Personal Finance for PhDs

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Jill Hoffman

Why and How These Grad Students Purchased Homes

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In this episode, Emily presents first-person stories from grad students who bought homes during grad school. The volunteers were simply asked to share their stories of home ownership, whatever they may be. You’ll hear from three volunteers throughout this episode, both on how they purchased their homes but also what’s happened since then, the benefits and the challenges. Perhaps you’ll be inspired to pursue home ownership yourself sooner rather than later. The final person included in this episode is a mortgage originator specializing in early-career PhDs, who summarizes why graduate students and anyone paid by fellowship have a difficult time securing a mortgage and his system for framing them as qualified borrowers.

Links mentioned in the Episode

grad student home ownership

Teaser

00:00 Courtney B: Owning a house is all about the long game. We hope to see large returns on the remodeling and roofing work once we sell, but for now we have to be willing to put a decent amount of cash down for deductibles, emergencies and our new monthly loan payment.

Introduction

00:18 Emily: Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others.

00:47 Emily: This is Season 15, Episode 2, and today we’re featuring first-person stories from grad students who bought homes during grad school. I simply asked the volunteers to share their stories of home ownership, whatever they may be. You’ll hear from three volunteers throughout this episode, both on how they purchased their homes but also what’s happened since then, the benefits and the challenges. Perhaps you’ll be inspired to pursue home ownership yourself sooner rather than later. The final person included in this episode is a mortgage originator specializing in early-career PhDs, who summarizes why graduate students and anyone paid by fellowship often have a difficult time securing a mortgage and his system for framing them as qualified borrowers.

01:32 Emily: By the way, there is still time to volunteer for one of the compilation episodes coming up later in the summer, specifically the episode on unions and unionization movements. If you have a story to share on that topic from the last few years, please email me at [email protected].

01:52 Emily: This next announcement is specifically for those of you who are applying to PhD programs in the US in the upcoming academic year. If you’re not in that group, please share this information with someone who is! On Friday, July 14, 2023 at 10:00 AM Pacific Time, I’m delivering a free webinar titled “Don’t Accept Admission to a PhD Program without a Sufficient Stipend.” Yes, this is something you need to understand and commit to even before you start applying to PhD programs! The three phases of this webinar are to go over why you need to be sufficiently financially supported in your PhD program and what that means to you; how you can ensure that you will be; and what actions you need to take in the fall during application season, in the spring during admissions season, and in the summer before you matriculate to make this come about. This webinar includes what I wish I had known as a prospective graduate student and the hidden financial curriculum of academia that it’s taken me over a decade to uncover. It’s so vitally important for prospective graduate students to have this information early, which is why I’m giving it away for free! Please help me spread the word! Anyone interested can register for the webinar at PFforPhDs.com/sufficientstipend/.

03:20 Emily: You can find the show notes for this episode at PFforPhDs.com/s15e2/. Without further ado, here’s our compilation episode on home ownership.

Hannah Stroud, PhD Student: College Station, TX

03:37 Hannah S: Hi, my name is Hannah Stroud. I am a final year PhD student at Texas a and m University, uh, which is located in College Station, Texas. College Station, Texas is a city with a extremely low cost of living compared to other areas of this country, uh, which is pretty much the only reason that I am here sharing my home ownership story with you today. , I guess I started my PhD in 2020 and purchased my house in March of 2021, and I had been a grad student before that and had been living in college station since 2014, so I’ve been here a while. Uh, and the low cost of living in this area in general allowed me to save a pretty substantial amount of my stipend just comparatively. So in my master’s, I think I was paying like six 50 in rent, uh, per month, uh, which meant that a decent portion of my stipend could go to fun activities or savings in general.

04:37 Hannah S: Um, how I grew my savings was through a robo-advisor managed, uh, money market account and also ETF investments. Um, and that was really helpful in kind of just turning what I had saved into enough to be able to afford a down payment. Uh, and so when I started the kind of mortgage lending process, um, in the first month of my PhD, so I am a fellowship student, which means my income is not w2 and I’m a NSF GFP fellow, which means that my intimate income is guaranteed for three years. So when I started my mortgage process, uh, that was important to my lender. What I didn’t realize is that when my mortgage rates were locked in, uh, they wanted my three years of employment to be verified from the time of closing. So when I closed six months later, I actually ran into some issues, uh, where my lender wanted some way to guarantee that I would be employed at the same salary that I’m currently making, uh, for three full years, not the two and a half that I could promise based on the time that had elapsed.

05: 43 Hannah S: Um, so I ended up needing to increase my down payment to the full 20% so that I didn’t have to qualify for private mortgage insurance anymore. But ultimately, the main aspect of my home ownership story is truly luck. Uh, I’m very fortunate to live in a very low cost of living city, and the timing of the pandemic honestly played a lot into the house prices being very low and mortgage rates being what they were. So given the current environment, I don’t know that a lot of this advice is incredibly applicable, uh, but advice that does stay the same is the, if you have non W2 income, it is important to learn from your desired lender. What aspects of your income are important to them, and if three years of proof of income will be required from the time of closing, it’s been a fun experience overall.

06:41 Hannah S: Ultimately, owning is significantly more expensive than renting because when things break, I am my own landlord and I get to fix them, and sometimes those expenses are more significant than I would like them to be. Uh, within the first kind of few months of owning my home, uh, both the washer and dryer that came out, the house broke, and so I needed to replace those. Um, and I found out that my non-mobile house had a mobile home shower installed in it, and all the plastic parts were degrading, so I needed to, uh, replace all that with copper piping and plumbers are expensive, and then any electrical issues become your problem, AC issues become your problem. So definitely get the home warranty. Uh, if you can include that in the conditions of closing and ha have it be something that the seller pays for, I would recommend that highly. And then I renewed it for a second year as well, cuz my air conditioning unit was pretty old. Um, and that ended up being the right choice for me just because the, the amount of maintenance that I required on, on that particular utility was, was significant in the second year as well. So yeah, hopefully you have as good of luck on your journey as I’ve had online and yeah, good luck going forward.

H, PhD Student: East Coast

08:00 Emily: This submission is from “H”, a PhD student who lives on the East Coast. Quote. I had a vague plan to buy my place in my second or third year of my program, but it ended up happening in a surprising and rushed way when a house came up right in my neighborhood, I had something like a month to close, which I did in August, 2020 at the beginning of the second year of my program. My income has increased since I got the house, so the monthly payment, including mortgage insurance and property tax, is now a little less than a third of my post-tax income. Initially it was closer to 40%. Having roommates in various configurations has offset between 25% and 65% of my payment at any one time. But there have also been months between roommates where I’ve been covering the whole amount. I’ve had kind of a revolving door of housemates, which has been a lovely part of having my house.

08:49 Emily: So far it’s been friends or friends of friends, almost all grad students because my roommates and I, I have so far always been gone for the summer, I rented out for more like 85% of the mortgage to people doing summer internships. Here it offsets the fact that my July and August stipend payment is lower than my 10 month academic year stipend payment. I charge less than market rent because I’m not a professional landlord and I don’t have a property manager. The house is old and not in perfect shape. When I’ve had water in the basement, a broken water heater or a broken window, people have been understanding and patience since I’m not charging a lot, I’m also able to undercharge because I have a financial safety net. My parents lent me almost all of the deposit and I won’t start paying them back until I finished my program.

09:33 Emily: Their justification was that they had paid the same amount for my siblings law school. We’ll pay them back interest free. I would’ve been able to get a place on my own, but it would’ve been smaller and I would’ve bought later. The fact that I have a financial safety net has made being a homeowner less stressful. I haven’t had to ask my parents for money for repairs so far, but I can sleep at night knowing I’d be able to borrow money from them if I urgently needed a new roof or something. I love having an old house, but because of the upkeep, I think it would be too stressful to own one without that kind of cushion. It was very much a pandemic home purchase. I remember reading all these articles in 2020 and 2021 about people who are desperate for more space when working from home and how they had overpaid for falling apart houses.

10:17 Emily: I was like, oh my God, is that me? Now with the interest rates up, the news is all about people who lucked out with 2% interest rates like me, and now their incentive is just to never sell. Sometimes I think about how my mortgage on the house is twice what I was paying for a one bedroom apartment and how I spent money on repairs and my bills are much higher than in the apartment. And I wonder what would’ve happened if I had plugged the difference into an index fund instead. But if the house has increased in value, as much as Zillow says the house wins out as an investment, obviously you have to take Zillow with a grain of salt. I think only time will tell whether this was a good financial decision or not, regardless of whether it turns out to have been a good investment.

10:55 Emily: I have so many great memories of this house. I love having space to host and being able to provide a gathering place, especially in the pandemic. When I hosted people from out of town who needed a break from being isolated alone in their apartments. I’ve loved becoming closer to my housemates. I’ve had friends stay in the house when their family were visiting from abroad and needed a place to stay. I feel happy that the house has helped people out with somewhere to stay when other solutions were expensive and logistically difficult. I’ve loved being able to host my family, especially at the holidays. A lot of this would just not be possible if I were renting. I know that buying a house is normally seen as tying you down, but for me, I think it’s given me the freedom to be mobile. Having the house has allowed me to be pretty flexible during the latter part of my program, which requires research abroad.

11:40 Emily: I offset the monthly payment by renting it out so I don’t feel like I’m obligated to stay there just because I’m paying for it. When I’ve worked abroad on a job that included housing or got grants that covered my housing while researching, I’ve been able to save a good amount of money, money by reducing my housing expenses, but I also didn’t need to formally move out and I know I can come back whenever because there’s still a spare room compared to having to deal with paying for storage and finding a place during awkward lease gaps. I’m able to be much more of a free agent than other people I know Doing dissertation research abroad, it’s just one of the many ways that being financially secure makes the experience of being a grad student dramatically less stressful. I think it’s important to recognize that my financial privilege and home ownership, along with my citizenship, have given me greater research capacities. I’m not sure what I’ll end up doing with a house after I leave the program. I might rent it out on a more formal basis or if I decide to buy elsewhere, I might sell. End quote.

Courtney Beringer, PhD Student: Corvallis, OR

12:37 Emily: This next submission is from Courtney Beringer, who was previously interviewed on this podcast in season 10, episode 18.

12:45 Courtney B: My name is Courtney and I’m a third year PhD student in civil engineering at Oregon State University in Corvallis, Oregon. Uh, I recorded a podcast with Emily shortly after I bought a house in 21, so I’ll briefly talk about that and dive into what has happened since then. I bought a house with my friend in July, 2021 in Corvallis, Oregon for about $250,000. It’s a three bedroom, two bath with an additional room that we converted into a bedroom. My co borrower and I live in the house along with our two tenants. Our mortgage is about $1,500 a month, and our rental income is, uh, $1,300 a month. Um, we were patient and took months to find a house that met our needs of being within about five miles of campus. Um, had rooms we could rent out and was under our budget of about $320,000. Our loan process was made, uh, a little complicated by having co borrowers who were not related or married.

13:50 Courtney B: And because we were both grad students with changing sources of income throughout the year, we worked with our loan officer through these hurdles and everything actually turned out great. It has now been two years as homeowners and with tenants. Uh, it has been great to have a passive side income through renters. We have enjoyed the freedom that home ownership has provided, uh, but home ownership is always unpredictable. We had a water heater leak in January this year, which caused my co-owner one of our tenants and I to live in a hotel for two months while demo and construction occurred in my room and our shared bathroom insurance covered so much. But this took a lot of time out of our studies and lives to move, make remodeling decisions and coordinate with contractors, and we just got a roof place, which added a $13,000 loan to our joint finances. Owning a house is all about the long game. We hope to see large returns on the remodeling and roofing work once we sell, but for now, we have to be willing to put a decent amount of cash down for deductibles, emergencies, and our new monthly loan payment. Uh, I hope my story gives you a sense of the joys and realities of being a homeowner.

Commercial

15:07 Emily: Emily here for a brief interlude. Would you like to learn directly from me on a personal finance topic, such as taxes, goal-setting, investing, frugality, increasing income, or student loans, each tailored specifically for graduate students and postdocs? I offer seminars and workshops on these topics and more in a variety of formats, and I’m now booking for the 2023-2024 academic year. If you would like to bring my content to your institution, would you please recommend me as a speaker or facilitator to your university, graduate school, graduate student association, or postdoc office? My seminars are usually slated as professional development or personal wellness. Ask the potential host to go to PFforPhDs.com/speaking/ or simply email me at [email protected] to start the process. I really appreciate these recommendations, which are the best way for me to start a conversation with a potential host. The paid work I do with universities and institutions enables me to keep producing this podcast and all my other free resources. Thank you in advance if you decide to issue a recommendation! Now back to our interview.

Anonymous, PhD Student: Atlanta, GA

16:26 Emily: This submission is from an anonymous contributor. When they mentioned Sam in the course of this contribution, they’re referring to Sam Hogan, a mortgage originator specializing in early career PhDs. And we’re actually gonna hear from Sam next

16:39 Emily: Quote. I purchased a home during the spring semester of my first year as a PhD in Atlanta, Georgia. I closed in April, 2023. I have been debating home ownership since 2020. I would be entering graduate school in my early thirties, so I wanted to try and build wealth so that I wouldn’t be too far behind in retirement savings or net worth. When I finished in my late thirties, my parents were not convinced that buying was the right move. So when I moved back home to Atlanta to start school, I ended up renting a beautiful old studio. But in January of spring semester, when I was informed that rent would be going up $200, I realized that I was ready to buy and that I needed it to happen fast.

17:18 Emily: I tried several different mortgage lenders, but most were rather confused by the stipend structure. I would get pre-approved based upon my credit score and lack of debt, but then would always receive several follow-up emails asking for documents from my university, asking for verification and explanations. I turned to Sam fairly early on, just asked him questions and then ended up going back to work with him after the other lenders didn’t work out. I received my pre-approval from Movement Mortgage with no follow-up questions and began house hunting. In late January, maybe eight or nine bids later, I finally landed on a home, not a condo, which had been my original call, but HOAs kept blowing my budget in late March with a closed date in early April. For a moment, there was a bout of panic because the house has an unfinished primary suite and we, Sam, my realtor and myself, didn’t know if it would pass appraisal the suite, huge bedroom, bathroom closet was essentially a bonus room or a garage.

