The Money Meets Medicine Podcast

The Pitfalls of Buying a Home

June 26th, 2024

If you are considering buying a home, you need to consider certain things. This includes realtor compensation, rules of thumb to determine “How much house can I afford?”, and ways to make sure you not only get the house you want but that you also get it at the best price. We discuss all this and more in this Money Meets Medicine episode.

Notes

In this show we discuss:

  • The changes to realtor compensation that started in July 2024
  • How much house you can afford
  • Ways to reduce costs when buying a home
  • Physician Mortgage Products
  • And more…

 

Did you know that there’s a right way, or at least a better way, to buy a home? Keep listening as we dive in. Welcome to the Money Meets Medicine Podcast, where we talk all about the personal finance topics you wish you’d learned in medical school.

I’m your host, Dr. Jimmy Turner, and here’s your co -host, who has a secret hack for getting your house organized after they move. Justin Harvey. Jimmy, great to talk to you today. I recently moved into a new house that we bought.

As we were packing and everything, I was listening to the Walter Isaacson biography of Elon Musk, which I’ve really been enjoying. Lots of just very interesting stuff. Elon has a way to get things done, create a ridiculous and totally manufactured artificial deadline, and then push his team insanely to achieve said deadline, and in so doing has really accelerated innovation.

I have adopted this on a very humane, personal scale, where after you move, invite a bunch of friends over, say it’s going to happen three days after you move, and then you have to get your house, at least some part of your house, appropriately organized for hospitality.

You’ll laugh at this in particular, because I’m having some friends over tonight to smoke a brisket. This morning, I got up early, got my big 16 -pound slab of meat. I’m doing the trimming, and the salt and the pepper, and the smoked paprika, and all that.

Disability Insurance for Physicians

 

Then I took it out to the smoker, and I realized the power cable for my smoker was nowhere to be found. That’s precisely the kind of thing, when you move, you’re like, that could be literally anywhere.

I have no idea. I didn’t even know it was detachable. Then I realized it was the same power cable that hooked up to my monitor, so I dropped the meat on the smoker, came inside, unplugged my monitor, ran back out, plugged in the smoker.

So far, so good, and I think we’re on schedule for tonight at 8 p .m. For people that don’t smoke meat, that’s a big deal, because brisket takes a really, really long time. really long time to cook. And then you have to decide, are you a fat up or a fat down kind of guy?

You can take off the point separately. There’s all sorts of questions. So just having to find a cable, for me, that’d have been a stressful moment. And also, we’ve established this in the past, but you are substantially better at cooking brisket.

I’m very good at cooking ribs. And so maybe we should open a restaurant together and then you cook the brisket, I cook the ribs. Does that sound good? It sounds awesome. We can call it money, meats, medicine.

You know, that’s pretty funny. MEATS. All right. Well, hey, you know, actually, house organizing tip number two. So when we moved, Kristin put everything in boxes and then color coded them. She slapped a color on the front of the box.

And then she made this like key that she put at the front door. And it basically said like, you know, hey, blue boxes go to the kitchen boxes go to the oldest daughter room, or just goes the middle kid, you know, all that stuff.

And so people just picked up the boxes and they knew exactly which part of the house to bring them to. I actually thought that was a brilliant idea. That’s incredible. And actually it would have been helpful with my moving crew, which we were not fluent in each other’s languages.

So there’s a little bit of miscommunication and some stuff that I had to move around after the moving crew left. So the color coding would have been the perfect way to handle that. Yep. That’s exactly right.

So we’re going to talk about homes on the show because you just bought one and I can’t wait to dive into this topic, hear about all the horror stories that you just went through and hopefully some triumphs as well.

Money Meets Medicine, Jimmy Turner, Justin Harvey

 

But before we do that, don’t forget, if you want to build your financial foundation, you can do that moneymeetsmedicine .com where you can snag a free copy of The Physician Philosopher’s Guide to Personal Finance.

