Buying a first home

Hi all! My husband is a senior resident who will be graduating in June 2004. Hopefully we will be buying our first home when he graduates. The only problem is, we have huge student loans and probably won't have money for a down payment. Do you know of any good lenders who will let physicians purchase homes with little or no money down? If you have purchased a home, I would love to get your advice. Take care!

[migirl]

I think Bank of America offers what they call a Physician's Loan (unfortunately for us, it is only offered in certain states and ours was not one of them). Although ours was a slightly different situation, I found it helpful to contact the residency program and ask them what banks/credit unions/other lenders they have relationships with or could recommend using. Maybe you could ask around to other physicians in the area that you're going to since lenders can vary by region. Good luck and congratulations on moving on!

We bought our first home last year and it was a fun, stressful, exciting, nail-biting experience. We also put zero down because what we had in savings we put into purchasing our family car a couple of years back. At the time we thought it was a smart thing to do to avoid paying interest but then we realized come home buying time that it was much better to have something to show than nothing. So my first bit of advice is to scrape as much together to have some down payment ($5K wouldn't be too bad) while you still can, if you can.

If it just isn't feasible, we got money for closing costs (that's right, we had to "get" money for that) through SunTrust Bank. I think it's based in the southeast - GA/FL. Anyway, it loans money to physicians with the amount depending on what year of training your husband (or the dr. in the family) is in. First year residents don't qualify for as much as third year who don't qualify as much as fellows, etc.

A word of advice on this loan, however. If you need it for closing costs or down payment, be sure you have the money loaned IN the bank account at least 60 days before you go and pre-qualify for your home loan. If not they will give you grief about it being borrowed money and worry endlessly about your ability to pay this loan back in addition to your mortgage.

Next, it's time to get pre-approved. It is better to know what you qualify for before going house shopping because then it won't be disappointing to find a house you love only to find you can't afford it. Banks compete to get your business and you should shop around for the best interest rates. I don't know what it will be like in a year but be informed about what the going rate is when the time comes. Being pre-qualified also shows the seller you are serious and that they can trust you will be funded.

Then you would consider what kind of home you'd like and what you can afford. Keep in mind that unless this is your permanent home, get a home that you know will also be good to sell when the time comes to move. It was fun to go house-shopping and see what's available. Getting a good realtor is also important. If you happen upon a realtor that pressures you to buy immediately because "this house is going to go fast" I highly advise you to RUN quickly in the opposite direction. You want someone who has your interests and not his/her commission in mind.

Finally, be sure the lender you choose gives you exact figures on what closing costs, interest rates, etc will be on paper prior to closing. Closing for us was stressful because we got a whole different set of numbers than what was originally quoted and my husband was none too pleased and he let the guy know it. The interest was higher and we were going to pay $200 more per month than we thought we were going to. The lender did feel bad about it and ended up refinancing us for free a few months later with the original numbers he had quoted us.

One more thing. Be very fastidious in making your credit cards payments. You don't have to pay them all off before purchasing your home but any late payments will affect your credit history and your credit rating.

Now, aren't you glad you asked?

[Rapunzel]

Wow. That is such excellent advice! Thu Van, can you turn that into an article of some sort so I can find this handy information quickly in, say, two years when we start this process?

Jennifer

Thanks so much to everyone for the helpful information. You don't know how valuable it is to my husband and myself! We currently live in the LA area where the real estate market is just booming and housing prices are through the roof! We are actually looking to move out of state to get away from the sky high prices! 8O

Jennifer, your signature says you are a Texan. That is one of the areas that we are looking to move to. As of now we have our sights on Austin or Dallas. Do you know what the pros/cons are of those areas?

Thanks again for the great advice!!

Jennifer (and the many other Texans and former Texans on this board) can certainly answer better than I since I haven't lived in Texas. BUT my cousin and his wife just moved back to Colorado from Austin and they enjoyed their time there quite a bit. And....two friends went to grad school there and really liked it.

