  You keep talking about the cost of rent per month vs the cost of buying per month, but what you need to start doing is focusing on your net worth.

    Have you ever calculated your net worth?  It’s your assets minus your debts.  Yours is very, very, very negative.  Even though you are both about to start making big bucks, it will remain negative for quite some time.  You are behind other people your age because of this.  You need to remind yourself of this every day to help you stay focused on what’s important right now which is…ELIMINATING YOUR DEBT.

    You absolutely, without a doubt, should not even think about buying a house right now.  First, get rid of your student loans COMPLETELY.  Then, save for a proper 20% down payment before you start shopping for a home.  Who cares what you’ll be paying in rent during this time.  It doesn’t matter.  It pales in comparison to what you’ll waste in interest on those loans over 5 years and what you’d be spending on purchasing a house (remember, that a mortgage is the minimum you’ll spend on a home each month, your rent is the max).

    You’re in your early 30’s.  I’m 37.  It seems like yesterday I was 29 going on 30 and starting my career as a hospitalist.  I had a similar attitude about debt at your age.  But, by time I hit 33/34, I was burnt out and wanting to change careers.  However, I couldn’t because I was so buried in student loans, mortgage debt, car payments, credit cards, and had very little savings.  I didn’t see that coming when I was 29.  My point is, you don’t even know if you’re going to love your career yet or how it will feel when you’re an attending or if you’ll like your partners, etc.  HOPEFULLY, you’ll love it and do well and end up with more cash than you know what to do with, but that’s not a guarantee and you shouldn’t pretend that it is.  Get rid of that debt asap and you’ll have options if it doesn’t work out.  Wait to buy a home until you can truly afford one, which right now you can not.

    Also, waiting until you’re on the other side of 35 to have kids can be risky as well, especially if you want multiple.  Remember that the risk of complications goes up significantly at that age.  My wife and I regret not starting earlier.  Something to consider since you’re still young and you know you want kids.

     

    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3080
    Joined: 09/18/2018
    To get a decent starter home in the area we want will cost 400-700K.

    Click to expand…

    Wait for the purchase then adjust your preferences to the real world. “Starter” has an implied meaning which makes me wonder the long term housing plans. Long term has an implied meaning as well. You are just getting started and already have future income spent with more on the way. The future is longer than five years. By the way, there is nothing wrong with waiting, just saying.

    What you can “buy on credit” is different than the wisest choice. Wisdom takes time. You might want to slow down the spending of future earnings. I would suggest you try to “fill the debt hole” with the big shovels first rather than digging deeper into debt. It’s not like you have a “need”.

    #217431 Reply
    Avatar Nysoz 
    Participant
    Status: Physician
    Posts: 88
    Joined: 10/23/2017

    Tldr answer- No.

    Longer answer- wait at least until you’ve been in the same city a year. Between buy ins, which have to be serviced in a reasonable time frame, and the loans, which you’ll want to service in 3-5 years, you’re gonna be writing five figure checks for several years. Don’t add a mortgage on top of that.

    Click to expand…

    I was really hoping this was going to be tldr answer no. Longer answer nooooooooooooooo.

    Anyways, another vote for rent

    Avatar EndoRobert 
    Participant
    Posts: 70
    Joined: 01/12/2019

    Tldr answer- No.

    Longer answer- wait at least until you’ve been in the same city a year. Between buy ins, which have to be serviced in a reasonable time frame, and the loans, which you’ll want to service in 3-5 years, you’re gonna be writing five figure checks for several years. Don’t add a mortgage on top of that.

    Click to expand…

    I was really hoping this was going to be tldr answer no. Longer answer nooooooooooooooo.

    Anyways, another vote for rent

    Click to expand…

    Haha. Next time I will.

    When OP seems set on a plan, as this one does, I try to not just post “he!l no!” even if that’s what I want to.

    #217462 Reply
    Avatar hospitalist md 
    Participant
    Status: Physician
    Posts: 86
    Joined: 10/31/2017

    just to give a perspective on numbers …. we are in the same boat with 2 physician income at around 680,000 +/- yearly income . we also have a mortgage of about 600000 , 15 yr which comes to a monthly payment of about 5400 including taxes and insurance … i wud never have bought that house if we had additional student loans… numbers wud just not work… u will on an avg have about  28000 +/- per month after taxes and retirement accounts …. if u have 1 million in debt , u wil be writing a large check every month just for the loans …. add on children and house maintenance and whatever else that comes up and u r going to live paycheck to paycheck for many years, despite the high income … its just not worth it…

    attending income appears large wen u start out but you get used to it real fast… grow into it slowly… sorry to be a bummer but numbers don’t lie…. run them and then make a decision …

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