Completely free. Pop in your email. I send you a copy that you can actually download a PDF or a version that you can put onto a Kindle if you have a Kindle reader. Please share that with all of your trainees.

I cannot tell you how often I hear, man, I wish I’d read this book when I was in medical school, when I was in residency or fellowship. The earlier people can build this financial foundation and really kind of set their ducks in a row.

The better. Moneymeetsmedicine .com. Please point people to that and share the show so they can hear about it too. Justin, the real estate market’s interesting right now for a couple of reasons. We talk a lot about high interest rates and homes.

The cost of homes are really, really high compared to, let’s say, five years ago. But also, there was a change to the way that realtors are paid or at least that’s the way these headlines came out. There’s these big headlines all over CNN and just every major news organization that basically said, hey, realtors are no longer going to be able to charge the commission that they charge.

There’s not going to be this baked in like 3% on each side. Maybe buyers will be able to negotiate their way down to a different way of paying realtors and maybe they’ll even save some money. That’s kind of the slant that these articles took when this news originally dropped, is that buyers and potentially sellers, but in particular, buyers are going to potentially save money.

But I haven’t really followed along since that giant headline came out. Is there any news on that front? Well, I have followed back up on it a couple of times and for me, it was just mostly something, an intellectual curiosity because I have already transacted at this point and will not be a beneficiary of any changes.

And where I currently understand things have landed is that it’s unclear… So there’s a big settlement. The National Association of Realtors essentially had hundreds of millions of dollars judgment against them and there’s some proposed restructuring of this sort of anti -competitive framework in which they’re currently operating.

How that’s actually going to impact things, I think, is to be determined and I was originally really excited because I mentioned this before we went live, Jimmy, that I think that there’s a lot of real estate agents out there that, man, 3% on a million dollars, it’s 30 grand.

And Jimmy, I know what you need to do to earn 30 grand and I know what I need to do to earn 30 grand. And in a hot real estate market, you’re just not going to convince me that the average realtor is worth $30 ,000.

Disability Insurance for Physicians

 

I will never buy that. And so I think that this was an industry that was ripe to get blown up and now I’m getting a little bit… deflated that I think it’s not going to blow up as like spectacularly as I was hoping as somebody who’s like, I can’t really represent myself and so much is sort of hard coded in terms of the agreements between agents and either the seller or the buyer.

I don’t know. I’m just less optimistic than that. Buying a house later this year will be much better. Yeah. I agree. So my view of this, and this is actually interesting when it comes to financial planning.

Because I’ve talked about me taking Series 65 and maybe in the future, some distant future that opens up the possibility of working with a financial firm, opening my own, what have you. And you and I have also discussed along the same lines, just like fee models.

We’ve chatted about that in prior episodes. And really the ultimate question there, there are all sorts of very prominent names in this physician, finance, personal finance space. It’ll be like, if you spend money on a financial advisor, it should never cost more than $10 ,000.

That’s the dumbest thing I’ve ever heard in my life. And the reason why is because whenever you’re paying for a service, the cost should be determined by the return on your investment. What services am I getting?

And are those services worth X number of dollars? Because there’s someone that could provide you a comprehensive financial plan for $6 ,000 and spend five hours on it and it’s a total waste of time. And there’s other people that could charge you $20 ,000 and do nothing.

They could just have low cost diversified index fund investing strategies. They check in with you once a year and they rake 20 grand away from you every year from your investments. That’s also not worth something.

But then you can have people that charge $25 ,000 and they provide a whole host of services that make that $25 ,000 in tax savings and investing opportunities and just comprehensive financial planning.

They’re checking in with you regularly that it is absolutely and fundamentally worth that money. And so when I think about a realtor and the value that they provide in terms of here are the market comps, these are the houses that are available, and walking you through homes and pointing out things that are good or bad.

bad. Is that worth something to me? Fundamentally, yes, it is. Is it worth $30 ,000? In no world that I’ve ever lived in is probably, is it worth $30 ,000? And that’s important because homes today, like a lot of physicians listening to this show are going to be like, yeah, I’m trying to be reasonable with my money and I’m looking at houses in my area and there’s nothing I can find that costs less than a million bucks.