18:11 Emily: The outside structure was finished, but there was nothing else. No drywall, no electric, nothing. Ultimately, the house passed appraisal, the seller contributed to closing and Sam even managed to get me a few hundred dollars back at closing. Looking back, this story sounds really straightforward, but it was super stressful. I also switched realtors during this process and I wish that I had done so earlier. I was also saving between $800 and a thousand dollars a month between January and April to make the down payment, and also ended up basically emptying my investment account and my Roth ira, both of which had less than $2,000 in them. I put 3% down on a home that was less than $200,000 a total steal in Atlanta. All in all, I’m glad that none of the other bids worked out. This home is spacious, has a lovely yard, is in a great location, and the unfinished primary suite will multiply the value of the home.

19:01 Emily: Of course, the house will need a lot of work, but I have a roommate and we’re both excited to get our hands dirty. My biggest piece of advice is to remember that the people who help you purchase your home need to advocate for you. Sam is a phenomenal advocate and helped me get into my first home and stopped at nothing to make the sale work. The realtor who I ended up working with was also an amazing communicator, and I wish that I had been working with him the entire time. Of course, save money and do your research, but remember that the people on your team matter. End quote.

Sam Hogan, Mortgage Originator

19:36 Sam H: Greetings. This is Sam Hogan. I help graduate students, postdocs and PhDs achieve home ownership in all 50 states. We’ve closed hundreds of loans for PhD students and postdocs. They have a unique, uh, income set and require unique mortgage approval process. Um, having done this for over four years now, we are the nation’s only lender that focuses on your success while you’re getting your degrees in higher education. My team is a longstanding advertiser and sponsor of PF for PhDs, and I am delighted to also be Emily’s little brother. So Emily reached out to me in, um, spring 2019, um, having seen a pattern of difficulties for PhD students, um, closing on home loans.

20:29 Sam H: The issue with PhD income is that the loan officer in the pre-approval stage will either pre-approve them and not do enough work themselves or deny them out the gate. Now, when an underwriter sees the PhD income after loan offer, pre, pre-approved them, them, it might not have enough information about the stability and continuance in history, and you also can be issued a denial because the underwriter doesn’t have to give you a final approval based on those offer letters. Um, after some a few months of investigating, we developed a system to properly document the income, the continuance, and the stability. Um, regardless of how soon or how late you are in your PhD stipend continuance, where I come in is demonstrating that the borrower who’s a PhD student has always been a full-time student, has always maintained a good gpa, has a track record of staying in the same field of science or research.

21:34 Sam H: We do have to over document a file sometimes to demonstrate continuance, but even if we have less than three years, we are able to help the underwriters understand the quality of individual behind this stipend income, which has helped us become successful in closing loans in this space. I will rescue PhD deals every single month. This happens often with, uh, new construction builders and their lender is completely unfamiliar. Or some other companies like, um, loan Depot for example, will just outright never accept stipend income. So those clients will read my reviews or, uh, find Emily’s blog where we give a little bit more of in depth information on how it works. Um, I’ll connect with them and they will become homeowners and protect their deposit, have a more stress-free approval working with us versus a lender. Loan officers. Not, not familiar. When we originally started helping PhD students and post-docs become homeowner, homeowners, we were more comfortable with having three years of continuance.

22:42 Sam H: So at the early years or maybe before your first semester of becoming a PhD student, that was our, um, bread and butter easy approvals with confirming that income. As we’ve done more PhDs and expanding to more states, we’ve actually seen some success helping PhDs who are in their later stipend years, years four, five, sometimes six. Um, so really we just need to make sure that we can show history and continuance. Even if you’re stipend might be ending in a few months, we can still help you. We just like to show the career field that you’re going into and some other details about your career path and your future successes. A lot of home buyers in this market are not excited about taking higher than a 5% rate, and I wanted to just encourage people that it is much more difficult to find the home than to get a mortgage on it. So we say in our industry, marry the house date the rate. Once you’ve found your home and rates improve, you’ll be able to refinance and lower your payments and lower your total interest paid. What you don’t want to do is wait for rates to get a little bit lower and then the market is flooded with buyers and you have more competition searching for that same home.

24:03 Sam H: Having to read originated loans for seven years working with the PhD community just makes my life such a breeze. Everyone is very responsive, calm, cool, and collective. They understand what I’m talking about and they’re willing to listen to me explain a little bit extra about the home buy-in process so they can have a better understanding of it. Unfortunately, there’s not a lot of standard education on how to buy a home or how to get a mortgage, but that’s okay because you have people like myself who are willing to take the time to help you understand and find success in this space. But working with the PhD community has been, um, so wonderful over the last four years. I I wouldn’t trade it for anything. Having to having clients who, um, are attentive to your requests. I, I will say well qualified, a good, good credit scores and goal oriented. If you’re committing, uh, five or six years to a new area and you don’t wanna waste five or six years worth of rent, you know, please reach out to myself. The best number to reach me is 540-478-5803. Um, and I’m looking forward to hearing from you. Happy hunting.

25:14 Emily: I host monthly. Ask me anything with Sam. So if you’d like to meet him and ask a question about mortgages or the home buying process, please register for our next one pfforphds.com/mortgage.

Outtro

25:32 Emily: Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by Dr. Lourdes Bobbio and show notes creation by Dr. Jill Hoffman.

Why and How These Graduate Students Side Hustle

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In this episode, Emily presents first-person stories from grad students who side hustle. The volunteers were asked this set of questions: What is your motivation for having a side hustle? What is your side hustle? What are its benefits and detriments? How much do you earn through your side hustle? If someone listening wants to pursue this side hustle, how would you recommend they get started? You’ll hear from eight volunteers in total throughout this episode, and perhaps be inspired to start or expand your own side hustle.

Links mentioned in the Episode

Grad student side hustles

Teaser

00:00 Anonymous #1: Some places might give you entirely free housing. Some places might be like mine where you get like a 50% off for your housing rate. I find it to be beneficial because that’s money that I get to keep for myself that I can invest in my Roth IRA that can be used for my own spending, that can use for a traveling for leisure, because we know we get started as graduate students. So it’s really important that I take breaks and have that extra money so that I can invest for my future and take those much needed breaks

Introduction

00:33 Emily: Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. This is Season 15, Episode 1, and today we’re featuring first-person stories from grad students who side hustle. The volunteers were asked this set of questions: What is your motivation for having a side hustle? What is your side hustle? What are its benefits and detriments? How much do you earn through your side hustle? If someone listening wants to pursue this side hustle, how would you recommend they get started? You’ll hear from eight volunteers in total throughout this episode, and perhaps be inspired to start or expand your own side hustle.

01:34 Emily: By the way, there is still time to volunteer for one of the compilation episodes coming up later in the summer, specifically the episode on negotiating your individual grad student stipend and the episode on unions and unionization movements. If you have a story to share on either of those topics from the last few years, please email me at [email protected].

01:59 Emily: I’m beyond excited to announce that I’m offering a brand-new live one-hour seminar titled “How to Not Hate Your Fellowship During Tax Season.” It’s all about how to understand and properly handle your fellowship stipend that will not be reported on a Form W-2, which is what I call awarded income. Awarded income typically doesn’t have income tax withheld from it, which can become an unwelcome surprise and even financial hardship if the recipient is not taught what to do starting with their first paycheck of this type. In addition to teaching about estimated tax and self-withholding, I give pointers for preparing for and navigating tax season with awarded income. This seminar is intended to be taken during orientation or shortly after by people who are switching onto awarded income for the first time, so it will be exclusively available between August and October of this year. If you are starting on awarded income in the fall and your university doesn’t withhold income tax—or you’ve dealt with that scenario in the past—would you please recommend this seminar to your fellowship coordinator, program head, or graduate school? Please cc me [email protected] so I can pick up the conversation. My goal is for every grad student receiving awarded income to be forewarned about this issue before it rears its ugly head during tax season!

03:29 Emily: You can find the show notes for this episode at PFforPhDs.com/s15e1/. Without further ado, here’s our compilation episode on side hustling.

Shan Kutagulla: Technology Incubator

03:46 Shan K: My name is Shan Kutagulla at the University of Texas at Austin. I’m getting my doctorate here. I have a masters and did my bachelor’s at USC in Southern California. I do materials research for semiconductor and energy. Energy topics.

What is your motivation for having a side hustle?

04:08 Shan K: Yeah, my motivation for side hustling, I think like everyone else is to make a little extra cash. But in addition to that, it’s trying to get some skills that I wouldn’t necessarily get in the lab. I think for me as an engineer, I think soft skills are always going to be one of those things that engineers tend to either stereotypically or realistically lack.

What is your side hustle?

04:29 Shan K: So I work for my campus’s technology incubator, so that involves a lot of interviewing people, talking to founders of companies. So that really helps develop a lot of soft skills and then also gives me exposure to the business side of things. So it’s a little kind of rounding out the skill set in addition to making making some cash, which is always, always needed in grad school.

04:54 Shan K: So it’s through the school UT is I think one of a couple of universities has like technology incubator associated with it. So if any, any graduate student or any or founder really has a good idea that they kind of want to commercialize those, take research and spin it out into into the real world. So that the issue with that is a lot of people start applying to those positions or applying to the incubator to have their company incubated and they need someone to kind of bridge that gap between the technical side of things, which is just is this technology legitimate versus the business side of things, which is will this technology survived the competitive landscape.

05:35 Shan K: So this is something through UT that I applied for because I have an interest in going into like technical due diligence in the venture capital industry upon graduation. So it kind of helped you build that skill set. But I got this through just a relentlessly applying. I actually got rejected four times in a row and I got it on my fifth try.

05:53 Shan K: So it’s just an exercise in persistence or knowing someone I don’t really know, but I but either way, it worked out and it’s a really fulfilling position, I would say. And it’s just like a one of a couple of things that I do on the side to get some extra cash.

What are its benefits and detriments?

06:11 Shan K: Yeah, I mean, drawbacks are always going to be like the time, right? Any time, especially in grad school, any time you do a side hustle, it’s time taken away from research, especially if you ask some professors, thankfully not mine.

06:23 Shan K: And then, I mean, benefits always just be like the people you meet. Networking is a huge part of grad school, I would say opens a lot of doors as I would definitely say one of the things people warned me about grad school is that it closes a lot of doors and they can’t do anything else. I don’t necessarily think that’s true. It’s open a lot more doors and I had before and it’s a lot of people I just would not have met without applying to these these side hustle positions like I get to talk to The leader, the technical director of the incubator directly on a weekly basis. I talked to the president at university every now and then a lot of people in industry, academia, I get to help define mission roadmaps. I was invited to do an article on semi analysis. None of that would have been possible without without a side hustle. And so it’s been very, very fulfilling.

07:14 Shan K: But yeah, the cons would just be the time commitment really. So if you can make your own schedule with a side hustle, that’s probably a huge benefit that I didn’t necessarily have. But those are the pros cons that that you’ve got to weigh. So maybe that’s that’s some other advice that I have. Just do something that you really enjoy. Don’t don’t take positions that would just be incredibly bored in. And don’t find any fulfillment in.

How much do you earn through your side hustle?

07:39 Shan: This one actually only pays 15 an hour. I work for a startup too, one of the start-ups that we have right now on pay is much better. It’s like 40 an hour. So yeah, but again, one of those doors that’s open that allowed me to go work at a startup, right.

If someone listening wants to pursue this side hustle, how would you recommend they get started?

07:54 Shan K: Every major city has a technology incubator Los Angeles where where I went to undergrad has Los Angeles and Los Angeles Clean Tech incubator, Austin Technology Incubator in Austin Obviously Boston has a bunch. So like if you’re in one of these major cities where they exist, just go Google who the director is of your respective verticals if you’re interested in energy, semiconductor, whatever. Google them, find their email surprisingly easy to stalk online.

08:24 Shan K: Just email them and be like, Hey, I’m a grad student, especially if you’re trying to do technical due diligence, email them and be like, Hey, I’m a grad student. This university interested in technical due diligence because a lot of times those incubators are staffed with like business people who have a lot of business experience, but they don’t really necessarily do technical due diligence, which is a very specific role that only PhDs can really fill. And then that’s why you see it a lot of like hard tech investing firms like Kleiner Perkins, it’s always staffed by PhDs on due diligence. It’s just to avoid if they’re in a situation and there’s there’s not that many people who can do that. So they’d probably be very willing to take your help and don’t be afraid to work for free for like a couple of months, but then you can kind of push on them.

Anonymous #1: Graduate Housing Community Assistant

What is your motivation for having a side hustle?

09:10 Anonymous #1: So I am a pre doctoral student at University of Rochester. I’m a second year and my motivation is really based on seeing how much my parents were able to save or their parents are immigrants. And so I’ve seen them working very hard on my life and not getting the most pay. But I also want to make sure that I’m setting myself up for financial freedom in the future so that I can, you know, as lofty as it is nowadays on a home one day as well as save my retirement. And so those are my biggest goals. I want to set myself up for a positive future financially.

What is your side hustle?

10:17 Anonymous #1: So my side hustle is working with my university’s graduate housing department. Through them, I work as community assistant, so I get to not only socialize with people that are also going to my graduate school, but I also get a very good deal on my rent. I get about half off for my rent and it really does help considering how much rent has skyrocketed in the past couple of years.

10:44 Anonymous #1: Like all across the country, especially in New York State, it’s just gone up. It used to be that you could get a studio for under 800 across the board in this area and now that is no longer the norm. You have to be outside of the city. And because I want to live as close campus as possible, I decided to go for this position with graduate housing because I knew for me and my schedule didn’t make my commute easy as possible was in my best interest.

