Purchasing a house is one of the most exciting times in life, but the process can be intimidating and complicated – especially for doctors buying their first home. It’s not just browsing a site like Zillow or Redfin; buyers need to think about down payments, mortgages, the true costs of owning a home, and more.

For doctors buying their first home, it might feel like enough to keep them renting for life. But it doesn’t have to be that way. Here are five things for physicians to keep in mind during the homebuying process to make it as smooth as possible.

What physicians should do during the home buying process

Be realistic about your budget

Just because the banks might allow you to buy a house worth three times their gross income, be careful before diving in. Don’t fall victim to being house poor, or buying a home beyond your means. Instead, a good rule is to stay within two times your salary.

When it comes to long-term ownership, the best way to buy a house is by using the 20-10-1 Rule. This consists of:

• Putting 20% down on a home;
• Keep 10% of the total home price in an emergency fund for things like moving expenses and renovations; and 
• Save 1% of the purchase price for any unknown expenses that might crop up.

If this plan isn’t realistic, don’t panic! Remember, you don’t have to put down 20%. Instead, consider using the 10-10-1 Plan:

• Put down 3% to 10% on a home;
• Keep 10% of the home price in an emergency fund for moving expenses, renovations, and other costs; and
• Save 1% of the purchase price for any unknown expenses that might come up.

In addition to these plans, remember that there are other monthly expenses you’ll need to consider when calculating your budget. These include, but aren’t limited to, HOA fees, property taxes, fixed expenses (utilities), and maintenance.

Consider taking advantage of a physician mortgage loan

Doctors, especially those who are first-time buyers, often struggle with getting a mortgage because of high debt-to-income ratios, little cash, and no credit. Enter the physician mortgage loans (also called a physician mortgage).

These loan programs are made specifically to help those in health care, including doctors, nurses, and more. Physician mortgages offer:

• Higher loan amounts;
• 100% financing of $1 million or more;
• The ability to close on a home before you have a job;
• A down payment of less than 20% and no private mortgage insurance (PMI); and
• The ability to refinance at any time.

However, be careful when taking advantage of this opportunity. While these loans do have high limits, be careful not to borrow more than you should. Additionally, keep in mind there are adjustable rates, higher interest rates, and limited eligibility (for instance, condos and townhomes aren’t eligible).

Be familiar with common mortgage terms

On top of confusing rates and rules, mortgages also have a specific vocabulary you should know.

Here are a few terms to get familiar with:

• A term is the period of time over which interest rate, payment, and other mortgage conditions are set. These range from 3 months to more than a decade, but typically last five years. 

• Fixed-rate mortgages give buyers the stability of knowing what their interest rate and payments will be for the full term of the mortgage. They will not change, hence the term “fixed.”

• On the other hand, a variable-rate mortgage means that while payments can still be fixed, the portion that goes toward principal instead of interest will change. That rate varies depending on the bank’s prime lending rate. Because of this, buyers should have a higher risk tolerance (but they will likely save money on interest in the long run).

• Amortization is the number of years over which the loan is repaid (15, 20, 25, 30 years). The length of time impacts how much interest is paid.

Work with an expert Realtor

When you’ve figured out your budget and are ready to get serious about the house hunt, don’t rely on just anyone to show you around. Instead, look for a Realtor who’s been in the business for at least a decade and has referrals or examples of past deals.

This type of vetting allows you to rest assured that you’re working with an expert, both in terms of the area and the market. They’ll likely be better negotiators and give you guidance on spending and budget as well.

To find a Realtor you’re comfortable with, shop around. Conduct interviews! Take your time and get to know each one you interview. Look for an ability to explain things quickly and thoroughly, a deep knowledge of the area, and prompt communication. 

Above all, find a Realtor you trust. Remember, once you’ve signed a contract, you’re legally bound to them.

Visit houses in-person

It goes without saying that while pictures are usually worth a thousand words, it’s not true for home buying. It’s next to impossible to get the full story or feeling of a house on the internet, so even in a competitive market, take time to see it in person.

Doing so will allow you to see things you might have missed otherwise, including natural light, ceiling height, street noise, and neighbors. 

If possible, avoid open houses in favor of private showings. This will help filter out the noise and crowds and give you the chance to take your time and have privacy while you get to know the house.

Remember, you’re new to this! Don’t worry if you get overwhelmed – just keep these tips in mind and you’ll be off to a great start. 

This material is for informational purposes only and is not intended to provide financial, legal, tax, nor any other professional recommendations or advice.