Which is better a physician loan in 1 year and refinance in a few years after saving 20% down or save up in a few years for a standard 20% down payment?
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Which is better a physician loan in 1 year and refinance in a few years after saving 20% down or save up in a few years for a standard 20% down payment?
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It depends on how certain you will be in your area long-term. Many physicians who need physician loans are recently out of residency. Why not rent your "starter" home and when you are sure you will settle in that area long-term, then buy your dream home using 20% down.
-WSP
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As others have said it depends. We used the Physician loan to be a home in residency and to buy our current house when my wife finished fellowship. Interest Rates were almost equivalent to putting 20% down. You may want to price shop now to see what your options are if you are considering buying.
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Physician loans generally have a slightly higher interest rate than conventional loans (somewhere in the vicinity of 0.25-0.5%), but don't carry PMI. If you're sure you want to stay in the area and like a house, a physician loan is a viable option. If you're not sure about the area or like the current housing options, rent to save the 20% then buy.
Semi off topic, has anyone run the numbers about the difference between a physician loan vs conventional loan? The slightly higher interest rate and putting the 20% into the market vs 20% down payment into the house?
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The prudent thing to do is to save up the cash for a full 20% down payment. If you don't have that, you probably shouldn't be buying a house right now. Are your student loans paid off yet? I would also recommend you save an additional ~$20k outside of the down payment to cover costs of moving and some new items for the new house. All of this will make buying a house a much less stressful ordeal.
All that being said, this is "do as I say, not as I do" advice. I bought a condo during residency (2008) with a physician loan. Then we sold it in 2012 and bought our current house. We sunk a lot of money into this house when we bought it because it was a total renovation of an old home (built in the 1880's). If I could go back and do it all over again, I would have paid off my loans and saved up lot's of cash before buying anything. In hindsight, had I done that, I'd be debt free and have much larger retirement accounts now. Instead, I'm still paying off student loans nearly 7 years after residency
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In my smallish TN town the physician loan product through a state bank was by far the best choice. Zero down payment, no PMI, and the interest rate was 0.25% less than the next lowest traditional mortgage with a down payment. The bank said they can offer such a good physician loan product because they are competing for our business, and of course our relationship with potential future bank services. My 30 year fixed rate is 3.7%, closed last year.
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