Doctor Loans Revisited: 100% financing in declining markets in California

[NolaK]

We are looking for a doctor loan to purchase in a declining market in California for an amount above the FHA limit.

Bank of America was able to provide 95% financing but only with high discount points.

Tower Mortgage as recommended here cannot offer loans in California.

USA Bank no longer has such programs.

Does anyone have any recent contacts? It seems that a number of lenders no longer offer doctor loans with no PMI and 100% (or even 95% in declining markets) financing.

Thank you.

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[southerndoc]

My group has a contact at SunTrust. 100% financing, nothing down, and no points. However, we are a very large group, and I think it's more of a company benefit/relationship instead of a true doctor loan.

 

[dragonfly99]

I'm thinking of doing something similar (buying in California) next year, but I'll probably only have 5% to put down. I hope I'm not hosed.
Nolak, just out of curiosity, what if you had wanted to buy but not "above the FHA limits"? And what is/are those limits for a resident or fellow with income of say $45-50,000/year?

 

[NolaK]

Would love to get contact info if it is available to others and not just your group.

 

[LADoc00]

My recent experience in CA BofA doctor loans was essentially you need 20% down...if you dont have that 20% there really is no reason you should be even thinking about buying in California!

You would be underwater on your mortgage about 24 hrs after you close...

Regardless, if you have 20% and a good credit score, talking 780+, the rates from BofA for docs in CA are quite good..on the order of 5.625%

 

[NolaK]

My recent experience in CA BofA doctor loans was essentially you need 20% down...if you dont have that 20% there really is no reason you should be even thinking about buying in California!

You would be underwater on your mortgage about 24 hrs after you close...

Regardless, if you have 20% and a good credit score, talking 780+, the rates from BofA for docs in CA are quite good..on the order of 5.625%

1. That is incorrect. BoA offers doctor loans 100% financing or 95% in declining markets with no PMI.
2. Why would anyone be necessarily under water for lack of 20% down?
3. Bank of America charges discount fees (points) for their loans making them pretty expensive in comparison to other doctor loans.

 

[southerndoc]

1. That is incorrect. BoA offers doctor loans 100% financing or 95% in declining markets with no PMI.
2. Why would anyone be necessarily under water for lack of 20% down?
3. Bank of America charges discount fees (points) for their loans making them pretty expensive in comparison to other doctor loans.

This varies by state. In one state BoA may offer 100% financing, but in another they do not. In Georgia, they do not offer 100% financing.

 

[The White Coat Investor]

I suggest you rent for a bit, save up to 20%, and get a conventional. Keep in mind if you have a $1,000,000 house that is 100% financed and the value drops 18% (as it very well might in the next year) you'll be $180K in the hole. If you need to sell in a hurry, you have to come up with that to get out of the house.

Few people think real estate is going to take off in a hurry, and many think prices will decline even further. Why not take a little time, make sure you like the job, save up a bit more while renting, and get a better loan in a year or two? What's the rush? The last time I rushed into buying a home I really regretted it, and so did all my friends who have had to sell this year.

 

[dragonfly99]

ActivedutyMD,
To save a 20% down payment when one is paying off 130k of more in loans and on a resident/fellow salary is difficult, next to impossible.

At some point people get sick of delayed gratification. I've been working at this (lab technician --> med school --> residency --> research --> fellowship) for almost 10 years now and I have been responsible. Not much spending, no debt except student loans, etc. And we're not talking about buying million dollar homes here...we're talking about 150k condos or something.

 

[LADoc00]

1. That is incorrect. BoA offers doctor loans 100% financing or 95% in declining markets with no PMI.
2. Why would anyone be necessarily under water for lack of 20% down?
3. Bank of America charges discount fees (points) for their loans making them pretty expensive in comparison to other doctor loans.

1.) Not what I was told and my next door neighbor is a mortgage broker. Again this is location specific, my area is classified as "extremely stressed" or some crap like that.

2.) If you lack significant down and your property is DEPRECIATING, then of course you will be underwater almost before you actually close. Its called math, and quite frankly it ROCKS. learn it.

3.) my BofA rate was the best of the bunch and I shopped it for a long time.

 

[The White Coat Investor]

ActivedutyMD,
At some point people get sick of delayed gratification. I've been working at this (lab technician --> med school --> residency --> research --> fellowship) for almost 10 years now and I have been responsible. Not much spending, no debt except student loans, etc. And we're not talking about buying million dollar homes here...we're talking about 150k condos or something.

That "entitled" attitude will get you into financial trouble like most MDs. The world at large doesn't care that you lost a decade worth of earnings. If you can't save up 20%, you probably can't afford to buy yet. There's no shame in renting. I wish I had rented in med school. I bought before I was ready with a 3% down loan. The property appreciated 3% in the 4 years I was in it. I still came out behind compared to had I been renting in the same condo building.

Trust me, buying a $150K condo won't feel much different than renting. Save your cash and buy when the time is right. My colleague who also felt entitled bought a $750K home and watched it depreciate 30%. He couldn't afford to sell it and now rents it out at a loss hoping for the market to come back. I bought a $150k townhouse because I could only come up with $30K for a downpayment. It has slowly appreciated over the last two years. Meanwhile, I can invest/save a huge percentage of my salary because I'm not blowing it on mortgage interest. Even if it had depreciated I could have come up with the difference out of the earnings. If you buy with 0% down and the place depreciates 30% over the next two years what will you do? If you can cover it out of your earnings, and you really think owning will be that much more pleasurable than renting, go ahead.

ActivedutyMD,
To save a 20% down payment when one is paying off 130k of more in loans and on a resident/fellow salary is difficult, next to impossible.

Thus residents/fellows with $130K in loans shouldn't own houses. If you can't come up with 20% BEFORE buying, what makes you think you can come up with 20% before SELLING if it depreciates? There is a time and place in your life where buying a home will make financial sense. This isn't it.

 

[dragonfly99]

I disagree that I am an "entitled" spoiled brat as you seem to imply. I actually think that it is stupid and entitled to buy more than one can afford (i.e. a new car and a 250k or 300k home on a resident salary). I have never owned a new car, any fancy/designed clothers, or any home or condo. However, being a 33 year old who has worked my entire life, including during college and for several years prior to residency, and having completed a residency already plus a 2 year research fellowship, I would say that wanting to own is reasonable at this point in my life. And I don't think that waiting another 3-5 years until I am pushing 40 and done with a fellowship is necessarily a good thing. Those who rent apartments and houses will charge enough money so that they are making a profit off of me. I would personally rather pay a $800-900/month mortgage than pay someone $950 rent. I disagree that if the home were to not gain in value or go down slightly, I wouldn't be able to pay the money owed when I sold the house...that would assume that I have saved no money during the time I lived in the house, and that I never did any moonlighting, etc. Many people who found themselves "upside down" with regards to their mortages and having to sell bought houses they could not afford to begin with, and had ARMs with shady mortgage companies, or they did not have a secure job situation. I would not consider doing either one of those things. I think your scenario of a home losing 20% of its value is unlikely. It has happened in Florida and California recently, but those prices were way inflated/overvalued to start off with. I personaly wouldn't buy a home or condo that inflated in value.

I agree that folks who have NO money to put down for a down payment or closing costs should probably not buy a home. This would include many or most medical students. However, I would hope that some bank would be willing to lend me money if I can come up with closing costs plus 5-10% of the value of what I want to buy. If a doc with a medical license in 2 states and through-the-roof credit isn't a good risk, I'm not sure who is.