How This Doctor Bought a Million-Dollar Home Despite $450,000 in Student Loan Debt

Student loan debt causes millions of Americans to push off future plans. Buying a home is one of those dreams that can seem impossible to achieve, but it doesn’t have to be. You can buy a home with student loan debt, even if it’s in the six-figures.

Ryan Mattie, an interventional pain specialist in Los Angeles, was able to buy his dream home despite having $450,000 worth of medical school loans. Buying a home for Mattie was the “…tangible culmination of working so hard for so long …” in medical school, he said.

Mattie prepared to buy a home for over five years

Before Mattie even began the homebuying process, he did two essential things to prepare:

1. Saving up a down payment

Mattie worked a side hustle to save up a down payment. “I covered shifts at nursing homes every weekend when I wasn't on call at Stanford. It wasn't pretty, but I was able to save about $50,000 a year doing this.” After five years of moonlighting in the nursing home, Mattie saved up $200,000 for a down payment.

Mattie put his student loans in forbearance while in medical school training. So saving and not paying down student loans means that retirement is further away for Mattie.

“Was this the smart long-term play geared towards early retirement? Absolutely not,” Mattie said. “But I knew buying a home was going to be the most important thing for me, so I did it anyway.”

2. Staying on top of finances and away from consumer debt

“I've always been very tight with finances when it comes to credit cards or frivolous spending,” Mattie said. Not having any other forms of debt to worry about helped during the pre-approval process when buying a home.

After finishing his fellowship at the University of California, San Francisco in 2018, Mattie took a position as an independent contractor for a large pain group. He enrolled in the Revised Pay as You Earn (REPAYE) Plan, one of the four income-based repayment (IBR) plans. His payments were $1500 a month.

“Fortunately another opportunity came up with Providence Cedars-Sinai Medical Center. This was a big step in getting a mortgage because I went from a 1099, with variable monthly income, to a W-2, with guaranteed salary,” Mattie explained. A W-2 job is the stable income option that lenders prefer.

What’s an affordable home when you have student loan debt?

Mattie set out to buy a home where he worked in Los Angeles. The L.A. median home price is over $600,000. “Overall, I was really stressed. I didn't think I'd be able to do it. It's so expensive to buy a house in L.A., and I have so much debt,” Mattie said.

Mattie still made it happen. He makes about $400,000 a year and stretched his budget to get his dream home. “With 10% down and a $1.5 million mortgage, that qualifies you for a purchase price of $1.65 million. We settled on our house at $1.63 million,” Mattie said.

Student Loan Planner® recommends not buying a home priced at more than two times your income. This recommendation assumes you are also paying off student loans and investing to reach retirement at the age of 60 to 65. Mattie knew he wouldn’t be retiring early with this purchase. He clearly defined which goals were most important to him and followed a financial plan to achieve those goals.

Mattie shopped around for the right ‘doctor mortgage’ lender

Medical school isn’t cheap, and debt can make it really challenging to find lenders.

Instead of looking for traditional mortgages, Mattie reviewed options for the “doctor mortgage.” Travis Hornsby, founder of Student Loan Planner® (SLP) explains, “A doctor mortgage basically allows you to put a low or no down payment when buying a house without having to pay private mortgage insurance.”

SLP recommends shopping around for physician mortgage lenders to find the best option, which is exactly what Mattie did. He found that Bank of America offered a better deal for physicians in California. Mattie could get a large loan for only 10% down and six months of mortgage payments in personal or retirement savings.

High student loans affect your debt-to-income ratio

DTI ratio is your monthly debt payments divided by your monthly gross income. Generally, lenders don’t want your DTI ratio to be more than 43% when taking out a mortgage. It’s an important tool to determine what a borrower can afford.

When Bank of America did Mattie’s DTI calculation, it came back “unfavorable.”

Though Mattie had been thoughtful with his money, could provide a down payment and had 6 months’ worth of mortgage payments in savings, his student loan payments were affecting his DTI ratio.

Mattie was told his IBR monthly payments were insecure and likely to change in the future. The bank suggested refinancing his student loans. He needed to have a fixed and secure monthly payment that wouldn’t tip his DTI ratio too high.

Mattie was able to get past underwriting by refinancing

SLP never recommends refinancing student loans during the mortgage process. This can affect your credit score and your DTI if monthly payments increase. It’s a big risk by which you could lose out on your dream home.

Mattie knew this. “[It’s] the one thing SLP says not to do amidst applying for a mortgage. But I just kept doing what was asked. Sort of taking a chance — you can't make an omelet without breaking some eggs, I guess,” he said.

He decided to refinance using Laurel Road. “I dropped my interest rate from 7% to 4.5% fixed, and got a standard monthly payment of $3,200. The bank was happy with this, knowing it would not increase over time,” Mattie explained.

While refinancing during the mortgage application process is risky, it did work out for Mattie. He was no longer on an IBR plan. He had a fixed monthly payment with a private lender.

Mattie’s new budget as a homeowner with student loan debt

Mattie pulls in about $20,000 a month and sends $2,000 to retirement. Even after buying a million-dollar home, his budget works.

“Our total monthly mortgage/insurance/taxes is about $9,000. Tack on my loans, car payments, bills, etc., and we're running a budget of about $15,000/month in expenses. So we've got about $5,000/month left over for the miscellaneous, rainy day, travel,” Mattie shared.

Mattie thinks of it as a trade-off. Pay off your student loans faster, or pay the minimums and save for a house.

This choice depends on what you want. “I didn't want to wait another 10 years to buy a house,” Mattie said. “They're expensive enough now, and it's hard to argue against investing in that now. In 10 years' time, who knows what a house in L.A. will cost.”

Buying a home with student loan debt is a huge success

Mattie was in medical school for years. He said, “So much of medical training is out of your control; it's nice to finally be in a place where I can say, ‘I live here,’ and not, ‘This is where I'll be living for a few years, but after that, who knows?’

“Maybe the moral of this story is that such a massive amount of debt doesn't have to entirely get in the way of your dreams,” Mattie said.

Buying a home with student loan debt isn’t impossible. You can find a way to make your future plans happen even if you have serious six-figure debt.

Related: How to Survive Getting a Mortgage with Student Loans