First time home purchase as a fresh attending

[Nickster]

Hello everyone,

This is my first time posting here and wanted to use your collective advice as a sounding board. First I'd like to state my position for some context.

• PGY-3 Family med resident about to graduate, my wife is a nurse practitioner(no kids). We have ~250k Direct unsubsidized student loans (REPAYE) between us. (Currently 0% interest until September 30, hopefully, longer)
• Our first job is a 3-year contract guaranteed base salary 350k between the two of us. 20k/yr student loan forgiveness for up to 5 years.
• Through moonlighting and saving I have maximized my Roth IRA and my employer match 401k each year and we have about 45k in savings accounts between my wife and me.
• This year we have a savings rate of about 40%, 60% if you include saving for our wedding this March.
• Credit score 765, qualifying for the best possible interest rates(2.65% 10y or 2.75 15y after a quick google search)

Now for the question: Should we buy a home right away or after saving more for a downpayment? We would be looking to purchase a house that is 1.1x our annual gross income 300-400k. We have good habits and would look at a 10 or 15-year term and try and pay it off a few years early. There are several great options that are a safe/quick bike commute away from our new job and it is very tempting. My initial plan was to rent for a year and buy a house after saving up a downpayment while paying off our student loans over 2-3 years. However, with student loan rates and mortgages at an all-time low I'm really curious if we should take more risk and get a mortgage right away. If we for whatever reason the job doesn't work out and we leave after 3 or 5 years, we are more likely to come out on top if we get the mortgage right away as opposed to waiting an entire year.

Our options:

1. 35k down payment physician loan
2. 35k down payment traditional mortgage
3. 75k down payment (borrow 35k from in-laws and pay it back with starting bonus and first paycheck) traditional mortgage to avoid PMI.
4. Rent for 6-12 months and purchase a house without borrowing from in-laws.
5. Ignore the tempting interest rates, pay off student loans completely, save up 20+% downpayment, and purchase a home when we have stronger financial footing.

I would love to hear what you all think. We are definitely open to other options and would just like some advice on the best approach before we start asking to borrow money (both from a bank and family).

Thanks in advance for your time and thoughts on the matter,

Nick

[Hank]

Rent for your first 1.5 or 2 years as an attending. Aggressively pay off the portion of student loans that won’t be forgiven, then save towards a down payment.

(Money is fungible. I’d rather have an extra $20K in income every year of my career vs. $20K in loan forgiveness for up to five years. Any chance of renegotiating this point in your contract?)

[CordMcNally]

Are you moving to a new area? Do you know the area you are looking to buy in? How far away are you from family?

I wouldn't be in a rush to buy a house. Rent and take your time looking for a house.

[billy]

generally, do not borrow from inlaws. Do not buy a house your first year at a new practice. I'd say that goes double since both you and your wife will be working there. it only takes one person to not like their job to want to move. Also, do you have a non compete?

You'll never regret renting for a year or two before figuring out your job. You *may* regret buying a house immediately then realizing you hate your job 1 yr in.

[Nickster]

Hank Sorry if I used the wrong terminology. The group we joined gives me a base salary of 250k, and I get a 20k bonus per year that I stay for up to 5 years. It's more like a retention bonus than student loan forgiveness. I tried to negotiate for them to pay my loans directly (so I don't have to pay taxes on that income) but they didn't budge. Additionally, I can pay off the loan in two years and still get the bonus for up to 5 years. Ideally, I would like to stay the full 5 years even though my contract is only for 3. Because my loans are Direct loans (currently at 0%) I have not made any payments since March and instead put that money into a high yield savings account.

CordMcNally We are moving across the country away from family, my wife and I are in our late 20's and we are looking for a 3-5 year adventure. I'm lucky enough to be an only child with parents willing to move with us if we decide to stay longer. We don't know the area too well (spent about 2 weeks there between our two interviews), but we have 3 months that were going to be used for a honeymoon (thanks Covid) before starting our jobs. I'm thinking about a short term rental for a month or two to explore the city more and find where we would like to live.

billy It is a high need area and there was a county hospital recruitment agreement, so I need to practice in that zip code for 2 years. Because of that, there is not a non-compete clause on either of our contracts. If the practice really does not work out we can join another practice. We are both in family medicine and my inpatient training was robust and I currently moonlight in the ER so I'm confident we could find another job if it was not a good fit. Also, I went on about 6 interviews and the culture and community I felt about this job far exceeded all my other interviews. We spent plenty of time (2 weeks) in the area and had multiple docs I'll be working with take time out of their free time to show us around the city. It's also a physician-owned group which is nice.

Thank you for all your input so far!

[Peds]

However, with student loan rates and mortgages at an all-time low I'm really curious if we should take more risk and get a mortgage right away.

dont fomo buying a house because of the fed.
https://www.cnbc.com/2020/06/09/stoc...lose-news.html

[CordMcNally]

[USER="2114"]
CordMcNally We are moving across the country away from family, my wife and I are in our late 20's and we are looking for a 3-5 year adventure. I'm lucky enough to be an only child with parents willing to move with us if we decide to stay longer. We don't know the area too well (spent about 2 weeks there between our two interviews), but we have 3 months that were going to be used for a honeymoon (thanks Covid) before starting our jobs. I'm thinking about a short term rental for a month or two to explore the city more and find where we would like to live.

