As you might remember, Last spring following Match Day, when we found out that we would be in the area for 7+ years, we started look for a house somewhere between DC and Baltimore. At the time, I was planning to keep my position at the large PR agency I was with and DrH was going to begin commuting into Baltimore when residency started in July. As it turned out, we ran out of time before the wedding in May to buy and we didn’t really like anything that saw up until that point. So, we decided to rent for the first year of residency and see what the year had in store for us.
We are glad that we waited and rented for a year. It provided us with time to settle down and adjust to our new life. It also gave me time to decided that I wanted to transition my career also up to Baltimore so that we would be in the same city. Once I accepted my new position at Johns Hopkins we agreed that it was time to start house hunting again. But this time, we new exactly where we wanted to find a place and we were ready to make that financial commitment.
For many residents, it is not recommended that they buy a home during their time in residency. There are a number of reasons for that, but the main one being that most residencies are not long enough for you to benefit financially from buying vs. renting (3-5 years). However, in our case, since we are here for 7+ years it makes sense for us to pay a mortgage which would be less than paying rent for the duration of DrH’s residency.
Not all that long ago, banks realized there was an untapped market out there for mortgage business – new doctors (Licensed Residents/Interns/Fellows in MD and DO programs). According to the Association of American Medical Colleges (AAMC) there were over 18,000 medical school graduates in 2014 – DrH was one of them. These new doctors, for the most part, have little money, have great future earning potential, and due to long periods of delayed gratification, would like to buy a home/ settle down when they can. But, by standard criteria for mortgages, they will have a difficult time securing a mortgage since they likely do not have anything to put down, they have a lot of debt already, and no proven earnings. In most cases the new doctors haven’t even started their job yet when they buy a home in a new city (for residency, fellowship, for first year out of training as an attending). So why not create a program that fits the needs of these doctors? Many larger banks around the country have: Bank of America, SunTrust, BB&T(you will have to check if they apply in your state) and some smaller, more local banks, like the one we went with in Maryland.
The Dr. Loan mortgage offering is great for those physician families who decide that buying a home would be a good choice for them. In our case, it is allowing us to not eat into as much of our savings as we would if we went the normal loan route. However, if the doctor is married to a non physician, they look into their finances as well, but the non- physician spouse’s credit score, as long as it meets the minimum requirement, is not the one looked at to determine if you qualify. Everything is based off of the physician’s current credit standing. The required credit score varies depending on which bank you use and where you live in the country, it is higher out here in DC/MD/VA region. So if you are looking to buy, keep that in mind–work on building your credit. Also, it also takes time to pull all the documents they need to process the loan, so start early.
This go-around of house hunting was a little more enjoyable than the last, probably because we were not stressed about everything we had going on last spring (recent match, pending move, wedding planning, etc). We also used the same agent that we worked with last spring who really has been great. She had us set up in a database so that we could see anything that was coming out. We looked at one place in person before we found our house. It is a small townhouse in a suburb of Baltimore, close to everything. We put an offer in the day after we saw it, they countered and then we accepted. Since then we have been taking care of all the paperwork and looking forward to our closing. There have been a few bumps along the way, but buying a house is never easy and everything will work itself out.
We will be closing early May and I can’t wait to get in there and make it our home.
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General info on doctor’s loans:
- Is made to a new resident, new attending (7-10 years out of residency or less)
- Requires little money down (0-5%)
- Doesn’t require the borrower to purchase mortgage insurance (PMI)
- Will accept a contract as evidence of future earnings (instead of paystubs the doctor doesn’t yet have)
- Requires the physician to open a bank account at the bank from which the mortgage is paid by auto-draft
- Is designed for townhomes, rowhouses, and single family homes (not condos)
- Has the same rate whether loan amount is above or below “jumbo loan” limit
- Some programs even allow you to use gift money for a down payment
- Requires cash reserves equivalent to a few months of Principle, Interest, Taxes, and Insurance (PITI), a reasonably good credit score, and a loan payment to income ratio of no more than 38%
- Often doesn’t calculate student loans toward the loan to income ratio