Eyeworld

by W. Ben Utley, CFP®, and Lawrence B. Keller, CFP® Eyeing a million dollar home? Three ways to buy one T here's a right way and a wrong way to do anything that matters, and nothing matters more than owning a comfortable place that you and your family can call "home." But this necessity often comes with a hefty sticker price, particularly if you practice in a major metropolitan area like New York, D.C., Chicago, or just about anywhere in California. Even small towns often boast homes with seven-figure price tags, perfect for a doctor who wants enough land to really enjoy his privacy. How do you go about buying, or more precisely financing, a home priced at $1 million or more? Most people have only two options but physicians have three. 1. Pay with cash The downside of paying cash for a home is obvious: Many physicians just don't have what it takes. But there's more to consider here. Plunking down $1,000,000 cash will tie up those resources for years, keeping you from investing for re- tirement or perhaps buying a prac- tice. Paying cash is also a liquidity trap since the only way to regain access to that cash is to sell or refi- nance. But there's one more thing to worry about: lawsuits. Unless you title your home correctly, all that eq- uity makes a tasty target for anyone who sues you, and your home equity is a matter of public record in most states. The big advantage of paying cash is simply knowing that you're "done" paying for a home and feel- ing secure in the decision. Also, it may be a little bit easier to actually close on the home since you dodge a ton of administrivia that goes with getting a loan. Paying cash might be a good move if you are near the end of your career and you have saved up most of the resources you'll need for retirement, or if you're super conser- vative and you can't stomach the thought of investing while being in debt on your house. 2. Go conventional If the Veteran's Administration can back it or Fannie Mae can buy it, your home mortgage will bear one of the lowest rates available in the marketplace, which is the big advan- tage of so-called "conventional" mortgages. For physicians though, conven- tional does not mean convenient. "To get conventional financing, you have to squeeze yourself into a tiny box for the sake of underwriting, which isn't always a good fit for doctors," said Josh Mettle, senior loan officer with Utah Physician Home Loans. Like everything touched by the government, strict guidelines and red tape are the norm, so some physicians—particu- larly those just out of training— simply do not qualify. Perhaps the greatest impedi- ment for the million-dollar home buyer is the down payment. Since the current limit for conforming loans is $417,000 throughout much of the U.S. and up to $625,500 in pricier markets, your down payment may run up to $583,000. Ophthalmology Business 68 April 2014

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