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My fiance and I are trying to determine whether or not we should rent or buy a house. She is a second year resident physician and is currently in the process of applying for a fellowship. Her first choice would be to stay where we are, in which case, she would start her fellowship as soon as her residency ends (June 30, 2012). However, there is a small chance that she might be accepted into a fellowship in another state and start there on the same date.
Regions does a physician home loan that has a zero percent down payment, $ 0 PMI, and around a 4.75% APR on a seven year ARM. Regardless, of if we stay here or move somewhere else for her fellowship, we do not plan in staying in this house for more than three or four years, probably.
Between us, we have around $ 50,000 saved up. We are really wanting a place with a garage, because she is leaving and coming home at all hours with her work schedule. There are only two apartment complexes in our city that have apartments with attached garages. Both of them cost $ 1150 per month. Houses are even more expensive than that, for older, low quality construction.
Would buying a house with the above terms be a bad deal, even if we only live in it for 1 1/2 to 3 years?
Oh, we make about $ 90,000 between us and are looking at homes in the $ 200,000 – 275,000 price range.

4 Thoughts on Rent vs. Buy a house with a physician loan?
  1. Reply
    Sam
    January 8, 2013 at 1:25 pm

    Closing costs:
    Only buy a home if you know you will stay in it for a full 5 to 7 years.
    It can take this long to break even from that huge cost.

    ARMs:
    Interest rates are about to rise, and rise fast.
    The rates could possibly double in just the next 5 years.
    You could find yourself with a payment in which the interest portion has doubled.
    I warn everyone to stay away from any variable loans, arms, 5/5’s, 5/1’s, etc.
    Stick to fixed rate only.

    Very comfused as to how you can buy a home with 0% down and no PMI.
    (perhaps its a perk, or perhaps its a trick to get you to sign up for the scam ARM loan).
    4.75% is extremely high for an ARM loan in the first place.
    (they are charging you for the perks hidden in the interest).
    Go to bankrate.com site to see current rates.

    Better idea: Keep renting, walk with her and pick her up at her car for safety.
    If you buy this house under those terms, you will find yourself in a heap of trouble.
    Keep in mind, that those ARMS carry hefty pre-payment penalties (when you sell) – that’s how they get you.
    I can honestly say an ARM mortgage is the worst financial move anyone could do today…

  2. Reply
    Sharon T
    January 8, 2013 at 1:40 pm

    If you have the time and energy, I’d look for a distressed property that is less expensive than what you quoted. Buy it, fix it up, live in it for at least two years and then sell (hopefully at a profit). Any gain will not be taxable.

    If you are not suited to this, look for a condo or townhome with garage to rent.

  3. Reply
    goldshire1
    January 8, 2013 at 1:47 pm

    Honestly, in your situation I think its better for you to continue to rent, keep saving money and when she is done with her residency in a few years then settle down and buy a place in whatever city she ends up. If having an attached garage is so important to you then move into the $ 1150 a month apartment, I still think that would be a better decision than buying a place. Your mortgage payment alone (not including taxes , insurance, HOA dues, etc.) would be about that in the scenario you describe (200k-275k loan, 30 year loan @ 4.75%). There are going to be closing costs involved with buying a home and if you are only planning on living in it for such a short time you are going to have a hard time recovering those costs especially since this isn’t really an appreciating market.

  4. Reply
    rhetta senteno
    January 8, 2013 at 2:35 pm

    I was in a similar position not long ago. I was able to find assistance here – http://www.loanguide.tk

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