Mortgage Type Advice (VA vs Conventional vs Doctor)

[koojo]

Hi everyone. I'm about finished with residency and will be moving cross country to start an employed position.  Here is my situation. Looking to sell our current home and buy another one.

- No medical school debt (paid it off recently...thank you military).

- We're looking for a new house in the ~ $600k zone.  Will plan to put about 5% down, or $30k.

- Once starting work, I'll pay about $3000k extra a month, which would allow to pay the house off completely in about 10 years (using a 30 year fixed mortgage).

- Loan options (using a mortgage calculator spreadsheet I found online):

• Conventional loan - We won't have 20% down for a conventional loan, so if we go that route, we'd have to pay a PMI. I calculated a rough $475/mo x 2.5 years until we reach 20% principle. Using a guesstimated 4.4% interest rate, total payments after 10 years to pay off loan ~ $720k


• VA loan - There is a required 1.75% funding fee (2nd time using it) that I could factor into the cost of the loan. Basically, it's the price I give away to the VA to use the loan. The interest rate is lower than conventional and Physician loan. Using a guesstimated 4% interest rate, total payments after 10 years to pay off loan ~ $707k


• Physician loan - Interest rate higher than conventional and VA loans, but no PMI and no VA funding fee. Using a guesstimated 4.7% interest rate, total payments after 10 years to pay off loan ~ $715k


• Didn't look at FHA loans, as I read the interest rates are even higher than physician loans, so doesn't make any sense.

Now all of this is conjecture, as I'm not sure what the markets will be like in several months when we buy and how the banks will loan.  It looks like overall, the VA loan would be a better deal, although only saving $13k over the 10 years. The problem with the VA loan is that we have to sell our current home (initial VA loan) prior to using it again to buy the new home, and the logistics of that is quite tricky.

Any thoughts?  Am I missing anything?

[Hank]

If you have a VA rating there’s no funding fee. You do have to pay 20% on the amount above the jumbo limit in your county. For the lower cost counties in 2018 the limit is $453,100. If you bought a house for $653K, you’d pay 20% on the $200K above $453, or $40K (6.12% down payment)..

If you’re military married to military then you each are eligible for on VA mortgage. If not, then you have to juggle the timing on selling the old house in order to buy the new one. If you’re thinking about keeping your current house as a rental, you probably have enough equity to refinance to a conventional mortgage. You then could use your VA eligibility for your new primary residence.

[Dicast]

Having no student loan debt is great but unless there is absolutely no option to rent near your new job I would recommend avoiding a house purchase. Until you have settled and know you want to stay in that job it can be very costly to jump back out of the house. You didn't state what your expected income will be. Would it be to difficult to rent for a couple years?

I don't see much of a difference between the options, seems like VA loan may be the best if you do buy.

[koojo]

Thank you for the comments. We're moving to a state my wife and I grew up in, next to all of our family, so we know the location and the hospital where I'll be working.  The chance of us staying at that location for the next 10 years is almost certain.

Dicast - Gross income will about $475k (my doctor pay, my army pay and my wife's part-time pay).

Hank - the limit in the state I'll be moving to is indeed $453,100.  We're planning on a $600k house, so like you said, the 20% downpayment on the remaining amount above $453.1 is $29380, which we can do, since we planned to put at least $30k down anyway.  I don't have a VA rating so I'll be paying the funding fee.