And some thoughts on the credit scores....I have been checking our credit reports in anticipation of getting a new mortgage next spring for when we move. While there weren't any major mistakes, I learned a few things:

--It is really important for your score to pay your bills on time. Every single account lists whether or not the account is paid on time.
--If you disagree with a statement on your credit report, call the credit reporting company and see if you can get it changed (note that it is difficult to change negative information that is accurate). I was able to close two really old accounts this way and correct a minor mistake.
--While it is ok to carry balances on credit cards, this can affect your score. I was surpised to see that a "negative" on my score was the balance on one of my cards -- I didn't think it was *that* high! But it wasn't much of a negative and the score was pretty good.
--If you are wanting to make improvements to your score, do so well before you apply for a mortgage. I don't know the best time frame, but maybe at least 3-6 months. The balances listed for my credit cards were about 2 or 3 months behind (I recently made larger payments toward them and was disappointed to see old balances ).
--You can go to the website myfico.com to learn more about your fico score. What I found most interesting was a table showing typical mortgage rates based on your fico score. The mortgage rate isn't set in stone but you can use this as a guide. You can order your credit reports from this site, but it my be less expensive to contact each of the three major credit companies.

We just bought our new house and planned on using the "doctor's Loan." As it turned out, the banks who do this, at least in our area, had a higher interest rate. We explained the situtation to our lender who found other creative ways to get around the whole school loan thing and the loan ended up being better than what the banks who did the doctor's loan were working out for us. So, before you dive into the doctor's loan, make sure that you check out the interest rates and if other lenders are able to be creative for you. Just food for thought.

[Rapunzel]

I grew up in the DFW area so I can confidently say I am an authority on that area. :P I don't know quite as much about Austin - but keep in mind Texas is larger than many, many independent nations. I'll try to give you a run-down of the "feel" for each city:

Dallas -
-The DFW area is very large both area and population-wise.
-The downtown is not a "24-hour" downtown. You work in downtown only - very few people live there. There is a push from "outsiders" to have living spaces in downtown but those are mostly very, very expensive condos in a downtown that simply is not designed to be lived in (ie no where to go grocery shopping and not really any downtown public greenery for example).
-The suburbs are quite varied. If I was going to choose one I would go for either a far north suburb (such as Allen or McKinney) or a very nice and quite expensive parcel in University Park, far North Dallas (Walnut Hill area) or in Frisco. With Frisco and McKinney you are talking quite a commute, however.
-Dallas is definitely a city that has reached maturity - youthful maturity albeit with many cultural attractions, incredibly diverse populations living together (not unconsciously segregated like up here in the Northeast), world class restaraunts and every single store a hard-core shopper could ever desire.
-Ft Worth - Dallas' sister-city - is really neat as well. You almost get a two for the price of one deal. Ft Worth consciously tries to keep the "cattle town" feel and does a fairly good job. The Ft. Worth stock-show and rodeo is a really cool event.
-Weather - predictable. The winter is fabulous with highs often in the 50s. Sometimes you get an ice-storm in Jan or Feb. It does not snow there - you get literal ice-storms that are deadly. March and April are absolutely glorious with the occasional huge thunderstorm rolling in across the prairie (I really miss those - they are a thrill). The summer is terrible - VERY humid and HOT (we're talking 90 to 100+ degrees) from May through September.
-My largest complaint about Dallas (second to the weather) is the architecture or rather, the lack of architecture. New houses (pretty much anything built in the last, well, 50 years) look like brick boxes with horrid fan windows and tons of wasted space. Plano is like tract-housing for the middle class - row after row of the same house with slightly altered facades. Truly terrible - and ugly.
-The hospitals are ambitious - led by UTSouthwestern in their quest for world-wide fame. It's good in one way- the level of care is exceptional. And it's bad in another way- the physicians and hospital admins are cut-throat.

Austin:
-More laid back than Dallas (although it is the state capital it is largely a college-town with the main campus of the University of Texas which has the largest population of undergrads of any college campus in the nation or so I've been told).
-Music is a really big thing here and you can find a wide variety.
-Many more trees and hills than Dallas.
-A short drive to San Antonio (my favorite town).
-Lots of outdoorsy things to do with Lake Travis nearby as well as the "Hill Country".
-The weather is pretty much the same as Dallas' (although the landscape is VERY different).
-You are much more likely to find an aesthetically pleasing house in the Austin area.
-Not an area destined for medical fame, but a fabulous place to raise a family.

That's what I can think of off the top of my head. Feel free to send me a private message if you have specific questions or details to ask me - I'll be more than happy to help!

Jennifer