11:17 Anonymous #1: Coming from a major city, I knew commute can be 45 minutes plus on public transit. I was not willing to do that for my Ph.D. because I need to focus on my studies. So what if I to do this? It’s and it’s very relatively easy. I’m doing an A one event per month and a meeting here and there, introducing people to the right to resources that the university has. So for the money I’m getting off of my rent, it is it’s a very sweet gig.

What are its benefits and detriments?

11:43 Anonymous #1: So the main benefit is the financial discount that I get on a rent, I get half off for my rent charges. So that’s the biggest benefit. I also get to socialize more and meet other people in my community. Moving to a new city. I did not know anyone here, so I was able to use this as a way to socialize with other people at my graduate school. I would say that if you do have the opportunity to be a graduate housing assistant, I would highly recommend it. If you’re someone that likes planning events then and interact with people, I’d highly recommend it. It’s not something that I that I find to be very tedious.

12:21 Anonymous #1: Some places might give you entirely free housing. Some places might be like mine where you get like a 50% off for your housing rate. I find to be beneficial because that’s money that I get to keep for myself that I can invest in my Roth IRA that can be used for my own spending, that can use for a traveling for leisure, because we know we get started as graduate students. So it’s really important that I take breaks and have that extra money so that I can invest for my future and take those much needed breaks. Because I’m on a training grant so I can’t like have a job or an hourly wage. So this is like, ah, this is my way of going around that. So I have to abide by the PhD rules, but also I need to live my life.

13:06 Anonymous #1: Some of the drawbacks are just the logistics of hosting an event, having people turn out thinking and brainstorming new ideas that are both interesting to busy PGD and master’s students, but also attainable for me as a as another busy Ph.D. student to test, to schedule and plan for. So those are like the biggest cons that I could think of.

13:35 Anonymous #1: I really do enjoy like event planning, and if I wasn’t interested in STEM, I might have gone down this route because making sure that I check off all my boxes and doing things in a very organized manner is something I really enjoy doing. And yeah, those are the only those are the only drawbacks. I really enjoy this position and it’s not very difficult for me. I am a social person, so meeting people, introducing them to the to the grad housing area is not something I think of as a hardship.

How much do you earn through your side hustle?

14:04 Anonymous #1: For this year, for 2022, 23, I’m getting a rent reduction of $555 every month. I have a one bedroom apartment and the rent reduction is a flat rate for all graduate housing assistance. And so I think they calculated based off of a to a two bedroom apartment. But I have a one bedroom and I get charged $944. So I’m paying less than $400 for my rent every month, which without roommates, no one that I know has that that charge at all. And I only work about 10 hours per month in total, I’d say in terms of planning, brainstorming and hosting events, the events only last 1 to 2 hours, depending on how many people are there. And so I guess the hourly rate that I calculated based off of that is $55 per hour.

If someone listening wants to pursue this side hustle, how would you recommend they get started?

15:00 Anonymous #1: So the first thing I would look into is if your university does offer graduate housing, not every university does offer on campus graduate housing. So looking into that first and then once you do find out that your university does offer it next thing I would do is look to see if they have any job openings. Usually those job openings will be posted sometimes throughout the semester, but primarily during the move in and move out periods around the summer and winter time, depending on how university work. If you’re on the quarter system or on like a semester system that could also be dependent on when they post those job openings. But because grad students will graduate in December is often going to be opportunities for people to get these positions. And then once you do find out when they tend to post positions, email the contact person so that one they know you’re aware and two that you’re actually very interested in the position and gives a bit more of a of a of an idea. I think when they’re looking at your application, they’ll recognize that, oh, this person emailed me several, several weeks ago saying that they were interested and they scheduled an informational interview with me to go over the, the requirement for the position that’ll sort of put you in their mind, which is something that I did to me to sort of better ensure that I got the position because I very much wanted it.

16:20 Anonymous #1: And then going through the regular interview process. And if you do have any skills in terms of event planning or a previous housing related occupation or internship or or what have you. That will also better you for being chosen for the position.

Ariana: Pet Sitting

16:20 Ariana: My name is Ariana. I’m a fifth year Ph.D. candidate, the University of Virginia, and I live in Charlottesville, Virginia.

What is your motivation for having a side hustle?

16:58 Ariana: So my motivation for side hustling is the obvious one. Money. I’m I was really in need of some supplemental income especially as I my program fifth year the time a lot of applications of preparing for a big move coming up so it was that and also trying to think about what I could be doing as a side hustle for the longer term.

What is your side hustle?

17:21 Ariana: My side hustle is pet sitting. Primarily dogs and cats, but I am open to a range of other animals.

What are its benefits and detriments?

17:28 Ariana: So there are so many benefits, but also some considerations of pet sitting. First is that I love animals and as a person who has a cat not a dog, it’s nice to be around dog energy and just get to meet very sweet animals around my community and honestly see places I haven’t seen before. So I’m walking them around and all that. It’s also a pretty flexible gig. I mean, usually things settle around weekends and on breaks, but as a graduate student, especially in my later years, it’s been nice to be like, okay, I’ll go do a midday walk or something like that. It’s also a job that again, it’s flexible in the nature that if I don’t want to do it for a month, I could not do it and that would be okay. I’m my own boss in that sense, and there are apps that help you to find people and vet them and give you all the support you need.

18:20 Ariana: Drawbacks are definitely that like I’ve been dissertating and even with the flexibility of like it’s been hard sometimes and it can definitely become an unintentional or intentional avoidance strategy to be with pets. It’s also time away from my apartment, my home so a lot of the chores and things that need to get done often have to be delayed because I’m spending weekends with other people’s pets and I kind of like that too. So those are some of the consider.

How much do you earn through your side hustle?

18:54 Ariana: My earnings can really range depending on how committed I am to getting things done. I think it would be possible to get about 25, like if I would just walk, for example, 25 to $50 weekly, it’s only really do 200 a month, but house sitting or pet sitting where I’m staying with them, that can look more like 500 or so dollars a month if I’m doing every single weekend. And that’s another consideration. It’s not the most I’m not flowing in money rather like it is a lot of time. But those like additional benefits, getting to walk outside, having to play with the pets kind of adds to the compensation for me.

If someone listening wants to pursue this side hustle, how would you recommend they get started?

19:41 Ariana: If you want to be a pet sitter, it’s actually easier than I knew. So I was recommended by my cousin who is a lab technician. But there are apps like Wag and Rover which have a really streamlined system for getting you involved. I mean, I’d recommend, of course, having some comfort with pets, but you can get reviews or sort of testimonials from family members and friends and other folks who you may be pet for on the regular. I would say that’s where I started. I was doing more just ad hoc pet sitting for other grad school friends and then really expanded into this, I would say to just be thoughtful about what you’re comfortable with. You don’t have to sit at people’s houses, but I feel pretty comfortable doing that because of all these safety measures are in place and people are really folks who want someone to care for their dog, kind of wants you to feel comfortable as well. So I would say those are the quickest ways. So I’m sure they’re, you know, you can advertise your services on a neighborhood group or something like that and get some direct referrals.

20:48 Ariana: I was going to say that’s another drawback of the piece. So doing the apps I would say is a great starting step because you get screened, you build up your reputation, but they can take about, you know, if I charge $17 for a walk, I’ll probably get 13 of those dollars. So I can’t do the percentages really quickly. I’m not a math PhD, but it’s notable. And so when you do that over time, something like that and it’s not nothing. So but what I found, which I appreciated is after like one successful stay, a lot of folks are okay with going off the app, and just paying me directly. And likewise, like I trust them and I’m comfortable just reaching out. I have all the information that I need. So while I think it’s an upfront cost, it doesn’t have to be a continuous cost. Just you’re trying to get a lot of clients.

21:43 Ariana: I wish I’d started earlier, with the side hustle, I mean, it’s really hard when your schedule’s more packed with things, but I think it’s the type of side hustle that is really relationship and community based and can be a good way to get integrated into a place that as a grad student I know I was like in my room or studying in the building. So that was really nice. And I would say that it’s not it’s actually kind of a nice little mini retreat, You know, I can be in someone else’s home or space with WiFi working on things, and that’s been kind of nice too.

H: College Consulting

22:29 Emily: This submission is from H a fifth year humanities PhD candidate on the east coast whose stipend is $40,000 per year.

What is your motivation for having a side hustle?

22:37 Emily: Quote, my motivation for side hustling is two-pronged. Part of it is to have the extra income. This allows me to save more. I’ve maxed out my Roth IRA every year since I got the job and I get a 7% match into a 401k with a 3% safe harbor. So I effectively save 17% of my pre-tax side hustle income. This is great because my stipend income isn’t eligible for a 401k and wasn’t eligible for Roth IRA contributions for the first couple of years of my degree before they changed the rules to make stipend income eligible. The savings are reassuring for me because I hate the idea of graduating from my program in my early thirties. Seriously behind on retirement savings, especially as job prospects for humanities, PhDs are pretty precarious and usually poorly paid.

23:23 Emily: I find it psychologically reassuring to have savings for when I finish my program, but it’s not just the savings. The extra income also allows me to have a nicer lifestyle than I would if I were living entirely off of the stipend. I don’t feel like I’m missing out because of my income. I’m admittedly a person who likes certain luxuries, like getting my nails done or having a wine subscription or going on vacation a few times a year that are out of step with a typical PhD lifestyle and need some more cash to fund. I like that I don’t have to bow out to plans with my friends who have higher paid jobs just because I’m in grad school, I can go on trips, go to weddings, go to a nice dinner, et cetera. I know plenty of grad students who enjoy living simply and don’t want missing out on those things, but they’re important to me.

24:08 Emily: The second reason is job security. I’m very conscious of how few decent academic jobs are out there. I have witnessed very talented scholars totally flounder on the job market and then panic when they have to rapidly pivot into a new plan with little or no work experience and a lack of obviously marketable skills. Understandably, this leads to a lot of anxiety and depression. I find it petrifying. I don’t want to be in that situation. I hang onto my job so that if I finish my PhD without anything else lined up, at least I have this. I like the job and would be fine to keep doing it while I figured out some other move post-degree. I think having the jobs gives me some security, both materially and existentially along with my main side job. I also have done other fixed term gigs to develop a more diverse skillset.

24:57 Emily: My goal is to make sure that I have recent work experience on my CV after I graduate and talking points for informational interviews. Besides just my research, I don’t wanna be in the position. I see many people in where it’s like they are graduating off a cliff and they have no idea what comes next or how to prepare.

What is your side hustle?

25:15 Emily: For my main side hustle I work in private college consulting. My company provides advice to students applying to university programs, working with clients around the world with a special focus on US colleges. My role involves mentoring students in their final year of high school as they work on their college essays. It’s almost all remote though. We do team retreats once or twice a year.

What are its benefits and detriments?

25:36 Emily: There are a lot of benefits. It involves two of the main areas. I enjoy working in education and writing. I love the colleagues I work with and I love almost all of my students. It’s a pleasure to get to know them and I learn new things about the world from them. I feel like they grow as people throughout the process of us working together, even when they don’t end up at their dream school. That makes it rewarding to me. It’s a great counterpoint to my independent research work because it’s people focused and the impact feels immediate. Unlike an abstract and long-term dissertation project, when I’m deep down a research rabbit hole on my own in the library, getting on a zoom to talk to a colleague or student is a breath of fresh air. Sometimes I feel that having a second job makes grad students more efficient. Anecdotally, I find that up to a point, the ones who have less time seem to manage it better. The drawback is that it’s highly seasonal work and I’m often having to be on email for several hours a day September through December.

26:34 Emily: It’s tough when it overlaps with the holidays and the fall semester crunch time. This was especially true in my second and third years when I was grading finals and writing my own papers and attending conferences simultaneously alongside my job. The nature of the work means that I just have to respond if students are down to the wire on their deadlines and my academic work has suffered in those moments, but not badly enough that my advisors said anything. I’m still on track to complete the degree in time and have been successful in my program. It’s a bit easier now that I’m ABD and more in charge of my own schedule. I have the freedom to organize my time around the busy season. The benefits to me are money and setting myself up for future careers Outside academia, the drawback is the stress and risk of burnout that can come with being over committed and the risk that spreading yourself too thin means not doing as good a job as you could have on your main gig. Personally, I’m okay with that. My approach works for me and my priorities, but plenty of grad students I know would hate it.

How much do you earn through your side hustle?

27:34 Emily: I earn $45,000 annually on salary for the college consultant gig for which I am technically part-time. This is after several raise negotiations. I’ve been at the company six years now and started on 30 k. I get a Christmas bonus of $1,000, also paid for my laptop in the busiest season. September to December. I work 20 hours a week, and in low season it can be four to 10 hours a week to get started in college consulting.

If someone listening wants to pursue this side hustle, how would you recommend they get started?

28:00 Emily: To get started in college consulting I cold emailed a bunch of companies and ended up going with this one, but had offers from others. I’ve heard of someone getting into the same type of role after being reached out to on LinkedIn. My university list serves, sometimes sends out listings for similar roles. I would recommend trying to connect personally with people rather than applying into a black hole, but then applying to a few places. I imagine that experience working with students as a TA or in a writing center would be really helpful, but if you have no relevant experience, try doing it on a volunteer basis first. I know if people getting these jobs after doing pro bono work, finally, it’s a fundamentally credentialist industry. So if you have a degree or two or three from a very competitive school, that will help, end quote

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28:44 Emily: Emily here for a brief interlude. Would you like to learn directly from me on a personal finance topic, such as taxes, goal-setting, investing, frugality, increasing income, or student loans, each tailored specifically for graduate students and postdocs? I offer seminars and workshops on these topics and more in a variety of formats, and I’m now booking for the 2023-2024 academic year. If you would like to bring my content to your institution, would you please recommend me as a speaker or facilitator to your university, graduate school, graduate student association, or postdoc office? My seminars are usually slated as professional development or personal wellness. Ask the potential host to go to PFforPhDs.com/speaking/ or simply email me at [email protected] to start the process. I really appreciate these recommendations, which are the best way for me to start a conversation with a potential host. The paid work I do with universities and institutions enables me to keep producing this podcast and all my other free resources. Thank you in advance if you decide to issue a recommendation! Now back to our interview.

