Landing your first attending job after years of training is a huge milestone in every physician’s life. Often, a new job comes with relocation to a new area of town, city, or state. We often see questions in our physician online community from graduating residents and fellows who are trying to determine whether they should rent or buy as they relocate. Many also seek advice on parameters around the home buying process as they navigate their first attending paycheck such as how much house they can afford and what type of mortgage (physician loan vs. conventional loan, 15 year vs 30 year) they should consider. Below, we cover these topics as well as other tips to help new attendings navigate the home buying process for the first time.
Note: This article is part of our resources for graduating residents and fellows and transition to practice series. We’ve compiled a list of other relevant resources below. If you are not a part of our transition to practice series and would like to sign up, you can:
Disclosure/Disclaimer: Our content is for generalized educational purposes. We are not formal financial, legal, or tax professionals and do not provide individualized advice specific to your situation. You should consult these as appropriate and/or do your own due diligence before making decisions based on this page. To learn more, visit our disclaimers and disclosures.
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Should you rent or buy when starting your first attending job?
After years of living like a medical school and resident, the temptation can be strong to buy a home as soon as you land your first attending position. Generally though, it’s usually the smarter financial decision to rent at first as you settle into your new job to make sure you like it. Many physicians change jobs within the first few years, and transactional costs for buying, selling, and furnishing homes are high and can quickly outweigh the benefits of buying vs. renting. Renting also gives you a chance to get used to your new attending paycheck and to get a solid budget in place to help you determine how much house you can afford.
If you are relocating for the job, it can make even more sense to rent for a short time to help you get to know the area better and have a more informed understanding of where you’ll want to live long-term. (See tips on how to assess this below.)
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How much house can you afford as a graduating resident or fellow?
If you’ve decided to buy a home, first determine how much you can afford to spend on a house. It’s never fun to fall in love with a potential house and then realize that you can’t afford it or that it will make you house poor, so put parameters in place up front. This will also narrow your search parameters and save you time and energy.
While your primary residence will hopefully gain equity, most people do not view it from the lens of an investment. Much of what you decide to spend on a house is determined by emotional factors such as what you want, rather than what makes sense from a numbers perspective. Additionally, a house will likely be the most illiquid asset you own. There is no guarantee that the house will appreciate in value, and certainly no guarantee that it will do so at the same rate as the stock market. Having too much of your net worth tied up in your house can make it difficult to accumulate wealth as a new attending physician, particularly as so much of your budget is likely going towards mortgage, student loans, and/or the need to catch up in your retirement savings.
You don’t need to continue to live like a broke resident, but be mindful of lifestyle creep with your home purchase and make sure you assess your full financial picture when determining what to spend. Don’t forget you’ll have other fixed expenses as well like homeowners insurance, property taxes, closing costs, moving expenses, new furniture, renovations, etc. etc.
There is no perfect equation. Instead, we have a few guidelines to help you determine how much to spend and to finance on your home.
When calculating your net income from your future paycheck, remember to account for taxes on both your bonus and future paychecks.
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If you’re struggling to balance all your financial goals now with your personal desires, a financial advisor can help you put together a personalized comprehensive financial plan for your new attending income.
Getting preapproved before your start your home search
When searching for your first home, you will need either proof of funds (or in the case of a physician loan, a signed contract) that supports that you can purchase the house or a preapproval letter from a lender. While some sellers or their real estate agent may not require this until you get to the offer and contract stage, depending on the market and the home price, some may want to see it before they let you schedule a house viewing. As you’re determining how much home you can afford, start reaching out to mortgage lenders to begin the preapproval process.
What you “can” afford to squeeze into your budget is generally pretty high with an attending salary, so your preapproval letter may come back higher than you’re expecting. This does not mean you should spend that much on a house. Make sure you assess the guidelines above versus home hunting based on your preapproval amount. You don’t want to end up “house poor” while starting your new career.
Determining what type of mortgage to get as a physician
When you speak with a lender, they will have multiple options for mortgages you can use to finance your home purchase. What type of mortgage is best depends on your specific situation. Different options can include:
A 30-year mortgage term
A 15-year mortgage term
An adjustable rate mortgage (ARM)
A physician loan
A conventional mortgage
Jumbo loans
VA mortgage loans
FHA mortgage loans
We highlight these types of mortgages in more detail in our guide to mortgages for physicians. In general, most graduating residents and fellows and early attendings will likely be looking at a physician loan or a 15-year or 30-year conventional loan. Be careful about taking a loan where the rates can change such as an ARM, as budgeting for potential large future hikes in interest rates can be hard.
