For all the reasons people tell you not to buy a house during residency, there are just as many reasons to do it: We’ll review the benefits, as well as how to get the best deals on home loans and home insurance types if you decide to go for it.
Home Ownership as Sanctuary
If you’re a medical resident who has saved some cash (and you’re not worrying about medical school student loans), take advantage of savoring the comforts of home.
When I worked at a community blood donation center, I logged long hours and up to 16,000 steps per shift. The work was gratifying, but physically and emotionally draining. After work, I needed quiet time and comfort.
But when I lived in an apartment complex, I had few precious moments of that. With a large number of people packed into a small area, I was at the mercy of parking challenges, barking dogs, loud neighbors, foul odors, and occasional police presence. Generally, the people around me displayed little consideration for their neighbors or care about their living space.
There was also a long list of restrictions, from having only certain types of curtains to not being able to grill. You couldn’t even light a candle.
So when I purchased a home, I enjoyed much more quiet time. I didn’t have to compete for parking. I could wind down by working in my yard and by decorating however I desired, inside and out. And I could cultivate relationships with fellow neighbors who also took pride in where and how they lived.
This goes double if you have a spouse, and even more so if you have children. My husband, who works from home editing an online medical publication, was forced to wear headphones all day to drown out the apartment noise. Now that we’re in a neighborhood of homeowners, he is much happier too.
Medical residency is much more taxing than what we do. So there’s an even greater need to have a proper place to study, sleep, and relax. And if you have family, home ownership provides a place for them to spread out, develop connections, and pursue interests especially for all of the hours that you’re unavailable.
Given the above, it’s easy to see why studies have shown that homeowners and children of homeowners are generally happier and healthier than non-owners, according to the National Association of Realtors (NAR).
And an additional note for peace of mind: NAR added that research on crime and home ownership shows a lower crime rate among homeowners. When you know your neighbors, it’s easier to recognize if something is amiss.
Home Ownership as Investment
If you come at your decision to buy a home from an investment perspective, you will see that it works. You can take advantage of the current low mortgage rates, which are set to continue in 2021, especially if you buy in a good location with good resale value.
A Home Invests Your Future
Think of the home you buy as a resident as your starter home, not your dream home. Let it provide you with the foundation of helping you become financially literate, learning the ins and outs of home buying and home ownership.
That way, when you’re ready to buy your dream home, you can use the income you receive from selling your starter home, as well as your experience to negotiate the best home price and find the best mortgage rate.
And if you don’t want to flip the house, you could rent it and use the rental income toward the mortgage on your next home.
Also, from a tax standpoint while you have your starter home, it may be beneficial to forgo the standard deduction and itemize, as homeowners can deduct interest expenses on up to $750,000 of mortgage debt from income taxes.
And when you sell your home, you can do it exempt from capital gains taxes on the first $250,000 if you’re single and $500,000 if you’re married. To claim the whole exclusion, you must have owned and lived in your home as your principal residence an aggregate of at least two of the five years before the sale. You can claim the exclusion once every two years.
A Home Invests You in the Community
Yes, your primary focus during residency is learning to become a compassionate and competent physician. A big component of that is connecting with your patients. As a fellow member of the community, you’ll have additional avenues to “break the ice” with a patient, which will help establish rapport and gain trust.
The Best Path to Home Ownership
The rise of WebMD, Google, and online forums has made the medical profession have to raise its patience level with patients who self-diagnose. A little online research is fine to advocate for yourself and know what questions to ask, but then consult with professionals.
The same goes for the lending and insurance industries: Get your knowledge base, but then get the most accurate and up-to-date information from the professionals.
The Best Deals on Home Loans
Luckily residents are in one of the select professions that have access to loans just for them.
You can speed home ownership with a profession-exclusive loan.
The doctor mortgage loan is a great way to go for residents. Although you’re starting your career with student loans and most likely low savings, lenders know you have a high earning potential.
Also working in your favor in lenders’ eyes: Doctors have very low foreclosure rates.
You can do a down payment of just 1 to 5 percent and still avoid private mortgage insurance (PMI). You can also have a debt-to-income ratio (DTI) of up to 50 percent (lenders usually prefer under 36 percent DTI for a typical mortgage).
For example, through your American Medical Association (AMA) membership, Laurel Road offers custom digital mortgages with no PMI and low rates, and you can earn up to $1,650 off your closing costs by getting a mortgage with them.
But that’s not your only option: Alternatives include the 3.5 percent FHA loan, which is even more lenient on income history and debt ratios.
There’s also a Veterans Administration loan, which you can look into if you qualify for VA benefits. It’s more advantageous than the Federal Housing Administration (FHA) loan because you don’t have to make a down payment or get mortgage insurance.
Of course, if you do have the means to make a 20 percent down payment, then your best bet is the conventional 20 percent down mortgage. This way you’ll get the lowest interest rate, the lowest fees, and the most payment options, such as 30-year fixed and 15-year fixed.
Since you have so many options, get a few quotes from standard lenders with competitive rates. Then compare traditional programs to special ones. Also check your state, county, and city government websites for programs.
The Best Deals on Home Insurance
When it comes to homeowners insurance, insurance companies want the lowest risk and you want the most coverage. So go for the most popular type of homeowners, the HO3, special from home policy. This is the most affordable policy that offers lots of coverage and is good for a single-family home. This is also the policy type usually used for mortgages.
HO3 is an all-perils policy, which is better than a named-perils policy since it covers any peril not specifically excluded. Coverage also includes personal property, personal liability, and loss of use. So if you’re unable to live in your home during a covered loss, insurance will pay for additional living expenses.
The average rate for HO3 is $1,200, but that can vary based on a number of factors. If you want to be on the lower end of that premium, there are several ways you can keep your homeowners insurance as low as possible.
For one, take advantage of special memberships, such as the AMA, which offers competitively priced auto and home insurance exclusively for physicians, available through Liberty Mutual.
Bundling insurance policies in general, in which you have your home and auto insurance with the same carrier, can save you hundreds of dollars a year.
Any safety additions you make to your home will reduce your insurance premium: not just security camera systems, but also deadbolt locks and centrally monitored smoke and fire detectors, as well as having electrical, heating, and plumbing systems less than 10 years old.
AMA also offers 25 percent off the SimpliSafe home security system, plus a free SimpliCam and two free months of monitoring. Having a security system to protect your home when you’re away is vitally important.
Speaking of fire, you can also reduce your premium if you buy a home near a fire hydrant or a fire station.
So be a savvy home buyer: Research, negotiate, and then enjoy building equity, getting a tax break, and putting a stamp on where you live.
Karen Condor is a real estate and insurance expert who writes and researches for the life, home, and car insurance comparison site, ExpertInsuranceReviews.com.