Courtney: Landlord

30:04 Courtney: My name is Courtney and I am a third year Ph.D. student in civil engineering at Oregon State University in Corvallis, Oregon.

What is your side hustle?

30:12 Courtney: My side hustle is renting out rooms in my house.

What is your motivation for having a side hustle?

30:16 Courtney: I do this to supplement my research assistant income and pay my mortgage.

What are its benefits and detriments?

03:21 Courtney: It’s a study dependable form of income and helps reducing my house, my housing costs dramatically. Besides occasional banking and paper work is a very passive source of income taking care of a house. It’s hard work, but when you have tenants, things have to be done in a timely and high quality manner with their living conditions in mind. For example, we recently replaced the roof and had to include them in the discussions of what the condition of the house would be during the construction.

How much do you earn through your side hustle?

30:52 Courtney: Since I co-own the house, I also split the rental income. So I make $650 a month and I already pay quarterly estimated taxes for my fellowship anyway, so I calculate this income into that as well. But I also use tax deductions for housing costs by following form 1040 schedule E, which actually lays it out really nicely.

If someone listening wants to pursue this side hustle, how would you recommend they get started?

31:17 Courtney: This side hustle requires the purchase of a property which is quite an undertaking. It requires some dedication to understanding rental laws in your state and city. But after that initial setup, having yearly tenants who stick around makes the side hustle low energy input for high rewards. I started this two years ago and I plan to continue the side hustle until I graduate in a few years. At this point I probably spend about 3 hours a month on managing tenants and their needs.

31:48 Courtney: If it feels impossible to buy a house look into co-borrowing or a first time homebuyer financial help in your state or county, and check out Emily’s other podcast on grad students buying houses.

Anonymous #2: Research Assistant

32:07 Emily: This next submission is from an anonymous grad student who is about to start intern year and lives in Texas.

What is your motivation for having a side hustle?

32:14 Anonymous #2: What is my motivation? Having a side hustle. I would say as a graduate student, I just needed money. And while I was grateful for the system that I received from grad school, it just wasn’t enough to be able to travel, to visit family, just to have a little extra cushion. And then now that I’m moving out of state for internship without my side hustle, I would not have been able to afford it at all.

What is your side hustle?

32:40 Anonymous #2: I am a research assistant at a hospital.

What are its benefits and detriments?

32:43 Anonymous #2: Some of the drawbacks of position, I would say, is for the spring semester balancing my schedule. There was a lot to do when it came to doing my internship interviews, wrapping up my final semester, in the state that I live in and just trying to balance my schedule, I would say is one of the drawbacks. Benefits of that are just having money, having a cushion. As I mentioned before, I am moving. I’m single. I’m moving from the states I live in to another state and I feel very fortunate that I’m not worried about affording my move. I am not worried about like the cost of a U-Haul or having to borrow money from relatives or like take out a personal loan. I am solely financing my move from the income I receive from my side job.

33:38 Anonymous #2: I would say in terms of how this will like this position will impact or like play a role in my future career. I’m the type of hospital that I work at is type of setting I would like to work in in the future and this population as well. Also, I can probably request letters of recommendation and from my bosses, and I think it gives me a lot of insight into the type of field that I’ll be working in the near term care.

How much do you earn through your side hustle?

34:12 Anonymous #2: So I’ve been at this job since, I guess like orientation was in December and I make about 25. I make $25.83 an hour and 20 hours a week. And so I would say after tax, before taxes, I take home about 2000 a month.

If someone listening wants to pursue this side hustle, how would you recommend they get started?

34:34 Anonymous #2: If someone’s looking to pursue this type of position or just a side hustle, indeed this a great source when it comes to looking for research assistant jobs that are flexible that are part time. I also recommend especially if you’re interested in research or just want to get some clinical, reaching out to PIs at different hospitals that might. They don’t always broadcast like that they’re hiring. And so reaching out to them and inquire like, Hey, you know, I’m so-and-so, I’m looking for a job, or I’m interested in any position you might have available. And that’s even better. That’s kind of how it worked out for me, where someone put an email out there for, like you said, Assistant Do you know of anyone? I responded back and I know me and I’m looking for a job.

35:28 Anonymous #2: I would say finding that balance in your schedule is really important. I and also having some flexibility. So during the semester I was working like in the middle of the week and now the semester has ended I requested a shift in the schedule so I could work the first Monday through Wednesday, which is helpful for me so that I can get other things done before the end of the week. But also I think just there was some delay. I work for the government and so there’s some delay when it came to my application process and not on my end, but just governments and and I, I very much communicated with my prospective supervisor and let them know like, hey, I filled all the paperwork. I’m just waiting to hear back. It took six months to actually get hired to start the orientation, to start the onboarding process, even though I was hired back in the summer of 2022. But I think for me, patience was a virtue and really just showing up and being present at work. And I’m confident that in the near future when I’m applying for postdoc positions, if I request a letter of recommendation from any of my supervisors here, they will happily write it.

36:43 Anonymous #2: Now that I am no longer contracted at my university as a grad student. The month of June is my last month. I’ll be working here. I’m just working here and I am so fortunate. Like I know I’m not like another. You know, I have peers that are either married or they’re receiving like, Oh, they have a partner or they’re receiving support from their family and like, I don’t know. So financially like, I take care of myself. So and I know for a fact that I would not be able to move 1500 miles from where I am now. Had it not been for this job, because the money I received, the the grad student through my stipend was great. It covered all of my bills and like maybe an extra $100 or two. But over the course of six months it would not have been enough to pay for UHaul to pay for moving boxes and also to and in my case, you know, oftentimes we apply for housing. They want someone who on paper earns three times the rent. And so if I did not have this job, I would have likely had to reach out to a relative to cosign my lease, which is fine. But, you know, it’s a hassle having to ask someone to do that again and again, especially if they’ve been like, So supposedly they’ve done it. You know, for me throughout grad school, it’s nice to kind of feel a little more independent.

DreVon Dobson: Professional Musician

38:08 Emily: This submission is from DreVon Dobson. Quote. I’ve recently graduated with a PhD in pathology from UNC Chapel Hill, studying the genetic regulation of blood coagulation factors. I’m about to start a postdoc position soon in environmental toxicology, studying the effects of ozone exposure on health and disease outcomes.

What is your motivation for having a side hustle?

38:29 Emily: Having a side hustle has been a great way to give my mind a break from my lab work, as well as supplement my income as a graduate student, which was livable but not great.

What is your side hustle?

38:39 Emily: My side hustle is performing as a professional musician. I minored in jazz studies on the saxophone and undergrad and I’ve kept my passion for music alive as a side hustle. I play at churches, country clubs, weddings, et cetera, with a few different bands usually on the weekends.

What are its benefits and detriments?

38:56 Emily: The benefits of this are that it provides a constructive and profitable outlet for my passion and it’s fun. The detriments are that there’s a considerable amount of preparation involved in order to play the gigs well, practicing learning, music, purchasing and maintaining equipment, et cetera. Also, the gigs can consume a good amount of my weekend depending on how far and how long they are detracting from my ability to rest for the upcoming work week. But you can also say yes or no to opportunities to fill your needs and schedule.

How much do you earn through your side hustle?

39:26 Emily: I have worked my way up to earning about $20,000 a year from my side hustle. This is definitely on the higher end for a part-time musician and I had to work my way up to that over the years. This is generated by about two to three gigs a weekend averaging out at around $200 a gig.

If someone listening wants to pursue this side hustle, how would you recommend they get started?

39:46 Emily: Pursuing this side hustle is totally obtainable. If you are musically inclined, you can start by visiting local jam sessions in your area to figure out who might be in need of your musical talents. There are also online avenues to pursue in local Facebook groups and ads and websites like Reverb Nation Beyond Music. If you have a passion for the arts, there’s most likely a way to monetize it. You can sell art, join a dance troop, audition for a theater production, et cetera. I have found artistic passions and scientific studies to be a great combination of financial gain and life balance. I would encourage anyone who is interested to give it a shot. You never know.

Dan Gorman: Chaperone, Podcast Recording, Writing Lesson Plans

40:31 Dan G: My name is Dan Gorman. I am finishing my PhD in US History this summer at the University of Rochester, and I also live in Rochester, New York.

What is your motivation for having a side hustle?

40:41 Dan G: My motivation for side hustling is solvency. Uh, while we had pretty good PhD stipends at my university, it’s still, you’re living in sort of comfortable poverty as a PhD student, I find, and for some people it’s less comfortable. I stay comfortable in my case because I don’t have any dependents. Um, it’s just me in my household, but there’s always wanting to have more than just a little bit of extra money in the bank account, wanting to have something of a cushion. Um, especially as we got towards covid, I was glad to, I had done some side hustling and saved up some extra money. Sometimes the, when I say solvency, I mean, yes, paying the bills also, it’s good once in a while to actually do something fun with your assets, but also I, I think mainly my main reason for wanting to save up money was in case of an emergency. You know, if somebody got sick and I needed to go visit them or, um, you know, during covid when we just didn’t know what else was gonna happen next.

What is your side hustle? How much do you earn through your side hustle?

41:33 Dan G: My side hustle isn’t really one thing. What I recommend to other people is sign up for as many internal newsletters at your university as possible and re and actually read them. Um, I found a number of paying side opportunities within the university just by being on the newsletter feeds for different offices. Um, for example, okay, so the Office of Undergraduate Research a couple years ago they were sending a delegation of students to the National Conference on undergraduate research. And an opportunity came up that they would wanna send a couple staff or grad students as chaperones. Um, it was a pretty easy job. I had to go to Oklahoma City for four days, but they covered all my expenses and there was a small honorarium. It wasn’t a ton of extra money, but it was there and it was an experience that I could say, Hey, this counts as teaching and advising and mentorship.

42:22 Dan G: Another example is that I had joined a professional group for graduate students through our music conservatory, but they’d opened it up to graduate students in other divisions. It was called working PhDs. So they were doing professional readings and interviewing people about how they transitioned into alternative academic jobs. And as part of that, they launched a podcast called Working PhDs. And so by recording interviews for that, I was paid I think $75 per episode and I did three episodes. So then that was, it was over $200 extra. Um, so we’re, I’m not talking about huge amounts of money here, but finding bite-sized projects like these internally, um, if you do enough of them, they do start to add up to some extra cash.

43:04 Dan G: And again, $200 may not sound like a lot, but that could cover, you know, depending where you live, that could be internet, your insurance bill and something else for the month. So it’s not, it’s not nothing. Um, looking beyond the university, I think sometimes it comes down to professional networks and signing up. So again, it’s, I don’t have a very original method, but it’s signing up for the listservs for your professional organizations. Um, an opportunity came up a couple of years ago actually during the pandemic that, during that first pandemic year where some friends of mine were working on a digital library project, um, at Northern Illinois University, which is, you know, 800 miles away from me. But they said there they needed people to write sort of lesson plans for their, for their website. It was pairing archival old books that were scanned with how you could teach it in the classroom. And then you, we would present it digitally and that came with a $600 honorarium.

What are its benefits and detriments? If someone listening wants to pursue this side hustle, how would you recommend they get started?

44:01 Dan G: Um, and again, I don’t have a magic method for finding more of these except, you know, in my case, in my field, in the humanities, get on h net, humanities net, um, sign up for the main feeds which post every day, 10 to 20 calls for papers, podcasters. Sometimes you’ll see independent editing projects and, you know, it can be a little tedious cuz then, you know, you’re, you’re deliberately spamming your inbox both from internal sources and then from external professional organizations. But there are opportunities out there. It’s not a lot of money. Again, these are small, usually project based. The $600 for the, uh, the lesson plan was that’s at the high end of what I’ve gotten, but smaller bite-sized projects that you can fit in without massively impeding your own studies. Or if you have a more prominent work study job that you know you’re doing 10 to 20 hours a week. Um, I think writing that lesson plan and presenting it, I think it took maybe six hours total over the course of a couple weeks. Um, because the book was a dime novel. It was quite thin. Um, so your mileage may vary.

45:07 Dan G: Other challenges, I think also, again, that oftentimes these bite-sized academic projects, whether they’re at your school or somewhere else, they tend not to pay a lot. Um, you know, we’re talking one to $200 US users really. But the flip side is that if it’s a bite-sized project like that, you can do it quickly and it doesn’t really impede on your main work responsibilities at your university. And that was, that was the big thing for me. So wanting to find ways I could use my skillset, um, make some extra money, but also where it wouldn’t become such a massive time sink that people at the university, my supervisors would be saying, Hey, you’re not focused on your main work. Ultimately, I would say that the kinds of projects I’ve described are not ways to make a lot of money, although there are exceptions. Like if you become a writing tutor, you will make a good hourly rate doing that. However, they can give you unique experiences and give you some more in business parlance transferable skills and deliverable outcomes that you can say you have produced when you’re going on the job market.

Outtro

46:14 Emily: Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by Dr. Lourdes Bobbio and show notes creation by Dr. Jill Hoffman.

PhD Home Buying Updates for 2022

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In this episode, Emily interviews Sam Hogan, a mortgage loan officer with Movement Mortgage who specializes in graduate students and PhDs. Sam lists numerous housing markets where graduate students and postdocs are able to buy a home on a single income or two incomes and explains why the rising mortgage interest rates should not be a deterrent to buying. Sam also illustrates why qualifying for a mortgage with fellowship income has historically been difficult for graduate students and postdocs, but how he and his team have found a way to reliably get them approved. They wrap up the interview with explaining how Sam’s recent shift to working for Movement Mortgage is going to smooth the path to approval even further.

Links Mentioned in this Episode

S13E1 Image for PhD Home Buying Updates for 2022

Teaser

00:00 Sam: This is advantageous to the PhD community because there are other things that are so stressful about the home purchase. You know, putting a $20,000 deposit down can add a little, you know, you might lose half an hour of sleep every night. I don’t want anybody losing sleep because they’re well qualified over income like letters. It’s totally ridiculous.