There are a lot of people listening that live in high cost of living areas with like a million dollars. Let’s try two. And a home sale and they’re not providing that kind of value. So I agree with you on that because it really is about the amount of money you’re giving for the return that you’re getting.

But this brings into question something else that’s commonly stated in this space, which is how much house should a doctor buy, right? And there’s some rules of thumb that are given there. And Justin, I know that you’ve got opinions on this, so maybe I’ll let you share your thoughts on this, but they are rules of thumb, right?

They’re not strict guidelines, but that’s it. Yes, so the rules of thumb historically has been like, you know Two times your gross income is the mortgage amount you should target and this has been a rule of thumb for I mean As long as I’ve been in like the physician finance blogosphere just been at least a handful of years at this point And since that time mortgage rates have gone from two and a half for a thirty -year fix to seven and a half for a 30 -year fixed so it stands to reason that with triple the interest cost perhaps an amendment to these rules of thumb is warranted and And it also I mean there’s significant market specific considerations in this question and Related is like the rent versus my question because I can tell you we’re you know We’re experiencing about a 60% monthly increase in living cost To buy a house that costs about 75% as much as the one we just left meaning if it was a million two with the place We were and this one is like 800 monthly cost We could rent a million two place for just over four grand and we can buy an 800 place for six or seven is The 30 -year fixed payment that is you know,

there’s it’s not a good math decision per se there’s a lot of other factors as we’ve discussed in terms of lifestyle and Permanence and raising a family and stability and all that that can tip the scale But that’s a question you not only like what is the price point and what does it mean in terms of monthly cost?

But what is the rent versus buy look like in our market? I was talking to a buddy of mine who has a house that He’s renting out for He was saying it was like 3500 bucks. He’s in Delaware And his house was probably worth like 350 $400 ,000 and so the differential is totally flipped from where it is here in Portland where he’s got a $400 ,000 asset where he’s making you know almost $40 ,000 a year on it,

which is great if you own that asset a $400 ,000 house in Portland, you know, you’d probably be able to rent that for I don’t know 1500 bucks two grand And there are there aren’t any of those by the way because it would it would be something you would just buy and knock Down and build something else on because the property values are kind of expensive here on the west coast if you didn’t know I know you’re in North Carolina.

So, you know nothing about that but Yeah, no, I don’t it’s kind of a bit of a bummer if you’re a buyer out here. So those are some some thoughts well, and I think that ultimately, you don’t want to be house poor and unfortunately you finish training for those of you that are listening that are heading towards that direction or maybe recently have and the next step seems like I should buy a house and There are so many moving pieces that go into this that are that are financially based But then also like psychologically based and and honestly some of it’s based on your situation that you have no control over,

right? So you’re moving into a job Everybody in the world thinks that like how this is, you know, I’m gonna love this job It’s my dream job, right? and and so therefore I’m gonna buy a house and it turns out that you become a statistic and 50% of doctors change jobs and You should have rented so that you didn’t have to Go through the process of selling that house and paying those 6% realtor fees that we’re talking about before The affordability from like a monthly standpoint is important Considering the cost of the home is also important but but it’s It is unfortunate because the housing market costs have gone up so much and out of proportion to the rate at which physician incomes have gone up.

I think that obviously the home prices and the borrowing prices have gone up much more than a physician’s compensation probably has. And so yeah, you can buy less house now on this income that you have as a doctor than you could three or four years ago.

