Ready or not, Match Day 2022 is fast approaching, and transitioning from medical school to residency brings its own challenges and decisions.
Once you’ve received your match, then what? How much should you budget? Where will you live? When should you begin student loan repayment? These are all critical decisions to make before you start your residency program. While you finish your last weeks in medical school and anticipate your residency, there is still much to do. To help you begin, here are a few steps to take once you’ve matched.
Plan Your Budget
When you exit medical school, one of the first things to consider is your student loan debt load. It’s common for medical students to carry student loans of more than $170,000. To manage this debt, you need to consider your repayment options. These choices include loan consolidation, refinancing, and loan forgiveness options.
Aside from that, you’ll need a solid budget to plan your living expenses, including your student loan payments. Your budget is your guide now and in the future. To help with your planning, consider which budget method you prefer: traditional pen and paper or a digital budget app.
Get an Emergency Savings in Place
If you don’t already have an emergency savings account, now is the time to start. Beginners should aim to maintain a minimum of $1,000 in emergency funds. Things break. Sickness and injuries happen. Unexpected life emergencies occur. Building your emergency fund now helps you weather a financial storm tomorrow. Your goal is to have a minimum of 3-6 months of living expenses in an emergency account that you can quickly liquidate if needed.
Decide Where You Want to Live
Once you’ve received your residency program match, you’ll need to decide where you want to live. Deciding on the where extends beyond just the general area, region, and even city. It also includes decisions on the neighborhood and type of housing that you’ll want to spend the next few years in.
Not all medical students realize this, but you don’t have to choose an apartment as your dwelling. There are specialized home loans available specifically for residents and physicians to buy their first (or new) house.
A physician home loan, sometimes simply known as the doctor loan, is a specialized loan program created for medical residents and young physicians in the home buying process. Physicians early on in their career may not qualify for conventional loans for various reasons such as minimal savings for down payments, high student loan amounts, or short work history. Despite these reasons, some lenders know that physicians like you are trustworthy borrowers due to traditionally very low default rates on loans, high earning potential, and stable employment.
Along with flexible credit requirements, physician mortgages also have unique financing terms. Lenders like Extraco Mortgage can help you with up to 100% financing on your single-family home. Unlike conventional loans, which often require private mortgage insurance unless you have 20% of the home value as a down payment, physician loans do not require PMI.
Build Your Credit
Your credit history is vital for your future. Build your credit history by paying off debt, including your student loans. Additionally, make all loan payments on time, every time to ensure a positive credit history and a great credit score.
Finally, your debt-to-income ratio is part of your credit history, too. That’s the amount of debt you carry versus your income. Aim to keep your DTI as low as possible – 20% or less is an excellent place to be, whereas anything over 40% can quickly stress your budget and your wallet.
Plan for Your Future
Planning for your future begins now, not later. Once you have fully funded your emergency account and lowered your debt load to a manageable level, it’s time to consider building your wealth for your future, your family’s future, and even for your retirement.
There are many ways to build your wealth, so it’s a good idea to speak with a financial advisor before you begin. A financial advisor can help you start on a path that makes the most sense while maximizing your investments today for a successful outcome tomorrow.
Prepare for Your USMLE
Finding time to study for your medical license can be challenging when you’re balancing a hectic schedule during your first residency year, but it’s also essential to your future. Be sure to set aside sufficient time to study and take advantage of the resources available to you. Your future depends on it.
The Final Word
Congratulations on all of the hard work that has brought you to this point! Entering residency is the first major step toward your future, but it’s certainly not the last. Your continued success will be impacted by your ability to plan for the next steps in your journey. Whether that’s through budgeting, buying a new home, or learning more about your financial future. The team at Extraco Banks is always here to help!
Learn more about the Physician Loan from Extraco Mortgage
We’ve helped over 500 Texas physicians purchase a new home with specialized credit and financing terms.