Introduction

00:28 Emily: Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. This is Season 13, Episode 1, and today my guest is Sam Hogan, a mortgage loan officer with Movement Mortgage who specializes in graduate students and PhDs. Sam lists numerous housing markets where graduate students and postdocs are able to buy a home on a single income or two incomes and explains why the rising mortgage interest rates should not be a deterrent to buying. Sam also illustrates why qualifying for a mortgage with fellowship income has historically been difficult for graduate students and postdocs, but how he and his team have found a way to reliably get them approved. We wrap up the interview with explaining how Sam’s recent shift to working for Movement Mortgage is going to smooth the path to approval even further.

01:46 Emily: Since we jump right into the discussion of mortgages in the interview, I want to take a moment here to prepare you for what’s to come! Sam has been on the podcast several times before if you’d like to catch up on our previous conversations. If you plan to listen to them all, please do so from oldest to newest. You can hear him on Season 2 Episode 5, Season 5 Episode 17, and Season 8 Episode 4. We have also held several live Q&A calls in the past in which Sam takes questions from grad student and PhD first-time homebuyers, and I’ve published a few clips from those calls on the Personal Finance for PhDs YouTube channel. We don’t have our next live Q&A scheduled yet, so if you’d like to be kept in the loop on that, please join my mailing list through PFforPhDs.com/subscribe/. Links to everything I just mentioned will be in the show notes. You’re going to hear me being pretty pro-homebuying during this interview because I get so enthused about it when I talk with Sam and reflect on my own rental and home ownership history. But I want to acknowledge up front that of course homebuying is not financially feasible for most graduate students and even if feasible is not necessarily the best financial or lifestyle decision. In my book, renting is a perfectly valid choice. Don’t feel pressured to buy by this interview. It’s more about encouraging graduate students and PhDs who are interested in buying that it may very well be possible for them and showing them how to do it. You can find the show notes for this episode at PFforPhDs.com/s13e1/. Without further ado, here’s my interview with Sam Hogan.

Will You Please Introduce Yourself Further?

03:35 Emily: We have an extra special episode of the Personal Finance for PhDs Podcast today because my guest is my brother, Sam Hogan, who is a mortgage loan officer with Movement Mortgage. And for the past several years, he has been specializing in writing mortgages for graduate students and postdocs and PhDs. And I’m just so delighted to have Sam on! By the way, he is an advertiser with Personal Finance for PhDs, and he’s going to give us some updates on what’s going on in 2022 and recent developments in the mortgage industry that’s relevant for our audience. So, Sam, thank you so much for joining me! And will you please introduce yourself a little further?

04:12 Sam: Thank you for having me. It’s Sam Hogan, I’m newly with an old employer, Movement Mortgage. And my NMLS number is 1 4 9 1 7 8 6.

04:23 Emily: And let’s get your contact information upfront in case anyone knows already that they want to get a quote from you.

04:29 Sam: Yes. So, my best phone number is (540) 478-5803. And the new email address for me is Sam dot Hogan at movement.com.

Homebuying Markets for Grad Students

04:41 Emily: As probably everyone listening knows, in 2022 we’ve seen a lot of rate hikes from the fed, which has trickled down into the mortgage industry. And so, I know that graduate students and PhDs are really concerned right now about still being able to afford to buy with these recent rate increases. So, can you tell us some examples of places or markets where you’re still seeing PhDs and graduate students able to purchase homes?

05:07 Sam: Yeah, absolutely. Some of our steady markets, I would say nationwide, are just pockets of the country where you can still find single-family homes or townhomes under $400,000. Whether it’s a PhD or postdoc buying on their own or with a partner. We see a lot of activity in North Carolina, and that’s within the Research Triangle and also outside of that area. I’ve had a couple of deals done in Winston-Salem for Wake Forest students. But outside of Chicago, Northwestern, those areas are good as well, including, you know, Philly, Providence, Rhode Island, for people who are going to school just across the bridge at Harvard or MIT. And also Austin, Texas, and outside of those city limits has been steady, no matter what the rate is. And I say that because with these lower-priced homes that are a little more affordable for PhDs, the interest rate, even when it goes up, it doesn’t make a huge, huge difference in your monthly payment.

06:14 Sam: Now, if someone was getting a high balance loan at seven, $800,000, when the rate goes up just a little bit, it makes over a hundred dollars difference monthly. Our first barrier and hurdle with the PhDs is, and will always be the monthly income. <Laugh> Not just including it, but finding a property that fits within that budget. You know, people who are debt-free and have a little bit of money to put down, still, it’s the monthly income that we say, Hey, 10% down is going to have to get the job done because the income is very tight.

06:49 Emily: Yes. Can you give us some examples there? Because I mean, you just threw out $400,000, which like is sort of breathtaking for me. And I assume that’s with two incomes, maybe people could afford that. Let’s talk about one income. Let’s talk about a PhD stipend. Maybe it’s $30,000 per year or something similar to that. If you had a person, a single person buying on their own with that kind of income of good credit score, no outstanding debt, I mean, we’re talking ideal candidate here. How much would they be able to qualify for with current interest rates? We’re recording this in August, 2022.

07:27 Sam: Most recent live data is a loan closing tomorrow and she purchased at $185,000 outside of Chicago with 10% down.

07:39 Emily: And what was her income?

07:42 Sam: She was a second-year student, I believe it was around $34,000 a year.

Keep an Open Mind to Possibilities

07:48 Emily: Okay. Okay. So, ballpark numbers. That’s great to hear. Obviously, like you said earlier, it’s going to be a stretch for a graduate student, especially a single one as I was just mentioning, to buy a home on a stipend. But there are some markets around the U.S. where this is still possible, and even more so if you do have a partner to buy with, or if your income is, you know, better than the average graduate student stipend. Basically, my message always when I bring you on is like, audience members do not completely dismiss out of hand the possibility of you owning a home during graduate school or your postdoc. At least look into it a little bit. Yeah. There are a lot of places where it’s not going to be possible, but you may be surprised that it is possible in some places.

08:27 Sam: Yeah. I mean, I have a client who is buying in LA right now, which people would immediately write off as way too expensive. She does have a second job that she has history of working. So, she’s able to afford a little bit more than just her stipend. I believe she’s going to UCLA right now. So, she’s still buying in the upper threes. You know, she does have 20% down, right? Which helps bring down that loan amount, but I’m only qualifying her off of the stipend and a small seasonal job. So, yes, she is looking at a studio with one bathroom, but that is what she knows she’s going to be comfortable with monthly. And I think just the biggest thing about owning in grad school is completely flipping your net worth, right? You could have a hundred thousand dollars of student loans going into grad school, but turn that into $200,000 net worth and then also rental property when you move out of the area.

09:31 Sam: So, even if it’s a studio, it’s still a wonderful stepping stone. You know, you get that first purchase out of the way and you realize, okay, you know, closing costs are basically the only thing I spent my money on that doesn’t go into equity on my home, right? And you know, learning these small steps of home ownership, like filing an insurance claim if you have to, or like, why do I have plumbing issues every month, right? Whatever, maybe my washer broke, what do washing machines cost, right? All these things are just, you’re going to learn them eventually, and the benefits of a five or six-year plan of you owning while, you know, progressing yourself personally is just unmatched, I would say.

House Hacking

10:16 Emily: Sam, you put that so eloquently, and long-time listeners are going to know I’ve said many times that one of my big financial regrets from graduate school when I went to Duke in the Triangle was not buying my first home when I had the financial means to, because I had a lot of limiting beliefs going on at that time about what home ownership was for graduate students. So, I won’t belabor that point right now, but if you want to go back and listen to some previous episodes we’ve had on home ownership, you can check out season eight, episode 18, where I talk a lot about my own limiting beliefs around home ownership during graduate school. And we’ve done multiple episodes with Sam as a guest in the past, but I would especially point you to season eight, episode four, which is when we talked about, the title episode is Turn Your Largest Liability into Your Largest Asset with House Hacking.

11:03 Emily: So, we talk a lot about what house hacking is, which is basically just when you buy a home that’s larger than what you need and you rent out one or more of the bedrooms to tenants slash roommates. And it can be a really powerful strategy for graduate students who are able to pull it off. So, especially go listen to that one because we, again, talk about all these like options for exiting a home ownership situation, if you are leaving the city, when you finish your graduate program or when you finish your postdoc. You could sell, but if it’s not the right time to sell, you could hold onto it, and it could become a rental, like Sam was just saying. Or there are other options as well. So, anyway, great episodes to listen to. Sam, is there anything that you want to add about like where graduate students in PhDs are buying and able to buy right now?

11:42 Sam: I can say reflecting on my last year’s worth of production, there were 17 states which I originated for PhDs last year, or I guess in a calendar year. I definitely see a lot of business in the Northeast. So, people who are going to any New Jersey, Massachusetts, Rhode Island, Connecticut area type of university. I actually had a very successful purchase for a student who goes to Yukon. His name was Joshua DuPont, and he implemented a wonderful house hacking purchase. Couple quick data points on it. He purchased at about $130,000. It was a two-unit, separate levels. The rental comp on the second unit was about $800 a month, which exceeded his mortgage by about 50 bucks. So, he was covering his entire mortgage by having that rental unit above his. I’m not sure which one he lived in, but it was a perfect example of someone who was making the commitment for five years, and then, I mean, his opportunity now financially is completely different than it would be if he was the person renting that unit from someone else, right?

13:05 Emily: I love to hear that. I’m so happy for him!

13:07 Sam: Yeah. And that’s actually the third PhD that bought a multi-unit.

Rates are a Moving Target

13:11 Emily: Wow! That’s so exciting! Okay. So far what we’ve heard is don’t discount home ownership. It’s possible in a lot of different markets. Secondly, rates are going up, but it won’t affect these on the lower end of home prices purchases as much as it will affect larger-scale home prices. So, still go ahead, get a quote from Sam, get a quote from somebody else, see what you can qualify for just based on your income.

13:38 Sam: I wanted to touch on rates one more time. You don’t want to be 100% focused on what rate you’re receiving. Because everyone at that time of the year is going to be in a similar boat as you. Rates have gone up, people will qualify for less at a higher rate, right? But the main goal is to find the right house within your budget. So, whether that is off of a 5% rate or a 6% rate, it still has to be a comfortable payment for you. Okay. So, while you’re looking for your home, rate is basically a moving target, right? What a lot of lenders implement is a float-down policy. So, my client in Chicago that’s closing tomorrow, when I locked her rate, she was up at 5.625. You know, condos have a little bit higher rates than single-family homes, but we’re able to lock at day one when we decided it’s a good time to lock.

14:41 Sam: And then also look at a second day in the future that’s before closing to see if the rate is better that day. In her scenario, the rates had improved for a few weeks. And so, we ended up floating down her 5.625 down to 5.1 at no cost to her. So really, when you’re locking your rate in, you’re just preventing the rate from getting worse, right? You’re locking in it at, let’s just say 5%, for example. Your rate’s never going to be over 5%. Should the market improve significantly before you close, ask your lender about a float-down option. They usually have one. I would say if they’re a competitive lender that does a lot of business, they have a float down policy. Okay. So, mainly, the point I’m trying to get across is, no matter what the rate is, even if it’s at 10%, don’t be discouraged from buying, because you still have the equity you’re going to gain in the home, the amount you’re going to pay your loan down, your tax write-offs, and the ability to either keep or rent out that home after you don’t want to live there anymore. So, all these things, compared to paying rent, rent is a hundred percent interest. The only good thing about paying rent is you get to call your landlord and say, Hey, I have a problem. Instead of dealing it with yourself.

15:55 Emily: That is a good benefit of renting, and one that I miss.

15:57 Sam: It’s the best benefit. Yeah.

15:59 Emily: I appreciate your points about still buying even at higher interest rates, if you qualify, right? The question is, if graduate students were at that tippy top max of their budgets anyway, and increasing rates have caused their monthly payment to go up to such a point where they could no longer even afford a house anywhere in that market, if they were on the bubble like that, then it’s an issue. But if you could still qualify at the higher rates, like you said, I still think it’s a reasonable idea to go forward with buying. Especially because, you know, let’s say next year or the year after that rates are lower, again, that person can refinance. As we saw so many people do with low rates over the past 10 years. And so, it’s not necessarily that that rate is going to be your rate forever. As long as you can still get into the property. So anyway, it’s worth investigating.

Buying Down Your Rate

16:44 Sam: Okay. So, I’ll add these details from what I experienced originating at higher rates right now. Like you just said a moment ago, you’re already on a tight budget. That’s not changing. And rates going up, you’re going to qualify for a little bit less. It’s not going to take you out of the market because now the rates have gone up, and home prices are actually starting to come down in some areas, right? You’re not going to go, you know, over contract price plus 10 grand to get into the home. Okay. So prices will adjust for a smaller buy approval that doesn’t qualify for certain amounts, right? And then secondly, usually PhDs are putting down savings or they’re receiving a gift from a family member or a friend. Some even are selling a previous home and buying another one, right? So, the $5,000 you needed from a family member to close, you know, planned on, might be $10,000 now.

17:44 Sam: You might just have to put a little more down to qualify for that house you want, right? Then again, I still have people buying single-family homes in North Carolina for under $150K. So, if you don’t need more than three bedrooms, you’re going to be able to find something. And then the last thing I wanted to point out is the realtor that you decide to work with is important because they’re going to work hard to find something that fits your budget. What we know already to start is that it’s going to be a tight budget monthly. So, I want to get my eyes on every property that you’re going to put an offer in to make sure it fits for your scenario. So, the room for error is very small here.