That doesn’t mean that you should stretch and try to afford a house just because, right? At that $2 million or that two times gross income house at 7% interest is going to cost significantly more. And so I think that that monthly pay rule, the 25% of your monthly pay, 25 to 30% of your monthly pay comes into play a little bit more easily nowadays because the 2X gross income number at 7% interest is probably going to put your mortgage well above that 25 to 30% number that,

you know, in terms of how much of your take -home pay is going towards your mortgage. Totally agree. And this ties back to what we were just discussing. It’s an important dynamic to be aware of is the inverse or I should say perverse incentives created by real estate agent compensation where real estate agents don’t want you to or they’re not paid more if you get the right house or if you get a house that fits your budget or if you get a house that is like within your target range or even if you negotiate well,

they’re actually a they’re, they’re paid to get you something. So they, they’re incentivized to get a deal done and B they’re incentivized to have you pay more. They make more money when you pay more money.

So I don’t see real estate agents like, you know, pushing people to pay more, but it also means they’re totally disincentivized from negotiating. They just want you to get the deal done. Real estate agents are not incentivized to be your financial advocate.

I tell people all the time, if you were buying a home, do not tell your realtor how much you’re willing to spend on a specific house because the psychological phenomenon of walking into a home and being like, this is the house for me.

This is the perfect home. There’s no other home out there. By the way, everybody walking into a house says that. And then if you don’t. get the deal, you realize when you see the next house, you’re like, oh, this is actually a great house too.

So like the perfect home is not a thing that really exists, although your brain’s going to tell you that. And then your realtor now knows, oh, this is the house they really want. It’s listed for 1 million, but I know that they told me that they would give 1 .1 for this house.

Well, guess what? They get 3% of that extra $100 ,000. So that’s a $3 ,000 incentive for them to somehow potentially provide the information to the selling agent. I’m not saying people necessarily do this, but that incentive is there, right?

Like, well, if I can actually get them to buy it for a little bit more, I’m going to make 3% on whatever that number becomes. I’m not saying that they’re doing that again, but at the same time, you have to understand how they get paid, just like anybody else.

So you understand the incentive that’s there and can then make decisions knowing that information. Yeah. And unfortunately, my opinions have been colored by my experience. So take it with a grain of salt.

I am utterly convinced of the challenges created by these dynamics. And it frustrates me to no end. And even my wife is uncomfortable when I’m like, I want to negotiate. And, you know, try to advocate and Sarah doesn’t like negotiating even.

And so this is a dynamic of our relationship that whenever we’re transacting on a house or anything else, it’s like big and expensive. These personality differences do come to the fore. And especially through a real estate agent in that mix, someone, and by the way, our agent did an awesome job as a personal friend.

And so I would see him as actually one of the outliers who proactively organized thing and, you know, whether or not it’s worth that 20 to 30 grand. I is still an open question, but he was one of the best that I have worked with or heard of, but I just observed in the negotiating process.

Like I was like, you know, we, you know, I want to push, push, push. And the cadence of the dialogue, the counsel that we got about, Oh, here’s where comps are, you know, I don’t know. It was, it was not somebody who wanted to get us the best deal.

Yeah. Well, I think this is important because your personal experiences are going to color every aspect of your, your life in terms of how you view other professions, right, is well -documented basically everywhere I’ve ever been.

What I think about insurance agents, that’s the reason that we opened up Money Meets Medicine Disabilities because I truthfully had a really hard time finding agents that I could actually recommend to people that I knew beyond a shadow of a doubt would do the right thing.

And, and, you know, basically I got down to the point on the show where I just recommended Larry Keller, for example, and because Larry’s amazing, right. And Larry is a great trustworthy guy and I give him a completely, you know, free shout out, he’s not sponsoring the show or anything, but Larry was like one of the few people that, that we trusted.

And that’s why when we created Money Meets Medicine, I reached out to Larry and said, Hey, Larry, we want to do this, right. What’s the best way to do this? And unfortunately, my experience with 99% of other insurance agents, time after time, after time showed me that they were not going to do the right thing for the doctors that, that I was wanting to help.

And so we jumped into the game and said, we’ll do it ourselves. And real estate’s the same way for you, it sounds like. And that’s not, in my experience, we can call that, quote, unquote, anecdotal. But when you’ve had enough experiences at some point, you’re like, this is just kind of the lay of the land.

