What every doctor should know before buying a house

By Jonathan Ford Hughes | Fact-checked by MDLinx staff
Published September 13, 2022

Key Takeaways

  • While many doctors can afford an expensive house, it's not as simple as it may seem.

  • W. Ben Utley of Physician Family Financial Advisors identifies three big home-buying mistakes to avoid.

  • Too much house, too soon, and the wrong financing can all lead to trouble.

Most doctors would say they chose their career to help others. But let’s be honest, the trappings of being a doctor—chiefly the salary—are very attractive. That salary can buy a lot of nice things, like the house of your dreams.

But before you sign that mortgage, take a minute to study up on the big three housing mistakes that doctors make.

We called on the expertise of W. Ben Utley, Certified Financial Planner and President of Physician Family Financial Advisors, who clued us—and hopefully you—in on the big three housing blunders that doctors make.

A brief horror story

In early 2007, Utley tells us that he had an unsuspecting client who purchased an $800,000 home in Virginia. This doctor was just out of residency, married, and had two children. The home was beautiful and the location was perfect: close to mom and dad (built-in babysitters!). There was only one problem: Unbeknownst to Utley’s client, his practice partners were bilking Medicare.

The new doctor found out and left the practice. This coincided with the housing market crash, so he ended up having to pay $150,000 just to sell his house. To make matters worse, he had to borrow money from his family and take out loans to cover the sum.

“He made the classic physician mistake of buying too much house too soon,” Utley says. That’s two out of three of the big housing blunders, which are:

  1. Too much house.

  2. Too soon.

  3. Wrong form of financing.

We’ll break it down for you.

Too much house

Before you enter the housing market, study the ways of the hermit crab.

“Hermit crabs don’t go out and buy the largest shell that they can afford,” Utley says. “They find the closest shell that they can comfortably occupy. If you can, find a home that is close to where you need to be, that is a comfortable size, and plan to move up.”

Children are the primary reason for using this approach, Utley explains, but not for the reason you might think. You don’t know what educational needs your child might have

"Children are the last great uninsurable risk. The likelihood of you landing on top of the right school is dicey."

W. Ben Utley

The housing market crash of 2008 was only 10 years ago, but many people, including doctors, have forgotten its lessons. Buying the nicest house in the neighborhood at the top of the market means you could end up like the doctor from our horror story: $150,000 underwater on a house you can’t get rid of.

Think of buying a house like buying a pair of shoes, Utley says.

“You know what my shoe has in common with a house? My shoe fits me now,” he says, saying that if your family outgrows your home, you can always buy another.

“I can afford my shoes. My shoes are going to wear out. I can replace them. You have to have a home like you have to have shoes. A home is not an investment.”

Do you really need that pool?

Too soon

How well do you understand your financial situation? Do you have a budget? Do you have an emergency fund? Do you have a plan for repaying your student loans and are you making progress? Utley says start with these. Once you know your budget and have an emergency fund in place, start saving for a 10-20 percent down payment.

“That will make most people fall out of their chairs,” Utley says. But it forces you to consider what he refers to as competing goals. These are priorities, such as saving for retirement or your children’s college, that will compete for the dollars you may be devoting to purchasing a home.

The process should be done in this order, according to Utley: Plan your finances, begin the loan-qualification process, find the house you like, and then talk to a real estate agent.

Wrong form of financing

Utley recommends that doctors opt for a 15-year rather than a 30-year loan. The larger payments of a 15-year loan will ensure that you don’t buy too much house. Also, he adds, invariably, doctors who take out 30-year loans will make extra payments once their income picks up.

“They basically get a really expensive 15-year note,” he says.

Two other pitfalls that Utley cautions against:

  1. Do not get a variable interest rate loan. “We’ve hit the all-time low in interest rates.”

  2. Avoid doctor loans.

"The doctor loan was invented to strike a balance between siphoning off all the cash that a banker can from a physician and keeping that physician minimally viable. They want to give doctors the biggest loan they can without killing them."

W. Ben Utley

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