If you're only looking for a 3-5 year adventure then renting (for the entire time) would be the financially prudent move.

[Nickster]

Peds

I know, that is pretty much what I'm dealing with. I don't want to miss out on an opportunity to borrow at a low rate. Although, a 10 year fixed mortgage at 2.6% isn't quite as volatile as the stock market, a lower or higher rate in a year could be quite volatile.

CordMcNally

We would like to potentially live there longer, but we are giving ourselves 3-5 years before we make a decision where we want to settle down. What about using the property afterwards as a rental? It is in a college town and the demand is very high, we have been trying to rent a home for the past 2 months but they property managers only post when they are move in ready and most of the homes have been taken within 2 weeks and the property managers can't hold on to the property long enough to accommodate our move in window.

[Brains428]

In comparison to the rest of the market, is your desired home below, at or above median home price? Would that be a move in ready home or require some work? Any reason why you want buy a home for 2 people rather than rent an apartment?

You have to have time to appreciate a home by about 10% to break even. You also have to factor in cost of upkeep. Would the home prices collapse in the housing market you're looking at if interest rates went up 1 or 2 percent (basically the reason why you're pushing to buy is the interest rates, right?). Is the town you're moving to growing? If so, what's the housing inventory like?

What are commute times for home prices you're looking at? What are the schools like? Are the homes bargain prices because the schools aren't good (you don't have kids and don't care, but if you want to sell the home in 5 years, you have to care)?

Lots of questions you should have answers to before you go buy a home in a market you're unfamiliar with while sitting on 6 figures of unsecured debt.

[CordMcNally]

Peds
We would like to potentially live there longer, but we are giving ourselves 3-5 years before we make a decision where we want to settle down. What about using the property afterwards as a rental? It is in a college town and the demand is very high, we have been trying to rent a home for the past 2 months but they property managers only post when they are move in ready and most of the homes have been taken within 2 weeks and the property managers can't hold on to the property long enough to accommodate our move in window.

Rent. In my experience, a home that two professionals want to buy is not a home that the typical college student is trying to rent. Although I guess you could get a professor who will only be in town for 3-5 years and they make the right decision to rent.

[jfoxcpacfp]

1. It wouldn’t have mattered how you negotiated the terms - the loan payoff was taxable, regardless (just want to make you feel better about it.
2. Agree with all the others - mistake to buy. Do you know how long clients have been stating, ”I think we should buy now before interest rates go up!!!”? Possibly (probably) since you were in high school. Don’t fall for the mind trick of trying to time the market. That includes interest rates.

[WorkforFIRE]

RENT.
#5

there is no rush to buy a home. Rent. Save. Pay off student loans. And then after saving 20% down payment when you’re debt free, will make you feel so much better.
remember, live like a resident for the first 5 years as an attending. You’ll be surprised how much you can save and this will really dictate your spending habits for the rest of your life.
the house will always be there. Be patient.

good luck!

[Nickster]

Brains428
Home is below median for the zip code, median for the city. Median home prices have increased consistently by 100k over the past 10 years. It would be a bike commute to my clinic (5-10 minutes) Recently renovated (not sure about inspection/repairs etc but it looks fantastic for a 40 y/o home.) The city is growing at a rate of about 5k per year, housing inventory is low because the city focuses very heavily on preventing urban sprawl. Most houses on the market are renovations and there are very limited new constructions. I'm not sure about how good the schools are but it is walking distance to a high school and has a public sports field nearby. The rental market is insane 2 and 3 bedroom houses only last for a few days and because demand is so high the property agents won't tell us before they are move-in ready. We want to rent a home so we can garden and have a small woodworking/3d printing workshop in the garage. I'd also like to have some equity, especially if we are going to be in the area for 5 + years I feel we can either sell or rent the home out. Yeah, the thought of more than doubling our debt seems pretty scary. It's just been difficult to find a rental home, and we are tired of apartment living and the current market seems very tempting.


Thanks for the kind words everyone, it's nice to have different perspectives steer me back towards my original plan. I've just been so tempted to hold on to the loans with the 0% interest rate right now and the low mortgages.

[zlandar]

I purchased a home fresh from fellowship back in 2007. The location was not my first choice and I pressured myself into buying a nice home for my wife who was pregnant. 6 months in I was offered another job in the city we both wanted to live in. Took 2 years to sell the home at a $100k loss.

I recently looked up the property on realtor.com and saw that the buyer sold the same home 8 months later at a $180k loss from his purchase price.

Renting is not so bad once you experience the potential downsides to home ownership.

[Hatton]

RENT. A first job is not stable at all. Especially when you are coming into a new area and know nothing of the neighborhoods you don't know where to live. Focus on getting your financial house in order. Plan to buy after say 2 years if you still like the job and know the town. Pay down your debt, save a down payment and fund your retirement accounts.