Like, this isn’t a bad apple, it’s a bad tree. And it gets tough. It’s also, and I’m pretty self -assured in terms of, I understand numbers, I understand how to do some financial analysis, I understand how to do comps.

And I just don’t trust a lot of these. One of the things that we would do is talk to the listing agent. We’d go to the house, talk to the listing agent. And I understand, I’ve got to advocate for myself, even if this person’s going to get literally get paid by the buyer and the seller, which is kind of crazy if you think about it.

They are doubly incentivized to just get a deal done. I know going in, at least they will help us get something done. And all the advocacy for a good price needs to come from me, at least in that context.

I know where the battle lines are. And so that has been the way that I have found to be a good fit for looking at properties in the past. And we didn’t actually end up transacting in that manner, but that’s something that for someone who’s a go -getter can have good luck.

But this might not… Not everyone needs to take my bad opinions upon themselves. Well, and everyone’s allowed to form their own opinion, but let’s say Justin that… And by the way, the reason that we’re mentioning all of that, that last five, 10 minute segment there is that the real estate changes are due to take effect literally less than a week after the show comes out.

And so July of 2024 is when the realtor market is supposed to change. So it’s still yet to be seen what actually happens and the true impact that these changes and that lawsuit have on the real estate market in terms of what you pay your realtor.

But if you’re in the process of buying a house and it’s after July of 2024, you need to look into that to see what the levers are that you can pull in order to get the best deal for you. So really important to mention.

Or even if you’re going to engage an agent in the next month or in the next few weeks, it’s not going to be worse for you in the future. It might be the same and it might be better. There are some states that are opting out of this class action suit.

So depending on what state you’re in, it might not impact you at all. But just be aware that things are shifting and it’s supposed to be shifting towards the consumer. So be aware of that. All right, Justin.

So someone wants to buy a house. The thing that gets a lot of airtime in the space is physician mortgages, physician loans. I used one of these in the past. Have you ever used a physician loan? And it’s a great tool.

And actually, one of the things I wanted to share related to these, and I think we can talk about the specifics. The bottom line is you can put low or no money down as a doctor. And because banks love working with doctors, they’ll give you preferred financing.

You’ll get the best interest rate available and you won’t have to pay PMI, which is normally if you’re going to put 0% down, you’ve got to increase your monthly payment by some percentage. It’s called private mortgage insurance.

It’s like the little insurance premium for the bank because you have so little equity, they don’t want you to just walk away, and then they’re stuck with a house that they can’t sell. I ran into a challenge that was unforeseen, and you’ll find if you talk to mortgage brokers that within certain bands, and it depends on the lender and state and a lot of other variables, but within certain bands, the required amount of down payment changes.

So between zero and a million, maybe it’s 0% down, between a million and a million and a half, it’s 5% down, a million and a half to 2 million is 10% down. These are the physician down payment requirements for a physician mortgage.

What was not apparent to us and something we got sort of caught with is it’s like there’s an asterisk there that it’s appraisal dependent and also market dependent. So what happened to us is as long as your house appraises at the offer price, then you’ll get 100% financing.

So if it’s a million dollar house, you can do 0% down. If you offer a million, they accept your offer, the house needs to appraise at a million by the bank in order to get a million dollars of mortgage.

If the house appraises at 900 ,000. The bank will give you, it’s still the 0% down product, but they’re only going to give you 900 grand. And then you got to come out of pocket for a hundred grand in order to get the deal done.

So that’s an important wrinkle. In addition to the specific house appraisal, there’s another, and this is where we got caught. There’s another box, it’s like line number 17 on the appraisal worksheet.

It’s like, and it’s so simplistic, it’s almost maddening, but it’s like this, you know, metro area is rising market, stable market, falling market. There’s three boxes and it’s, you know, for a number of zip codes and it’s basically like a, you know, lick your finger and put it in the air and try to figure out what’s going on for the real estate agents.

