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Old 08-18-2013, 12:32 PM
2 posts, read 7,580 times
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My fiance and I am looking to get a house when she graduates medical school in the spring of 2014, but I am having concerns about the ability for us to obtain a home loan that meets our current expectations due to the large amount of education loan debt we have incurred. We currently rent a house and have been holding down a monthly rent of 2400/month and could probably handle more. Are there any specific loans that are designed for those in our situation? Are there any specific things we can do to prepare ourselves for the spring?

I am a PhD in Electrical Engineering with a good job earning over 200k+ depending on the amount of overtime I am able do. I have been working 60-75 hours a week for a little over 2 years now to help pay down the school loans I have (originally 145k) and the credit card debt from the final 12 months of school. Right now I have my credit card debt down to a little bit of nothing and my school loans below 100k. Please note that I know I can't pull off those kinds of hours forever because it definitely takes a toll on me. This is just an interim solution to get my debt paid down fast.

My fiance will be graduating in the spring with 300k in debt and will begin residency starting in June. Her salary basically covers he school loans with very little left over. She will be in residency for three years and thus unable to contribute to the overall family income until then.

Right now I cover the brunt of the expenses since she is in school full-time and not allowed to work at the same time. When she graduates, we will be in a similar situation until the conclusion of her residency. One of our main goals is to not have to move again in five years because we have moved enough over our years of schooling and would like to stay put for 10+ years. That being said, we are not super interested in a starter home and would like to find one that would support a family of 2-3 kids down the line. We don't have a ton of money put back because I have been dumping it mostly to school loans since the interest rates are at about the 7% mark.

Any help or advice that anyone has would be greatly appreciate. Thanks for taking the time to read this long post.
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Old 08-18-2013, 01:34 PM
382 posts, read 649,674 times
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We are in the same boat, with both of us having law school loans. They do take those into account when figuring out your debt to income ratio. It's treated just like any other debt. In our case, it means we can only buy something 2x our incomes, which is what we'd do anyway. However, I know a lot of other people are buying 4-5x their incomes lately who don't have large student loans. You probably won't be able to do that.

Some things that will help is paying down any other debt you have such as eliminating car debts, private student loan debts, credit card debt, etc. Basically anything that affects your debt to income ratio.

This will be a starter house for you guys likely, so buy the cheapest house in the best location that you can, rather than the brand new mcmansion. The better location house, although smaller, will maintain its value and you'll be able to trade up in a few years when you will likely be able to put down a larger down payment.
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Old 08-18-2013, 03:10 PM
2 posts, read 7,580 times
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divakat, thanks for the reply and all the information. In your searches, did you come across any special housing loans for those in our position? Did you guys do an FHA loan by chance or a traditional 20% down loan?
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Old 08-18-2013, 05:55 PM
Location: NY/LA
3,079 posts, read 2,549,205 times
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When we were looking, we had heard from friends that there were MD loans available where you could put down less than 20% with no PMI. Since we were planning on putting down at least 20%, we didn't really look into it, but I'm assuming that those types of loans might still be out there. A search for "Physician Loans" will bring up a few results.
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Old 08-18-2013, 06:25 PM
382 posts, read 649,674 times
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Originally Posted by normanJackson View Post
divakat, thanks for the reply and all the information. In your searches, did you come across any special housing loans for those in our position? Did you guys do an FHA loan by chance or a traditional 20% down loan?
We went with FHA but many lenders are doing 10% down, 5%, or even 3%. FHA is not a good deal unless you had a short sale due to the waiting requirement before you are allowed to buy another house. The other types of people FHA is good for are those who can only put 3.5% down or for people who have lower credit scores. Beware that FHA recently changed the rules. Now you have to pay very high pmi for the entire life of the loan. That means you'd have to refinance out of the FHA loan in order to stop paying that high pmi. For us pmi is over $400 per month.
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Old 08-18-2013, 07:00 PM
320 posts, read 384,936 times
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I've heard of loans for doctors; it depends on the lending institution. They're not part of a gov't program, as far as I'm aware. BOA, for instance, used to offer such loans. You'll need to contact specific banks and see if the programs are still available. These loans had/have certain conditions and may not be the best deal for you and your wife.
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Old 08-18-2013, 07:07 PM
Location: Missouri
6,044 posts, read 21,125,101 times
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Would you consider renting a cheaper place for a few years, and paying more on those student loans? I don't know where you live but $2400/month for rent for a young couple sounds excessive, especially if you are deeply in debt, and I can't help but wonder if the house you want to buy isn't more than you will be able to truly afford right after your fiancee graduates. I would suggest you also take the time to save up a down payment for the home, at least 10% down and ideally 20% down. If you can't afford to make a decent down payment then you probably can't afford the house yet. Sorry, I know that's not what you want to hear. But sucking it up for a few years so you can get your debt under control and have a bigger down payment will save you so much money and stress in the long run.
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Old 08-19-2013, 01:31 PM
191 posts, read 370,039 times
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Has she been accepted in to residency? It's not uncommon to move a lot, so you may want to wait. My husband did not do his internship, residency, and fellowship in the same states. Is she going to do a fellowship? Is she doing a primary care specialty (which has rotten pay) or something more specialized with (generally) better pay? The military will wipe those loans out for you in 5 years, BTW, and the salary is really good, too, plus benefits.

I don't need the answer to those questions, it's just something for you to think about.

Doctor loans are going by the wayside. You can try for one, but few places offer them anymore. Your student loans are going to be a factor in how much you can borrow, and it should be. You have 400k in loans on a 200k a year salary. And you plan on having kids, so you need to budget for daycare, and with physician hours, you pay a lot extra for that.
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Old 08-25-2013, 07:23 PM
3 posts, read 5,486 times
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You will not need a physician's program. They are available, and sometimes can have great benefit. Just not the best fit for you and your wife.

Cease making additional prepayments on your student loans. Save for down payment.

The mortgage you take out will be in your name only. Both of you can be on title.

You will qualify for more than you need.
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Old 08-25-2013, 08:55 PM
16,476 posts, read 17,501,756 times
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Keep renting and maybe find a cheaper place like a apartment. Pay the snot out of the student loans and be debt free. Once you do that then go buy a house. With what both of you make you should be able to knock the F out of those loans. Don't buy a house while you have as much debt as you both do. Even at your income level you will be poor because all your money will go to debt. You will be no better than people living paycheck to paycheck one step away from disaster. Sacrifice now when you are starting out IMO. If you incur more debt you will just stay in debt. I have been debt free for over 15 years. I refuse to be a debt slave. Don't fall into the bs debt trap. Don't listen to any of these realtors and brokers. They are just trying to sell you a house they could give a f about if you lose it later. They just look at your DTI and try to sell you a house to make money off you. YOU and your wife already have a house payment its just in your student loans.
My wife and I struggled and sacrificed like hell to get debt free. Don't listen to anyone who is gonna make money off your possible purchase without doing your own risk assessment. And right now your risk is high IMO.
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