18:29 Sam: What’s very unlikely is that you’re looking for a home and I’ve preapproved you at five and a half percent. And during that period, rates go up to six and a half, and now you don’t qualify. That won’t happen. Because the cost to buy down the rate, if it were to go up, would be minimal. So, the rate that you don’t pay for has gone up, but if you are willing to put 1% or even 2% of your loan amount to buy down your rate, we can do that. Sometimes it’s cheaper to buy down for a lower rate versus getting another five or $10,000 to put down towards your loan. So even with the tight income monthly for one, you know, grad student on a stipend, it’s still achievable.

19:21 Emily: That’s really good to hear.

Commercial

19:25 Emily: Emily here for a brief interlude! These action items are for you if you recently switched or will soon switch onto non-W-2 fellowship income as a grad student, postdoc, or postbac and are not having income tax withheld from your stipend or salary. Action item #1: Fill out the Estimated Tax Worksheet on page 8 of IRS Form 1040-ES. This worksheet will estimate how much income tax you will owe in 2022 and tell you whether you are required to make manual tax payments on a quarterly basis. The next quarterly estimated tax due date is September 15, 2022.

20:07 Emily: Action item #2: Whether you are required to make estimated tax payments or pay a lump sum at tax time, open a separate, named savings account for your future tax payments. Calculate the fraction of each paycheck that will ultimately go toward tax and set up an automated recurring transfer from your checking account to your tax savings account to prepare for that bill. This is what I call a system of self-withholding, and I suggest putting it in place starting with your very first fellowship paycheck so that you don’t get into a financial bind when the payment deadline arrives. If you need some help with the Estimated Tax Worksheet or want to ask me a question, please consider joining my workshop, Quarterly Estimated Tax for Fellowship Recipients. It explains every line of the worksheet and answers the common questions that PhD trainees have about estimated tax. The workshop includes 1.75 hours of video content, a spreadsheet, and invitations to at least one live Q&A call each quarter this tax year. If you want to purchase this workshop as an individual, go to PF for PhDs dot com slash Q E tax. Now back to our interview.

Getting Ready to Purchase

21:29 Emily: Both of us have mentioned a couple times so far, like, okay, you know, ideal buyer candidate, like zero debt, and like, okay, how much money do you have to put down? Is it 5K? 10K? More? Let’s lay out for the listers right now, let’s say for someone who is really thinking they’re going to buy, maybe it’s within the next few months or next year, what can that person do within their finances and their life overall kind of to get ready to be in a good position to make that purchase a little ways down the line?

21:58 Sam: Well, you want to have a full understanding of where you stand credit-wise. [Annualcreditreport.com], we’ll have to check that for the show notes, but once a year, every consumer can get a copy of their credit report.

22:19 Emily: I just looked it up. It is annualcreditreport.com.

22:22 Sam: You really want to make sure that you have some money saved, you’re at a good credit standing, and you’re, I guess, mentally prepared to lose out on a couple deals before you find the right house. <Laugh> I would also say, if you do believe you’re going to be receiving a gift, to have that conversation a little earlier on in the process. We really don’t like to transfer money until we know things are done deal, but you know, prepping a family member or a spouse like, Hey, are we prepared to move around 10 or $20,000 to get this deal done, right? And then aside from credit and assets, your other main player is your income. We talk a lot about stipend income. I might know it better than some universities, but be aware of if your funding is changing. Usually, we have these annual increases.

23:25 Sam: But when that goes into effect, sometimes I receive funding letters that haven’t been officially signed. I’m like, we need to make sure you have a signed funding letter. And we do want to see some continuance, but we are not like every lender. We can still approve income even on a short-term contract. We look at the full picture, and Movement Mortgage uses common sense underwriting. So, if I can just show that you’ve always been in good standing as a student, and now you’re transitioning to this PhD in, you know, X science field or arts and sciences that we support you. We understand you’re a good borrower. We just, you know, there are obviously no guarantees because we want to make sure people fall into the right credit buckets, have the right assets, and the trio of how you qualify someone, right?

Advocacy for Grad Students with < 3 Years Continuance

24:24 Emily: Let’s talk a little bit more about that, because in one of our earlier episodes, it was quite a while ago now, season five, episode 17, we talked about this term continuance that you just mentioned. And at the time, again, it was a few years ago, the way things were understood regarding fellowship income–by fellowship, I mean, non-employee income, non W-2 income, awarded income is what I call it for my tax purposes. What we understood at that time was that fellowship income was sort of viewed differently than employee income, W-2 income, with respect to qualifying for a mortgage. And I was getting a lot of messages from graduate students and postdocs who were saying, oh my gosh, I was denied. I couldn’t get a mortgage. I couldn’t buy the home that I expected to because of the type of income I have. Not the amount of income, but the type of income.

25:13 Emily: And so, you looked into this, this is sort of how, you know, we started kind of collaborating together several years ago, you looked into this and one of the first things you found was, oh, well, if you have three years of continuance stated explicitly in your offer letter, which means this funding is guaranteed for three years, think like National Science Foundation Graduate Research Fellowship Program, it’s going to continue for three years. If that’s in the offer letter, oh, no problem. You’re golden. We’re going to be able to write that mortgage easily. Now that’s what we said in that earlier episode, but there has been some development since then, as you’ve been working more and more in this industry, you’ve actually gotten a lot of other types of people on fellowship approved. So, can you tell us more about the updates on that and the success stories that you have that don’t involve W-2 income and don’t involve three years of continuance?

25:54 Sam: Yes. So I have to kind of break this down into layers. So, what all lenders–that’s banks, mortgage companies, anybody who’s given a mortgage out for, I’ll say conventional loan–they have to go by the oversight committee, right? Fannie Mae, Freddie Mac, right? Fannie Mae and Freddie Mac have guidelines. And they are just mortgage laws everybody has to work with. Now, as you get down to the company that you’re working with, that company will also have a set of mortgage laws that are on top of what Fannie and Freddie consider, what they will ensure and take, right? Now, under that layer is your underwriters. The underwriter is similar to a loan officer. They’re a licensed employee of the company, and their license number is attached to every single loan that’s approved and closed. Okay. The underwriter basically can go either way with the income, right?

26:56 Sam: And a lot of times, a couple years ago, for me, I would always have to escalate my underwriter’s decision to their manager. Because the way the guidelines are written, they can be interpreted different ways, right? So let’s say this, actually, this is a real scenario that I got three weeks ago. Her name was Jane. She was buying in New York and she has exactly three years of continuance. Now the lender denied her because one month after the close date is when your mortgage starts and you paid in arrears. So you basically skip a month after closing. Well, when the payments start, she was under her three years continuance. So they said, I’m sorry, you don’t have enough time in your contract, right? So she got denied, found us online. I got her back on track. Her income’s been approved with Movement Mortgage, and she’s going to close on time without issue up in New York. As you get down to these layers, if you’re not working with the right people, you’re running into more and more issues. So what I’ve been able to develop is a way to present PhD income to an underwriter demonstrating historically where this student’s been, and where they’re gonna be going in the future. Technically speaking, the guidelines say the income must be likely to continue for three years. Okay? Now, if the underwriter can see that it’s not going for three years, they can say, I’m not budging. I can’t use this income. My license is attached to this. No. Right? Go get a co-borrower.

Interpreting the Word “Likely”

28:39 Emily: Because they’re interpreting the word likely in the way we would say guaranteed. They want to see a guarantee to think that it’s likely. But what you’re saying is, well, no, the word is not guaranteed. The word is likely. So how can we work with that word?

28:53 Sam: Right. I did a lot of due diligence before moving over to my previous employer Movement Mortgage, and I was able to get a guarantee from the whole entire company’s underwriting manager that I can take a PhD or postdoc with less than three years of continuance. Some less than one year. I can take them to a Freddie Mac product or a Fannie Mae product. This is advantageous to the PhD community, because there are other things that are so stressful about the home purchase. You know, putting a $20,000 deposit down can add a little, you might lose a half an hour sleep every night. I don’t want anybody losing sleep because they’re well qualified over income, like letters. It’s totally ridiculous.

29:42 Emily: This goes to that term that you mentioned earlier, common sense underwriting. Because I think the people listening to this podcast can clearly see from their own lived experience that graduate student income, whether it’s employee income or non-employee income, is pretty likely to continue. It’s certainly not more or less likely than some random job you might have, right? So like, we know as a community that this is very similar to another job. In fact, in some cases can even be more secure than a regular job. But the mortgage industry historically has not taken the same view until you, you know, went hard at work on this problem and started understanding the underwriter’s point of view, started understanding how you can present these packages, the language that they use. And like you said, with this most recent move, even prepping the underwriters at the company that you’ve recently moved to, Movement Mortgage, prepping them by saying, this is the type of, you know, letters and income verification that’s going to come your way. I need to know that you’re on board with this interpretation of the word likely and all the other factors that go into it.

30:42 Sam: Yeah. And one other thing about stipend income that was one of the main reasons I switched is universities will either pay their students on a 12-month pay cycle, or they will get paid semesters, right? So, where I was able to include someone’s fall and spring stipend, the summer stipend, because the pay changes, it’s a different pay rate. A previous underwriter at my old company was like, oh, we can’t use that income. It’s future income and it’s not guaranteed. And I debated with them. I said, the letter states that summer employment is often available for PhDs, but it’s not required. Meaning if you want to go to Europe, you’re allowed to go. But if you want to teach, here’s $6,000. That client of mine, he was able to get a co-borrower to solidify the $500 that they didn’t want to include monthly.

31:40 Sam: I took that same scenario and provided it to the underwriters at Movement. And they said, we see that he’s historically worked summers. And we see that he has this option to work as a teacher. And I was conservative. I did not include the higher income that I could have. He made, you know, $30,000 working for a different company the previous summer. I was like, I just went off the $6,000 that was within the letter. I would be able to close that here at Movement without the co-signer. And that just helps me get my PhDs closed with less friction. Because I see it as this is available income for next summer. So you get these layers, like what Fannie and Freddie will require, the lenders are a little more strict, and then the underwriter, you know, they’re on the edge of the fence. It could go one way or another. I couldn’t be happier working with PhDs. They’re responsive, understanding, usually very qualified, and they’re very, there’s no heavy lifting with doing these PhDs anymore. The back end, my team behind me, they’re the best community to work with. And it just doubles down of why they’re great people to approve for mortgages.

Reach Out to Sam at Movement Mortgage

32:54 Emily: Listeners, Sam does not just say these very complimentary things about you on the podcast. He says these things to me regularly about how happy he is to be working with you all. That you are such easy clients to work with, that you’re so responsive, that you’re so ready, that you’re so organized, you’re so responsive to email. Like you’re a great community for him to be working with. He’s really happy about this. Obviously, we have this personal connection that helps start it, but he’s off on his own now. Like he is clearly the industry leader in this area. So anyway, if it hasn’t already been clear through this conversation, Sam is working hard for you. Especially if you’re going to be buying a house in the near future, on your graduate student or postdoc income, his recent move to Movement Mortgage, he obviously did a lot of work on that. Making sure that things like inconsistent income throughout the 12 months will be included in your consideration for a mortgage.

33:44 Emily: So, all that to say, Sam, let’s wrap up here. I, of course, strongly encourage anybody listening or reading this transcript who is considering qualifying for a mortgage in the near future to at least get a quote from you. Doesn’t mean you can’t get quotes from other people, but at least get a quote from Sam. See what he can do for you. And he has probably the most experience working with this particular population of anyone in the U.S. I don’t know. Maybe there’s some random person in one random college town somewhere who also does this, but Sam works nationally. So, please go get a quote from him if this is on your radar at all to see what you could qualify for on your income and with the current interest rate. So, Sam let’s conclude one more time with your contact information.

34:23 Sam: Yes. My cell phone is the best way to reach me. It’s 5 4 0 4 7 8 5 8 0 3. And my new email address is Sam dot Hogan at Movement.com.

34:35 Emily: Well, Sam, it’s been a pleasure to have you back on the podcast. Thank you so much for the work that you do for this community and how much you care for them!

34:42 Sam: Thank you for having me!

Outtro

34:49 Emily: Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by Lourdes Bobbio and show notes creation by Meryem Ok.

How Two PhDs Bought Their First Home in a HCOL Area in 2021

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In this episode, Emily recounts her and her husband’s home ownership journey, what she’s learned along the way about buying a home, and what she wishes they had done differently. The episode is structured around the necessary elements in your life and finances to qualify for a mortgage and purchase a home: 1) desire to buy a home, 2) income, 3) debt-to-income ratio, 4) credit score, 5) down payment and closing costs, and 6) someone willing to sell you a home. In each section, Emily speaks about the element generally and takes you through their own history to show you how all these elements finally came together in 2021 to enable the purchase of their first home.

This is post contains affiliate links. Thank you for supporting PF for PhDs!

Links Mentioned

Introduction

Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. I’m your host, Dr. Emily Roberts.

This is Season 8, Episode 18, and today I’m going to recount for you my and my husband’s home ownership journey, what I’ve learned along the way about buying a home, and what I wish we had done differently. I have structured this episode around what I understand as the necessary elements in your life and finances to qualify for a mortgage and purchase a home: 1) desire to buy a home, 2) income, 3) debt-to-income ratio, 4) credit score, 5) down payment and closing costs, and 6) someone willing to sell you a home. In each section, I’ll tell you about the element generally and take you through our own history to show you how all these elements finally came together in 2021 to enable the purchase of our first home.

Purchasing a home in the San Diego area has been a decade-plus-long dream for us. My biggest long-term motivator for staying on top of my personal finances was not debt freedom, not financial independence or early retirement, not lifestyle spending, but rather being able to buy a home in southern California and live a financially stable life with children.

Whenever I met people who used to live in San Diego, I asked them why they moved away, and if the answer wasn’t being transferred by the military, it was nearly invariably financial pressures. I knew it would take all of my financial skills just to make it in this high cost of living area, so that’s what I’ve been working toward all these years.

My husband and I closed on our very first home purchase in north San Diego County in April 2021. So not only did we accomplish one of our major life goals, we did it in the strongest nationwide seller’s market in recent memory.

