Accepted Manuscript

“Buying a Home: Part I: When Not to Buy”

Robert M. Doroghazi M.D.

PII: S0002-9149(19)30502-8
DOI: https://doi.org/10.1016/j.amjcard.2019.04.041
Reference: AJC 23930

To appear in: The American Journal of Cardiology

Received date: 28 March 2019

Please cite this article as: Robert M. Doroghazi M.D. , “Buying a Home: Part I: When Not to Buy”, The
American Journal of Cardiology (2019), doi: https://doi.org/10.1016/j.amjcard.2019.04.041

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Editorial for The American Journal of Cardiology

By Robert M. Doroghazi, M.D.

Title:

“Buying a Home: Part I:

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When Not to Buy”

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Key Words: Purchasing a Home, Investing, Mortgage.

Corresponding Author:

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Robert M. Doroghazi, M.D.
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115 Bingham Road

Columbia, MO 65203-3577
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rdoroghazi@yahoo.com
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First Author: Robert M. Doroghazi, M.D.

Order of Authors:
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Robert M. Doroghazi, M.D.

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Affiliation: The Physician Investor Newsletter

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Part I: When Not to Buy

Conflict of Interests: None

No funding sources

Let’s start with the easiest question: Should a graduating medical student purchase a home?
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No!

Unless the physician, or their spouse, is independently wealthy, I find it impossible to imagine they

could afford a home. Standard financial advice, backed up by the hard lessons of time, is that you should

have a 20% down payment to buy a home. Since the average allopathic MD in the US graduates with

almost $200,000 of student loans (the average DO grad has about 20% more student debt), by

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definition, they will have minimal or no savings, certainly not the $30,000-$50,000 or more required for

the down payment on a starter home. Some might consider borrowing the money from their parents. I

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would remind them that a physician is a privileged member of society, at least 26 years old, and

probably older. It’s time to pay your own way in life.

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There are companies that will finance a graduating physician 95%, or even more, of the funds to buy
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a home. I believe this is unwise, and borders on seductive. Under-capitalization is one of the most

common cause of business failures. Buying a home with minimal down payment creates a precarious
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situation. If something goes wrong, and it always does (a new heating-cooling unit can cost $8,000-

10,000), you have nothing to fall back on. If you are forced to move, you might have to come up with
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money just to sell your home. Ouch!! Having less than a 20% down payment also requires you to take

Private Mortgage Insurance (PMI), which I believe is rapacious, one of the worst contrivances of modern
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finance, and for which you receive nothing in return.

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There are thousands of dollars of additional costs of starting a household. Appliances, yard tools,

furniture. Unless you borrow even more (doubling down, very unwise), all you can afford is cheap
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furniture. Cheap furniture looks cheap, and has minimal resale value.

The next question that arises is if a physician should buy a home during their training. Even if they

have saved enough money, there are two other issues which make this problematic: fees, and how long

you will live there. The “round-trip” costs to buy and sell a home: real estate agent commission, closing
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costs, fees, and more fees, are at least 10%. The bull market in residential real estate from 2000-2006

was an aberration. Other things being equal, a home must be held for a minimum of 5 years, the

duration of your training period, to recoup these costs.

Some might say there are advantages to buying a home, in that the interest on the mortgage and

property taxes are tax deductible. This is a terribly misguided reasoning. You spend $1.00 on interest to

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save 35 cents on your taxes? I do not consider that astute investing.

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For practical purposes, the average physician will not buy a home until they finish training. This is just

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one more direct, and unfortunate, result of the longer and longer training periods that have turned our

young physicians into professional students (1). Compare this to the physician’s high school

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contemporaries working at the steel mill, or college contemporaries in the business world, who could

have owned their own home for a decade or more before a physician can enter the housing market.
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In Part II of this Editorial, I’ll talk about when you should buy a home.
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References:

1) Doroghazi RM. Negative secular trends in Medicine: Prolonged training periods. Am J Med.
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2016;129(4):352-353.
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