first home--- down payment

[hospitalist md]

What would you do?

I have a situation. we are planning to buy our first home .we do not have other loans. my husband will come into a sign on bonus in a few months when he starts his new job . the question is , do we put that towards down payment for the house or do we take a physician loan with minimal down payment and look to put the bonus into some investment.

[Decapolis]

Not a lot of information but I would put down enough up front so that the mortgage is not larger than 2x your gross income. I'm not a fan of physician loans...very easy to end up with negative equity if for some reason you have to sell in the first few years of ownership.

[CM]

I would put the bonus into the down payment.

[Peds]

depends, what % is your DP now?

[hospitalist md]

if I put the entire bonus as down payment , it will be 25% down. I am looking at a house worth 485000 with work to be done. but I can also get a physician loan with barely anything down and use the bonus to invest . I am not sure which would be a good option.

[q-school]

That’s a good bonus. They frequently withhold tax at higher rate so you may not get quite as much as you think. Still congrats. I have no real comment about whether to put it down or not. Are you going to need the money to do the rehab?

[hospitalist md]

I was thinking about needing that money for rehab. but I can also do the rehab slowly while living there with our salary without having to dip into the bonus or taking a loan .

[KPInvestor]

karturi wrote:

I was thinking about needing that money for rehab. but I can also do the rehab slowly while living there with our salary without having to dip into the bonus or taking a loan .

Click to expand...

If you can renovate before you move it, it will be best.  I dont know how old the house is but there are a bunch of health concerns regarding renovations while living there, especially if you have kids.  Lead, asbestos, dust, VOCs from paint and cabinets, etc can be potential health issues especially with young ones.  Furthermore, its just simply easier to renovate when house is empty.

 

 

[StarTrekDoc]

What makes you happy and sleep at night?  Do it that way.  Either is fine.    If % and terms are same, go for lowest down needed and use the funds for remodel/fixers to make it your home -- make sure you have a good home inspection that checks all the issues that you may want to replace -- get cash concessions as possible with the list of things to correct.  Also good home warranty program for the appliances/HVAC/water heater.

Congrats!

 

[startupdoc]

Easy answer: put it towards the down payment on a the mortgage. People are becoming too comfortable with debt.

[GXA]

What is the interest rate, and how long are you planning on staying there?  If you rate is low/competitive, and you plan on staying there for a while, I would probably go with the low down payment loan.

This really is largely a personal choice - you can't make a wrong decision.  If a larger loan makes you uncomfortable, use the bonus towards the downpayment.

[wideopenspaces]

Is your husband starting a new job in a new town? If so, I wouldn't buy a house and I'd hold on to that sign on bonus for a year or so, until he is sure he wants to stay. I just had a resident who started a new job in a new town that sounded awesome. It was a nightmare. He quit 2 weeks after starting. If he'd used the sign on bonus to buy a house he would have been stuck in a terrible situation for much longer. Just a word of caution. If he's taking a job at the same place he trained and knows everyone you might be less cautious but I probably still wouldn't buy for another 6 months or so, just to be sure it's a good fit.

[q-school]

Quitting in two weeks! Wow that might be a record. Must have been terrible two weeks

[AdamMGrossman]

You state that the bonus would equate to 25% of the home price of $485,000, meaning the bonus will be roughly $120,000.  I'd suggest the following:

1. Use $100,000 for your downpayment.  That will give you a ~20% downpayment.

2. Keep the other $20,000 in cash for now.  With moving and starting a new job, you'll want to have that cushion for all of the expenses related to moving, including legal fees, repairs/renovation, furniture, etc.

3. To the extent that there is anything left over, still keep that in cash, as an emergency fund.

4. Once your husband starts work, you can start saving and investing through his workplace retirement plan.  That's a good way to start investing because it's tax-advantaged and allows you to dollar-cost average, which is a good thing with the market at all-time highs.

5. After you have those pieces in place, maybe in January, I would evaluate your household cash flow and make further decisions on how to allocate what's left over from each paycheck.  This would depend on your specific situation and goals, including potentially: (a) further renovations; (b) paying down the mortgage more quickly; (d) building up your emergency fund; (e) investing in a taxable or backdoor Roth account; (f) beginning college savings; (g) vacations/having fun/everything else.

Good luck!