And I’m sure they have a, or for the appraiser, I should say, I’m sure they have a scientific way of doing this. I can tell you, we were in a very competitive sort of situation here and there’s a lot of action and bidding and multiple bids on houses within a couple of days of things being listed.

But it turned out that on the appraisal, the house appraised for the value that we needed it to. So we’re so far so good. But then the appraiser said that the house is listed in a falling market environment in Portland.

And so as a result, the lender reduced the amount that they were willing to lend us and increased the amount of down payment required. So if you’re, here’s the takeaway. And for us, this was not the end of the world.

It means we need to delay our kitchen reno a little while. But if you’re trying to thread the needle on a zero money down product or 5% down product, there are things that can, I’ll put an air quotes, can go wrong, that can go against you in the appraisal that may increase the amount of money down.

And if you’re talking to a million or $2 million house, like 10% of 2 million is 200 grand. So that’s some money it would take a little while to make. So don’t cut it too close. You don’t want to bottom out at $0 when you walk into your new house and all of a sudden you’ve got a bunch of things to do and you’ve got to pay movers and maybe you need to overhaul your HVAC and get a new roof and whatever.

even with the physician mortgage, it’s worth it to have a little bit of extra cash and be prepared for that 5% or 10% move of down payment. And by the way, you’re still way better off doing 10% down compared to traditional financing, which would be 20% down on a million bucks.

That’s 200 grand. So you’re still way better off than the average bear, but having an additional cash margin is a good idea. Yeah. These loans, I’m a fan and I’m not a fan for different reasons. I’m a fan from a math standpoint.

I’m not a huge fan from a psychological standpoint. And the reason is, yeah, great. You can put zero down on these loans. The physician mortgage insurance, excuse me, the private mortgage insurance in physician loans doesn’t exist.

So it lowers your payment. Great things from a math standpoint. But then the problem comes, what I alluded to earlier, which is like, what happens if you don’t like your job and doctors are notorious for making financial decisions like this, you’re like, wait, I’ll put zero down.

The appraisal comes back, it’s $15 ,000 less than you expected. You’re like, okay, well, I can cough up 15 grand, even my emergency fund didn’t expect that. And then it comes out six months, nine months later, you just moved to this new town, you have this new job and you hate it.

And now you didn’t put any money down, but guess what? It still costs six to 8%, maybe 10% of your home to sell it. It’s that million dollar home. Now you got to come up with a hundred grand to sell your house and then to move and incur all the costs of buying another house that we have just described.

And so this can be a six figure issue. So what I always encourage people to do, Justin, I’d be curious to know your take on this, but I always want people, not always, I typically want people to have 8 to 10% of the equity value in their home available in some way, shape or form.

That could be in a cash count, it could be in a money market account. And honestly, it could be in a brokerage account because the chance of you needing it is low, but you need to be able to tap into the kind of money you’d need in order to sell a house.

Otherwise you get trapped. And I’ve shared this story on the show before, but had prior coaching clients, married couple, and they had a very expensive house on the West coast and they were having to commute an hour and 45 minutes, one way to go to work because they changed jobs and they couldn’t afford to sell their house at the time because they didn’t have the 10% they needed in their home.

And they had to do that for like, like a couple years. And it was super sad because they basically got trapped in their home. So this is a different way of being quote unquote house poor, right? You don’t have the ability to sell your house because you can’t afford to.

And so I like the zero down payment from a math standpoint, but psychologically it can trap you in some pretty stupid financial decisions if you’re not thoughtful about it. Yeah, you’re right. And I’m just thinking about Mr.

Money Mustache. I don’t know anybody out there knows who that is, but sort of one of the OG financial independence bloggers and his thing was like proximity to work is so important because he’s all about like buy a house next to where you work and walk there essentially or work from home.

And so there’s this one post he had that always stuck in my mind. It’s like, if you’re reading this and you’re driving more than an hour to work, like you need to like run across the room and start looking at real estate listings while your partner continues to read this article out loud to you across the room, like your hair’s on fire.