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If you don’t have money for a down payment or haven’t started your attending job, a physician loan may be the best option for you, but may come with higher fees and/or a higher interest rate. If you have savings for a down payment, consider looking at a conventional loan and comparing your options. Our mortgage lenders for physicians can help you compare options to pick what’s right for you.
If you’ve landed a locums position or will be a 1099 independent contractor, you may have additional challenges in securing a mortgage, especially if it’s your first attending job, but there are options. Learn more about mortgages for locums or 1099 physicians.
Remember when shopping for a mortgage that you can always refinance or recast your mortgage in the future as your financial situation changes. Most mortgages also allow you to prepay without plenty to reduce the amount of interest and decrease the length of your mortgage too. And if you go the conventional route, it’s possible to have PMI reduced later without refinancing once you have more equity in the home.
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Starting your search when buying your first house
While you don’t need to work with a real estate agent when looking to purchase a home, many doctors prefer having professional help for what can be a lengthy and time intensive process. This is especially true if you’re relocating to a new housing market and/or are navigating the numerous steps of the home buying process for the first time
Before you start your home search, determine if you want to work with a real estate agent. If so, start by searching for the right agent to find you the right home.
Not all real estate agents are created equal, so we put together a guide to help you interview a Realtor when buying a home. A Realtor can also help you gauge how hot the local market, and areas within the market, are.
Whether you work with a Realtor or begin your house hunt alone, consider the following during your search:
What area(s) of town would you like to (and can afford to) live in?
What commute are you comfortable with?
How are the local schools if you have kids or are planning on having kids soon?
How close to family do you want to live if they are local?
Are there nearby amenities, stores, or attractions that would be nice to have?
What are your must have dealbreakers in a house versus nice to have but not required criteria?
Do you prefer a townhouse or a single family for your first home purchase?
Are you looking to build a new home or purchase an existing home?
How much renovation work are you comfortable with/can you afford?
Chances are that you’ll have to make some compromises along the way, so weigh the pros and cons of each home against your criteria. Determining these criteria ahead of time can help you stay focused and intentional in your home search, and can provide your agent with guidance to narrow down options.
Putting in an offer and the home buying process
Once you find a home you’d be happy with that fits within your budget, it’s time to put in an offer. Be prepared to negotiate. If the housing market is hot and potential buyers are offering over asking, be prepared to walk away if you can’t afford it or it isn’t worth what others are offering. If the market is cooler, you may have more negotiating power to get the seller to accept an offer under asking. It’s almost never the best strategy to throw out your best offer at the beginning, as it removes your room to negotiate if they counter higher. Additionally, be careful about pressure to waive inspections or other due diligence in a hot market, as surprises about the need for repairs can be (very) expensive.
Once a seller has accepted your offer, the home buying process generally looks like:
Sign a purchase agreement once you’ve finished negotiating
Schedule and complete the home inspection and appraisal
Shop around and secure a homeowners insurance policy
Complete mortgage underwriting to secure your financing
Close on your purchase, which includes scheduling a final walkthrough
Sign your paperwork and get the keys (it’s a good idea to change the locks ASAP)
Congratulations! You’ve purchased your first home.
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Conclusion
We hope the guide above helps you navigate the exciting but sometimes stressful home buying process. Having a house to call home can be a wonderful milestone, but home ownership has costs beyond just the purchase price. Your primary residence is one of the largest assets you’ll likely own, so buying your home isn’t a decision to rush. Assess your financial situation and your comfort level with homeownership before moving forward. Take your time and work with professionals who can help walk you through the process to ensure the best possible outcome. And when you’re ready, enjoy your new home! You’ve earned it.
Additional resources for residents and fellows
If you’re a resident or fellow, make sure you watch the recordings of the transition to practice series events on our communities, which cover the topics above and answer a lot of other FAQs we see during this time period.
Checklist of things to do as a graduating resident or fellow
Securing your life and disability insurance
Contract negotiations and job search
Personal finance
Student loan refinancing
Side gigs for residents and fellows
Figuring out what to do with retirement accounts
Housing for physicians
Moving discounts for physicians under our resources, discounts and perks for physicians