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Prescription for Equity Building: The Case for Residents to Be Home Owners

on February 7, 2018     by Jeff Lottmann

doctor handing rx paper to medical resident who is a home owner

Home buying is a major decision with significant short and long-term financial considerations. Many residents are saddled with debt, making a modest salary, and think owning a home just doesn’t make sense for them right now. However, if you choose a real estate agent who specializes in working with physicians—one who has invaluable physician mortgage specialist contacts—it just might make more sense than you think.

Here is why buying a home as a resident is a prudent financial move:

  • Feasibility: First of all, physician loans make home ownership during residency not only feasible, but also strategic. You can read more about physician loans here; lenders created special mortgage products for those with a modest income, high debt, but large future earning potential. Usually, physicians can qualify for this special loan with 0-5% down. Debt-to-income ratios don’t apply and mortgage insurance is not required. The lenders are betting on the high future earning potential of physicians—and building goodwill to keep these professionals as customers.
  • Build Equity: Real estate is an investment, and by purchasing a home as a resident, with almost no money down through the physician loan, you are building equity and investing in your future net worth.
  • Build Credit: Many residents are financially naïve; they have spent most their young adult lives in training and have had little opportunity to build their credit. A home mortgage provides the opportunity to build credit and showcase financial responsibility to future lenders.
  • Autonomy: With your own home, you can change the light fixtures and paint the walls. For professionals who have spent the majority of the past decade being instructed and regulated, it is freeing to experience autonomy through home ownership.
  • Tax Deduction: Money you pay in mortgage interest can be deducted in taxes; every little bit helps!
  • Investment: Most residencies are longer than 3-5 years; a home purchase makes the most sense if you are planning to stay in the same location for 3-5 years. Plus, if you move after residency, chances are your home is near a major hospital system and can easily rent to new, incoming medical students or residents. Your home just became an investment property!
  • Resale Value: Residents, especially those with a young and growing family, typically choose homes in a convenient and safe location, close to good schools and a variety of amenities. This bodes well for resale value! Realtors who specialize in working with physicians who will eventually upgrade, know to keep resale values in mind when selling a starter home.

Every year almost 20,000 new doctors graduate from medical school and around the same number graduate from residency programs across the country. They have more in common than paralyzing debt and extremely specialized training; they are debating whether it is possible (or whether they should) purchase a home. At Lottmann Realty Group, we’ve partnered with leading hospitals and residency programs across the country to ensure their residents are informed, and to help them navigate the home buying process. If you have questions or know a resident who we may be able to help, please contact us by calling 636-812-4414 or emailing jlottmann@remaxstl.com.

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Jeff Lottmann
A natural born salesman, Jeff has always had a passion for real estate. After seeing success as an investor, he decided it was time to make his passion his career. So, in 2002, Lottmann Realty Group was born. Because his business and practical experience differentiate him from his competition, Jeff is the “go-to” real estate agent for hundreds of families and real estate investors throughout the course of their lives.