It’s that important. This is such a big, you know, money pit between the time to commute and the dollars in, you know, your vehicle. I, yes, totally agree with that assessment. So yeah, you could binge listen to money meets medicine, which isn’t a terrible thing, but that would probably not be a great life solution.

In fact, I think there’s studies that have shown like, from like behavioral standpoint that anybody who has to commute longer than 45 minutes, one way each day, their, their life satisfaction, their happiness is statistically and significantly lower, which doesn’t surprise me.

I mean, I don’t, I couldn’t go through like, you know, the nitty gritty on that study and how reliable it is, but I, the finding it, I mean, it, it tracks for me. Yeah. I wonder if they like adjust for income and.

Things like that, I’d be curious to know that. Are you saying that if you had to drive an hour, but you made a million dollars more every year, it might be worth it? Well, I would be curious if you drive an hour for a million bucks or an hour for, you know, 25 grand, if there’s a happiness differential there.

I imagine that people would be well on the stretch for that, yeah. So these position mortgages, talk about the PMI, zero down, they also allow you to borrow more. And if you start thinking about this from like a bank’s perspective, this all makes sense.

You might be like, wow, this is a really good deal. Why would they give this to me? Well, because you’re a physician, which means you’re in a very secure job, you have a high income, which means that you are the perfect person to lend money to because you are not going to default on your loan.

The default rate for physicians is extremely low. And so because of that, you’re like the perfect person. So they’re gonna give you all of these incentives that encourage you to take out their mortgage.

And it’s called a physician home loan. It’s specifically targeting you. And Justin, you’ve mentioned before, products and people that target physicians specifically should raise some red flags. But this is one that is generally speaking, if you can understand the psychology behind it, beneficial, in terms of being able to borrow more, but again, that’s a psychological problem in addition to a benefit,

you could borrow too much. And the bank’s gonna lend you a lot of money that doesn’t mean that you should extend to the length at which the bank’s like, you know what, you qualify for a $2 million home.

That does not mean you should buy a $2 million home. Those are different things. So again, psychological component, you gotta understand and kind of rein that in, right? Yeah, and if you’ve been exploring this, you might have stumbled across this thing called a mortgage affordability calculator, which is such a joke.

And I ran this for myself just, and I actually just pulled one up just because I was curious. And I can tell you that it’s yielding an amount about double what my wife and I are comfortable spending.

So don’t ask the bank how much they’re gonna give you and have that as your budget. You should have a slightly more scientific approach that’s going to get you a reasonable lifestyle and less financial stress along the way.

You know, Jimmy, a lot of what we do is try to have like a stress. adjusted trajectory for people to minimize stress and you want to have enough economically, but not at the cost of increased cortisol.

This is one of those decisions that locking in a high monthly payment is very difficult to get out of. So don’t ask the bank how much you can spend, ask Jimmy, look at your monthly budget and get something that’s more scientifically derived and that 25% of monthly take -home is a great starting point.

And if you do that, you’ll just never have a problem. And if you’re listening to this, you might be wondering who qualifies, right? It’s called a physician home loan, but it’s interesting because medical students qualify for this.

Residents qualify, which makes sense because you are a physician, which is like the hilarious going joke in medicine, right? Like when your mom’s like, hey, when do you become a doctor? And you’re like, mom, I’ve been a doctor for five years, you know, because you’re like in your PGY5 year of residency.

But attending physicians, obviously, and then veterinarians and dentists. So we have some listeners that listen to the show that are know, from other doctor specialties, doctors of animals or teeth, and they also would qualify.

And so that’s something for you to check into. This is not just for attending physicians of the allopathic or osteopathic variety. Two of the little sort of tidbits I want to… Things that I have learned in the last, you know, two weeks that I think weren’t mentioning.

If you’re working with an agent that doesn’t talk about an escalation clause, they’re doing you a wild disservice. An escalation clause will automatically adjust your bid, to be a certain margin higher than any other bids in a competitive situation.