As I tell the story of our journey to home ownership, I’m going to get really personal and transparent, which I don’t often do on this podcast. I am going to give some advice and suggestions as we go through, but please keep in mind that this episode is largely descriptive of our path, not prescriptive for yours. You will see that we’ve had privileges and opportunities that are definitely not available to everyone. COVID-19 in particular greatly influenced the end of this process, which of course we all hope will not be repeated.

I know that my story, especially the end when I start giving you numbers, will feel quite unrelatable to those of you who are still in grad school or who live in low- or medium-cost-of-living areas in the US. They certainly were for me when I was a grad student in Durham. Yet, multiple years out from finishing my PhD, here I am living it. If eventually buying a home in a high cost of living area is something you want, I hope you will find our story inspirational. If your goal is to buy a home soon, I hope you will find it educational.

If this episode raises new questions for you about the home-buying process or you’ve had some kicking around for a while, I invite you to join me and Sam Hogan for a free live Q&A call this coming Thursday, May 6, 2021. Sam is a mortgage originator specializing in graduate students and PhDs, particularly those with fellowship income. He is also an advertiser with Personal Finance for PhDs and my brother. You can register for the call at PFforPhDs.com/mortgage/.

In case you are a new listener, here is some brief biographical info so you can follow along with the episode:

My husband Kyle and I met and started dating at Harvey Mudd College, from which we graduated in 2007 at the age of 21; we both turned 22 in July 2007. Kyle started his PhD in computational biology and bioinformatics at Duke University in fall 2007; I did a postbac fellowship at the NIH for a year before starting my PhD in biomedical engineering at Duke in fall 2008. We got married in summer 2010. We defended our PhDs in summer 2014. Kyle stayed on as a postdoc in his PhD advisor’s lab for another year, while I worked a few part-time / temporary jobs while I launched Personal Finance for PhDs, which has been my main endeavor since. In summer 2015, Kyle got a job at a biotech start-up, and we moved to Seattle. We have two children, born in 2016 and 2018. In summer 2020, Kyle negotiated to work remotely permanently for the start-up, and we moved to southern California, specifically the Los Angeles area. We closed on the purchase of our very first home in North San Diego County in April 2021.

The six necessary elements to buy a home are:

  1. Desire to buy a home
  2. Income
  3. Debt-to-income ratio
  4. Credit score
  5. Down payment and closing costs, and
  6. Someone willing to sell you a home

In the rest of the episode, I’ll tell you how we checked off each of these elements and give you some pointers as well. By the way, this episode is for entertainment purposes only, and nothing in it is advice for legal, tax, or financial purposes for any individual. You are entirely responsible for your own financial decisions.

1. Desire to buy a home

Before even dipping your toe into the home-buying process, you have to actually want to buy a home. It’s not something that you can or should just fall into. And if you don’t want to buy a home, none of the rest of the elements matter.

Kyle and I do not find the idea of home ownership to be particularly attractive. We have been very happy to rent for these last 14 years in the sense that we like that our landlords have had the financial and logistical responsibility to take care of the properties we’ve lived in. We’ve never cared about not being able to customize the space we’ve lived in or anything like that. However, we did idly consider home ownership in some earlier stages of our careers.

Neither of us was in a position to buy a home financially at the start of grad school. We did know some other grad students who owned their homes in Durham, so it was perhaps feasible to buy a small home with a grad student stipend. I actually interviewed Dr. Matt Hotze, a house hacking grad student at Duke, in Season 3 Episode 3. However, anecdotally, all the grad student homeowners we knew personally had purchased their homes before the subprime mortgage crisis, no later than 2007. Lending standards were obviously a lot looser before the crisis than during and after.

The subprime mortgage crisis and the Great Recession had a very big effect on my outlook on home ownership, as I believe they have for many Millennials. The first chapter of The Psychology of Money by Morgan Housel (affiliate link—thanks for using!) discusses why individuals view money so differently from one another. The way he puts it is: “People do some crazy things with money. But no one is crazy… People from different generations, raised by different parents who earned different incomes and held different values, in different parts of the world, born into different economies, experiencing different job markets with different incentives and different degrees of luck, learn very different lessons.” His examples in the chapter of common financial experiences of various American generations include the Great Depression, high inflation in the 1970s, low inflation since the 1990s, the stock market’s high returns over the last 50 years, and the Great Recession.

Housel calls your teens and 20s “your young, impressionable years when you’re developing a base of knowledge about how the economy works.” Well, my early to mid 20s money mindset was scarred, as Housel puts it, by the housing crisis. By the time I reached my mid-20s, the mantras “Your home is not an investment” and “Don’t buy a home that you don’t plan to stay in for at least five years” had settled in deep.

Now, that five-year rule, that’s a tough one for early-career PhDs. Most of us expect to be fairly itinerant—moving cities, states, or countries for grad school, a postdoc, a first Real Job, a second, etc. You have to be really intentional as a PhD to stay in the same city for longer than 5 years, often making some kind of career sacrifice or concession to do so.

This is the dilemma that Kyle and I found ourselves in back in 2010. We had just gotten married and combined households and finances. The housing market was not strong by any means but it seemed that the worst was over. Our two grad student stipends were certainly enough to support a mortgage on a small home in Durham. We had a small amount of savings. Yet, Kyle was three years into his program and I was two years into mine. We thought, surely we will be leaving Durham by 2013, more or less. There wasn’t time, according to the 5-year rule, to have the reasonable expectation that we wouldn’t lose a bunch of money on buying and selling a home. So we didn’t buy. We focused our financial energy on retirement investing instead.

In hindsight, I learned the wrong lesson from the subprime mortgage crisis, or at least I applied a good lesson in the wrong way.

Here are a few things I’ve learned since 2010:

1) Personally, we didn’t actually move away from Durham until 2015. So we would have passed the 5-year rule anyway if we had bought shortly after getting married. The lesson there is: You might stay in your current city longer than you initially expect to. PhDs can take a long time. Keep a realistic timeline in mind in addition to an optimistic one.

2) If you own a home and then move away, you don’t have to sell it if your home hasn’t appreciated enough yet. You can rent it and become a long-distance landlord, likely with the help of a property management company. In 2012, we rented a townhouse from a private landlord through a property management company. The owner had earned her PhD at Duke and subsequently moved to Europe for a postdoc. Matt Hotze also employed this strategy when he moved away from Durham after finishing grad school.

As I record this, Scott Trench and Mindy Jensen of Bigger Pockets recently published a book titled First-Time Home Buyer: The Complete Playbook to Avoiding Rookie Mistakes (affiliate link—thanks for using!). I have not read the book yet, but I have listened to them go on the podcast rounds to promote it, and I’ve learned something just from that. One of the concepts in the book is on exit strategies from real estate purchases, namely: 1) live in it forever, 2) sell it, 3) rent it. When you buy a home, you should have more than one exit strategy that is a viable option for you.

What I want you to take from this point is that your home ownership clock does not need to stop when you move away from your current city. If it does take 5 years for your home’s rise in value to justify the transaction costs of real estate, which are very high, you don’t have to actually live in the home for all 5 years. Therefore, when you buy a home that you don’t plan on living in forever, whether that’s because of an anticipated move or growing your family or anything else, make sure that it makes financial sense as a rental as well as a primary residence.

3) Instead of relying on passive appreciation to increase your home’s value over a timeline like five years so that you can break even vs. renting, you can instead approach your primary residence with a real estate investor frame of mind. I’ve learned of two ways to do so through The House Hacking Strategy by Craig Curelop (affiliate link—thanks for using!), though there may be more.

The first method is forced appreciation, which is when you upgrade your home while you’re living in it through renovations or an addition or something similar. I don’t know how accessible that method would be to the average PhD; it’s not something that I would feel competent or confident to undertake in a cost-effective manner.

The second method is house hacking. I’ve already mentioned that term once in this episode. House hacking is when you buy a home that’s bigger than you need and rent out part of it. This could be a single family home where your tenants are your roommates or a multi-family property where your tenants are your neighbors. Assuming the ability to buy a home in the first place, I think this strategy is quite accessible for especially graduate students, who are accustomed to roommate living. I have had multiple house hacker interviewees on the podcast, including Matt Hotze, Jonathan Sun in Season 2 Episode 5, and Dr. Caitlin Kirby in Season 6 Episode 16. House hacking is an incredibly powerful strategy, which if done right can either reduce your housing expense or even eliminate it entirely and give you an additional stream of income. I discuss this strategy in depth with Sam Hogan in Season 8 Episode 4.

The upshot is that I wish I could go back in time and tell my early grad student self that living in Durham for grad school was a wonderful and rare financial opportunity. I would tell myself that buying a home with an eye toward renting it out, whether through house hacking or long-distance landlording, greatly mitigates the risk of buying in a city you don’t plan to live in forever.

That pretty well summarizes my aversion to home ownership and what I wish I had known about home ownership in my grad school years. Since I am unable to communicate with my past self, I hope you find it valuable.
In 2015, Kyle and I moved from Durham to Seattle, and that was quite a shock to our financial system. Kyle’s income jumped, of course, but suddenly our cash savings seemed pretty paltry compared to our new living expenses. Buying a home was no longer on the table. Instead, we rented a cheap apartment that was walking distance to his new job and focused our energy on growing our careers and our family. I’ll tell you more about how those years went for us financially later on in the episode.

By the time we were ready to reconsider the home ownership question in about 2018, we looked around and saw that Seattle was experiencing double-digit growth in its median home price and had been for several years. We had numerous friends buying or trying to buy in a super competitive market, doing things like waiving inspection contingencies. That didn’t sound appealing. Plus, going back to the previous discussion, we didn’t want to be in Seattle forever. I told Kyle when we moved there that I wanted to move to southern California within two to four years, and it had already been three. Instead, we decided to focus on building up a down payment on a home in California.

That brings us to the present, more or less. Home ownership was not super desirable for us in the past based on our location and mindset, but now it is. We have two big reasons for wanting to be homeowners at this stage in our life: 1) As a financially-minded person, I love the idea of, as Ric Edelmen puts it, carrying a big long mortgage. Doubly so with interest rates being as low as they are. 2) We, ideally, want to provide our children with a geographically stable home throughout their school years, which both of our sets of parents did for us. Our older child is entering kindergarten in fall 2021, so we knew we wanted to buy in 2021 if not sooner.

What I want you to take away from this section regarding whether or not you desire to become a homeowner is that you not should go on your feelings only. Your feelings matter, but purchasing a home or not purchasing a home is a big decision that should be well thought through. What are your motivations for home ownership? What are your exit strategies if you decide to buy? How can you use your home to increase your net worth, aside from passive appreciation? What are your other financial goals, and how do they rank against home ownership?

2. Income

Your income as an individual or household is one of the factors that determines the upper limit of the purchase price of your home. Income is the main sticking point keeping graduate students and postdocs from being able to buy in cities that their age-mates with Real Jobs could buy in, and that is due to the relatively low amount of income and sometimes the type of income.

First, I’ll address the type of income.

Employee or W-2 income is the easiest income type for lenders to understand and process. Basically, if you are an employee, the lender presumes that your job will continue indefinitely and that you will be able to pay your mortgage. You could potentially get a mortgage with just a single pay stub or an offer letter. Once the mortgage is close to being issued, they do check with your employer to verify that you’re not about to be let go or something similar.

Kyle has W-2 income through his job, so we knew that would be an easy sell.

Self-employment income is also common for lenders to work with, but they ask for at least two years of tax returns and profit and loss statements to ascertain whether the income is stable. Also, self-employment income will not qualify you for as large of a mortgage as an equivalent amount of W-2 income would.

I’m self-employed, and I was really concerned about how a lender would view my income. I wanted to wait to apply for a mortgage until after we filed our 2020 tax return because my income was higher in 2020 than 2018 so I thought that would help us qualify for a larger mortgage.

Fellowship income is the last income type that is common for grad students and postdocs. I hear frequently from grad students and postdocs who have been denied mortgages because the lender either doesn’t understand or can’t work with fellowship or training grant income. We’ve discussed qualifying for a mortgage with fellowship income in depth on the podcast in Season 2 Episode 5 and Season 5 Episode 17. Lenders view fellowship income as temporary, not indefinite like employee income, so they are concerned that you won’t be able to pay the mortgage after the fellowship ends. I know this sounds backwards to us because fellowship income is guaranteed over its term as long as you remain in good standing, whereas most employees can be fired at any time. However, it is possible to qualify for a mortgage with fellowship income under certain conditions and if you use a lender who is accustomed to working with it. Anyway, if after listening to the aforementioned episodes you still have some questions about whether you could get a mortgage with your particular funding situation, please come to the Q&A call on May 6th with Sam Hogan, who again is a mortgage originator specializing in fellowship income. You can register for the Q&A call at PFforPhDs.com/mortgage/.

Second, I’ll address the amount of income.

You may have heard a rule of thumb that you shouldn’t buy a home for more than three times your annual income. I learned through my own home-buying process that 3x your income is an outdated rule of thumb. Because interest rates are so low right now, people without other debt might be able to qualify for mortgages around 5x or more of their income.

The real metric that lenders go on is your debt-to-income ratio. There are actually two debt-to-income ratios, the front-end and the back-end. I’m going to address the back end debt-to-income ratio as a separate element.

Your front-end debt-to-income ratio is your total monthly housing expense divided by your gross monthly income. Your monthly housing expense includes the principal and interest payment on your mortgage, property tax, homeowner’s insurance, private mortgage insurance, and/or homeowner’s association dues. Lenders usually want your housing expense to be no more than 28% of your gross income, although depending on your loan type and credit history, some lenders might go above that number  .

Basically, this front-end debt-to-income ratio is a major factor in calculating the maximum mortgage amount you will be extended. However, what I’ve learned through my own home-buying process and my conversations with Sam is that the amount you’ll qualify for is a bit of a black box. If you want a definitive number, you’ll need to work with a mortgage broker or originator on getting pre-qualified or pre-approved.

