10 // THE NEW GASTROENTEROLOGIST: INSIGHTS FOR FELLOWS & YOUNG GIS SPRING 2016
FINANCE
Student loan debt
Student loan debt may affect your
ability to obtain a mortgage loan.
Both conventional and FHA financing
include your student loans in your
DTI. Most student loan balances will
increase your DTI above the qualifying rates, which is why these types
of mortgages can be very hard to
obtain for residents, fellows, or new
attendings. With physician loan programs, deferred student loans are not
counted in DTI ratios. This allows for
a lower DTI and will help you qualify
for the physician loan.
Out-of-pocket costs
Everyone knows they need some
kind of down payment, but it is not
always clear how much is required.
Like many of the topics covered in
this article, down payment amounts
vary based on the type of loan and
bank used. In general terms, conventional loans require a minimum of
5% down, FHA loans require a minimum of 3.5% down, and physician
loans require anywhere from 0% to
5% down. You can always put more
down, but these are the minimums
required in most cases.
The not-so-obvious out-of-pocket costs are called “closing costs”
which are additional costs on top of
your down payment. These can be
significant and vary from state to
state. Closing costs include a number of different fees and taxes that
are paid at the time of settlement.
Some common fees include, but are
not limited to: transfer taxes, title
insurance, property tax escrow/reim-bursements, homeowner’s insurance
escrow, government recording fees,
loan origination fees, appraisal fees,
credit reporting fees, and survey fees.
Using a $100,000 home as an example, the closing costs would be estimated to be from $5,000 to $8,000
depending on the state and city in
which the property is located. It is
very important to account for closing
costs when evaluating how much
money you’ll need for the purchase
of a home. Ask your realtor or lender
to run some numbers for you before
submitting an offer on a property.
Protecting yourself when
purchasing a home
There are a few ways you can make
sure to protect yourself when you
are purchasing a home. One of the
first things you’ll want to do is find a
good realtor (i.e., not your mother’s
best friend who has been doing this
for 30 years part-time). When buying
a home, it is important to know that
working with a buyer’s agent will not
cost you any money – you don’t pay
their commission. When looking for
a realtor, you’ll want to find someone
who is financially savvy, knows the
market, can work with your schedule,
and is a good negotiator. You should
get recommendations from both
friends and family and be sure to in-
terview candidates; remember, this is
one of the largest purchases you will
make. A good realtor will prepare an
offer package that will protect you
through the home-buying process
using contract contingencies. A con-
tingency clause defines a condition
or action that must be met in order
for a real estate transaction to be-
come binding. The two most common
contingencies are inspection and
mortgage, but there may be addition-
al contingencies depending on the
property and situation. Find out if
and when an attorney should review
your contract. In some states, there is
a review period, which allows for ad-
ditional time to ensure the contract is
correct; in others, once both parties
sign you are locked into a legally
binding agreement. A good realtor
will be able to point this out to you.
Purchasing a home is a great way
to build equity and security. When
deciding to purchase a home, there
are many factors that need to be
weighed such as length of ownership,
out-of-pocket costs, ability to obtain
financing, and ability to keep up with
general maintenance. As a physician,
you have special loan options available to help you finance the purchase
of a home. You should take the time to
educate yourself about this process to
make an informed decision. Finding
a qualified realtor will help guide you
through the process and maybe even
make it a fun experience as well. Remember that your real estate experience will be unique to you! n
Conventional
Loan Minimum 5% Required for down payment less than 20%, can be removed Up to 6% Maximum 43% Conventional
FHA Loan Minimum 3.5% Required for down payment less than 20%, lasts for life of loan Up to 6% Maximum 43% with exceptions Government insured
Physician Loan Minimum 0% Waived Optional
Varies - deferred student loans
will be viewed differently than
conventional loans
Portfolio
VA Loan Minimum 0% Waived Maximum 4% Maximum 41% with exceptions Government insured