So if the house is listed at 900 grand, you’re willing to pay a million bucks, you can do an offer at asking with escalation up to a million at $5 ,000 increments. So if there’s six offers on this $900 ,000 house and they’re at, you know, they come in around 950 is the next best offer, your offer automatically becomes 955 ,000.

It doesn’t guarantee you’re going to get it, but it does mean you’re going to pay the seller the most. That’s going to enhance your odds. It also means if you just offered a million, you paid 45 grand more than you had to, and that agent got, you know, extra commission, and both agents got extra commission actually.

So escalation clause is a really useful tool you should consider using if you’re placing an offer. Secondly, I… And Jimmy, I’m curious what you think about this. I am like so conscious of data security, guarding personal information.

You obviously are in a HIPAA environment, so you are too. It was frustrating to no end the number of times I saw my tax return flying around, signing authorizations to give people my tax return. And I can tell you, we sat down at closing and I signed my tax return or I, yeah, I signed the tax return.

I signed an authorization for someone to retrieve my tax return. And it was all sitting there in hard copy on this desk in some guy’s office. And I’m like, what was the point of sending all this securely by your secure link?

We’re just going to print all this stuff out and stick in a file. And like, you know, all these people are walking around in this office. That was very annoying to me. And there’s a number of, you know, all your personal sensitive financial information is in there.

So you may consider, and I’m actually going to do this, is once you get through this big transaction, lock up all your credit. If you don’t need to apply for more credit cards or anything, put a freeze with the credit agencies in order to protect your identity.

Because once it’s out there, it’s just like, man, you can’t put that genie back in the bottle and now it’s so annoying to me, but I think it’s a good step to consider. We use several different things.

So we lock our credit. We also use Lifelock or Norton, I don’t know if that’s the same thing or not, but they allure us to any activity that may be concerning. And then we use, there’s two different ones.

We use LastPass, and there’s also called OnePass, and basically you have that one master password or that last password you’ll have to remember, and every other password’s stored inside there. Now could they, LastPass or OnePass ever get hacked?

Obviously, it’s like any other company it could. That said, that is a secure way to make sure you have a bunch of passwords that no one could ever possibly guess. I mean, it would be astronomically challenging to do so.

We try to protect our information in a variety of ways to help prevent some of that from happening. But yeah, I’m a big fan of freezing your credit experience and everywhere else to prevent mishaps from happening.

So hopefully as you listen to the show, if you’re considering buying a house, you’ve already bought a house. Maybe you learned something that you didn’t know during the process. Really kind of think about this.

Realtor changes happen in July, week after this comes out. If you’re listening, check into them. Think about the things that we’ve mentioned on the show. And if you’re going to get a physician home loan, please understand both the mathematical side of things and that, yes, you can borrow more at lower percent interest.

Check into them. Think about the things that we’ve mentioned on the show. And if you’re going to get a physician home loan, please understand both the mathematical side of things and that, yes, you can borrow more at lower percent interest.

And there’s some, you know, you don’t owe any money down and the PMI is gone. There’s lots of mathematical benefit, but also understand the psychological ramifications of being told that you can borrow twice as much as you should and, you know, needing to have money to be able to sell a house should you come to that situation and ever need to do so.

As we head out, don’t forget to share the show, go on iTunes, Spotify, wherever you might listen to this and rate it, share it with friends. And if you are looking for a copy of the physician philosophers guide to personal finance, including one that you can put on your Kindle and read on there for free, you can download that by going to moneymeetsmedicine .com, pop it in your email address and it will be emailed directly to you.

We will see you all next week, cheers. Justin Harvey is a certified financial planner at APM Wealth where he helps anesthesiologists in pain medicine positions. Dr. Jimmy Turner is a practicing academic anesthesiologist at Wake Forest in North Carolina.

He’s also a licensed insurance agent. However, either Justin or Jimmy are your financial planner, investment advisor or insurance agent. This show is expressly for general education, entertainment purposes only.

Nothing should be considered financial advice. All views expressed are solely the views of the guests on the show and do not represent the views or opinions of their employer.

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