Regarding our own homebuying journey, obviously real estate in the San Diego area is very expensive. We had to decide how much we were comfortable spending on a mortgage, regardless of the amount we qualified for, and match that up against the prices of single-family homes. There are a lot of cities and areas in San Diego County that we absolutely could not and would not buy in, and even in the remaining areas we were only looking at pretty modest homes.

When we started homing in on our target range of home prices, Kyle’s income was borderline enough to qualify for that range on its own without including mine. We were really, really fortunate when, just after we made our first offer on a house, Kyle received an unexpected and substantial raise. His income with that raise was more than enough to cover our target range. Ultimately, we went forward with his name only on our mortgage since we didn’t need to use my more complicated self-employment income.

3. Debt-to-Income Ratio

In this section, we’ll discuss the back-end debt-to-income ratio, which many people refer to as simply the debt-to-income ratio. Your back-end debt-to-income ratio is your total monthly debt payments and certain other obligations divided by your gross monthly income. The numerator is inclusive of your proposed housing expense that we delineated when discussing the front-end debt-to-income ratio.

Aside from your housing expense, the other debts and obligations included in the back-end debt-to-income ratio are the minimum payments you are required to make on credit cards, car loans, medical debt, personal loans, and child support. If your student loans are in repayment, those minimum payments go into the calculation as well. If your student loans are in deferment, your lender may consider 1% of the outstanding student loan balance as a stand-in for the monthly payment.

The maximum back-end debt-to-income ratio permitted by lenders varies widely from about 36% to sometimes over 50%, depending on the type of mortgage and the rest of your financial profile. Again, it’s a bit of a black box, so if you think your back-end debt-to-income ratio is what will limit your ability to get a mortgage of the size that you want, speak with a mortgage originator like Sam Hogan.

Kyle and I have been essentially debt-free for many years, so in our case the front-end debt-to-income ratio equals the back-end debt-to-income ratio. I bought a car at the start of grad school with a personal bank loan, but I paid that off during grad school and have since sold the car. We own one car currently, and it’s Kyle’s college car. It’s a 2003 Chevy so pretty unglamorous, but that is literally how we roll. I had student loans from undergrad that we paid off a couple of years after we finished grad school. We use credit cards, but we pay them off every month. I think we may have financed a cell phone or two at 0% instead of parting with cash, but we’re done with those payments now as well. Kyle has essentially never been in debt aside from the kind that builds your credit without costing you any money, and I haven’t taken out any new debt since I was 23.

4. Credit score

Your FICO credit score and the three major credit reports it is based on are the major ways that your lender will determine how credit-worthy you are. Basically, your credit reports and score communicate how responsible you have been with debt in the past.

If you’ve never had any kind of debt, you don’t have a credit score, and then lenders, if they even want to work with you, have to do a lot more legwork, or what’s referred to as manual underwriting, to figure out if you’re credit-worthy. That’s pretty ironic because if you’ve never taken out any debt and always paid your bills on time, you’re probably very responsible with money.

On the other hand, if you have lots of outstanding debt, that’s going to hurt your credit score.

The middle ground with debt is optimal for cultivating a high credit score, which is taking out small amounts of debt and proving that you can pay it back consistently. As your age of credit grows older, your score improves as well because that track record of on-time, in-full payments gets longer.

Exactly how a FICO credit score is calculated is proprietary, but the broad strokes are that 35% is based on your payment history, 30% is your amounts owed, 15% is the length of your credit history, 10% is your credit mix, and 10% is new credit inquiries.

Lenders use your FICO score and credit reports to determine if they’ll lend to you at all, which type of mortgage to use, and what interest rate to offer you.

If your credit score is 760 or higher, you should qualify for the best interest rates on a mortgage. The minimum credit score to get a mortgage is around 620.

While Kyle and I have never tried to hack our credit scores, you can probably tell from what I told you in the previous section that they are very good by now. I started taking out student loans at age 18 and got my first credit card at 22, so my credit history is quite long in the tooth. Kyle’s parents actually added him to one of their credit cards as an authorized user when he was a teenager, so that gave his credit score a big boost right out of the gate. Of course being debt-free at this stage while still using credit cards raises our scores quite a lot. We also haven’t applied for any new credit cards since the pandemic started, so there were no recent hard pulls on our credit reports when we applied for our mortgage. I don’t actually monitor my credit score, but Kyle keeps tabs on his through Credit Karma, and it’s been consistently over 800 for several years.

5. Down payment and closing costs

Saving up money for a down payment on a house and the closing costs on the purchase was the biggest, longest, and most intentional process we went through in preparing to buy a home. I will tell you all about it in detail after going over what this money is for and how much you should target.

First, the down payment.

The minimum down payment on a home depends on the type of mortgage you’re taking out. A conventional mortgage can require as little as 3% down, though 5% is more common as the minimum. A Federal Housing Administration or FHA loan requires 3.5% down. United States Department of Agriculture or USDA and US Department of Veteran’s Affairs or VA loans don’t have a down payment requirement.

You may be familiar with the recommendation to, if possible, put 20% down on a home. If you put down 20% on a conventional or FHA loan, you’ll avoid paying private mortgage insurance, which is an insurance premium you pay to insure your lender against the possibility of you defaulting on the loan.

The more you put down, of course, the smaller your mortgage will be. A larger down payment amount can also potentially lower the interest rate on your mortgage and make you a more competitive buyer in a seller’s market, as we have in 2021.

Second, the closing costs.

Going into the home-buying process, I had heard that sellers typically pay closing costs, but that’s not a hard-and-fast rule and it’s not all closing costs. While in a typical transaction sellers pay roughly 5 to 8% of the purchase price in closing costs, buyers pay roughly 3 to 5%. So if you were targeting a down payment size of 3 to 5%, you may want to double your savings goal to account for closing costs.

I’ll give you a history of our down payment savings over the years. But first, I want to share a memory that I have from 2012. Kyle and I were at our five-year college reunion and chatting with a friend who lived in southern California. This friend shared that she and her husband wanted to buy a home and that they were working on saving up a $100,000 down payment. A ONE HUNDRED THOUSAND DOLLAR DOWN PAYMENT. That to me was a completely unrelatable goal. She may as well have said a trillion dollars. It was totally unattainable in my world. Now, to be fair, my friend and her husband were both engineer types and I’m sure had very good salaries. And of course real estate is very expensive where they live. One hundred thousand dollars may have been a 20% down payment, or maybe not. But since I was a grad student living in Durham at the time, my mind absolutely boggled at that number.

The irony is that, nine years later, Kyle and I put down well over $100,000 on our house purchase. And I will tell you how we got there. Before I do, please recall from the beginning of the episode that I am acutely aware of the privilege that you will soon see at play in this process and that I am simply telling you what happened for us, not suggesting that you will or could take the same path.

Kyle and I opened a savings account that we nicknamed “House Down Payment” in 2014, the year that we defended. Our main financial priority prior to that point was retirement investing. By the end of grad school, we had eked our retirement savings rate up to about 17% of our gross income. We were also quite focused on budgeting and saving for irregular expenses; I shared our system for managing those in Season 7 Episode 15. Just before Kyle defended, our combined net worth had crossed $100,000, which I talk about in depth in Season 1 Episode 1.

That summer, as a defense gift, one of our sets of parents gave us $14,000. That was an incredible amount of money to us—about a quarter of our yearly household income—and completely unexpected. We decided to sequester it in the aforementioned House Down Payment account so that we wouldn’t be tempted to use it for everyday living expenses. Then, in summer 2015, that same set of parents gave us another $14,000 as a graduation gift. That also went straight into the savings account. So by the time we moved to Seattle, we had quite a nice nest egg earmarked for a future house purchase.

Once Kyle started his job at the Seattle biotech company in 2015, we reevaluated our financial goals. We increased our retirement savings rate to 20% of our gross income and have maintained it there since. The house down payment became our secondary saving goal. We figured we could move it to primary savings goal status when we had a firm timeline on buying by decreasing our retirement savings rate to perhaps 10% for a year or two. I’ll also note that we didn’t have a firm target amount of money for the down payment. We thought it would be good to have at least a 10% down payment, though 20% was likely out of reach, but of course we didn’t know yet how expensive of a house we would purchase.

I’ll give you snapshots of how the balance in that account grew or didn’t grow over the next five years.

In 2015, we consolidated some other savings we had into the account, but didn’t actively work on adding any more money to it. We got pregnant with our first child that fall, so we were instead beefing up our emergency fund and saving cash to supplement our income during Kyle’s parental leave. The balance in the account at the end of 2015 was $29k.

In 2016, after the birth of our first child, we committed to contributing a certain percentage of my irregular at that time income to the account, which amounted to tens of or a couple of hundred dollars per month. The balance in the account at the end of 2016 was $31k.

We continued that savings plan into 2017, and I even started paying myself a regular salary from the business. When we got pregnant with our second child that fall, we switched our savings goal as we did for our first pregnancy and temporarily stopped contributing to the account. The balance in the account at the end of 2017 was $40k.

In 2018, our insurance changed halfway through our second pregnancy. We were responsible for more medical bills associated with the birth of our second child than we had with our first, plus we supplemented our income during Kyle’s parental leave again. We returned to our savings plan after the birth of our second child, but then decided to pull money back out of the account for some of the medical bills and other irregular expenses. The balance in the account at the end of 2018 was $39k.

Through 2019, we continued to save a certain percentage of my income into the account, and we layered in an additional fixed $250 per month. Again, around tax time we contributed to the account a portion of a distribution from my business and our self-tax refund, which amounted to approximately $10,000. (Sidebar: We save a generous amount from each of my paychecks into a separate savings account earmarked for income and self-employment tax. We pay quarterly estimated tax and also more along with our tax return. Our self-tax refund is whatever is left over in our savings account after all the taxes are paid, which we then incorporate into the rest of our finances.) The balance in the account at the end of 2019 was $56k.

2020, as you all know, started out normally. We again were saving a couple of hundred dollars each month, plus a bolus around tax time. Then, the pandemic hit. We stopped paying for childcare, which was certainly a strain on our time and stress levels, but did allow us to increase our monthly savings rate to the down payment fund to $1,500. We also put most of the first stimulus check into the account.

I’m sure everyone has struggled during the pandemic in at least one facet of life. Our primary struggle was as the working parents of very small children. Both of our children’s preschools and our babysitting service closed. We had no nearby family, and all our nearby friends were dealing with their own small children. I’m sure you’ve heard that “it takes a village” to raise children. Well, the village was gone—or only on Zoom, at any rate. We definitely had it easier than many because of the flexibility in my schedule, but that only goes so far.

By the summer, when we acknowledged this was not just a flash in the pan, we realized that nothing was actually keeping us in Seattle. Kyle negotiated for permanent remote work with his employer, and we started preparing to move to southern California. Our Plan A was to rent a single family house in one of the cities in San Diego County that we were considering buying in so that we could get to know the area. As our desired move date grew closer, we were having some difficulty arranging for a rental at a distance, and we decided to exercise Plan B, which was to move in with Kyle’s parents in the Los Angeles area. They had extended us an open-ended invitation to stay with them.

That’s how, in August 2020, we moved back in with our parents, kids in tow. And even though it wasn’t what we thought we wanted, it was exactly what we needed. I’ve been calling these last eight months a time of respite. We were so tired and so stressed. Moving in with Kyle’s parents has benefited us in so many dimensions. They have provided part-time childcare throughout this period, which relieved so much of the time pressure we were experiencing. Kyle and I could leave the house together without the kids, which was incredible, especially once we started house hunting in earnest. Our kids had two more people they got to interact with on a daily basis.

On the financial side, Kyle’s parents refused any payment for living expenses, not rent, not utilities. Our only financial contribution to the household was to take over the majority of the grocery spending. Therefore, starting in September 2020, we increased our monthly savings rate into our down payment savings account to $4-5k. The balance in the account at the end of 2020 was $115k.

That saving rate continued at the start of 2021. We also put the second and third rounds of stimulus that we received into the account. When our respective sets of parents saw that we actually started house hunting, they also gave us a combined total of $86k. That a lot lot lot of money. We were not expecting or counting on those gifts at all. We are obviously really grateful to our parents for passing those on to us. The addition of those gifts put us well over the 20% down payment plus closing costs target, and we even have enough left over to do some needed repairs and upgrades to the property we bought. We’ll get into that momentarily.

Before we move on from this section, I want to point out some advice or observations:

1) I think it was psychologically important to us that we had a named savings account open for our down payment. Having a certain place to house money for any particular goal keeps it front of mind and prevents you from mixing money intended for that goal with your other money.

2) It was a good step to have a set savings rate going into that account on a monthly basis, when we did, and also to know that we would put any financial windfalls, like our self-tax refund, into that account.

3) Living rent-free with family members is an very, powerful financial move if it’s agreeable among all parties. We wouldn’t have done it if not for the pandemic, but I’m really grateful that we had the opportunity.

4) If you suspect your family might be planning to gift you money for your down payment, I suggest trying to find a way to get that conversation started earlier rather than later. You can tell from our tally that over half of our down payment fund was sourced from gifts, most of which we didn’t know about until the eleventh hour. We could have done more optimal financial planning if we had known they were going to arrive. Then again, it does feel good that we had some skin in the game.

5) Speaking of optimal financial planning, I’m not thrilled that we had cash sitting around since 2014 waiting for us to buy a house when in hindsight it could have been invested. Throughout this whole period, we sort of continually thought that buying a home was about two years off. For a two-year time horizon, cash makes the most sense. But that two years was actually up to seven years in our case. I am glad that we maintained our 20% retirement savings rate, because at least that money benefitted from the incredible market returns in recent years.

So my suggestion is to not skimp out on your retirement savings unless you have a really firm timeline on when you’ll buy. You might even invest part of your down payment fund if you are confident that you have time to weather any market downturns. We knew that we would be able to remove our contributions to our Roth IRAs and even some of the earnings if we really wanted to use them for a home purchase, so that helped us feel comfortable with a relatively high retirement savings rate.

You can see why I said at the beginning that this is a descriptive rather than prescriptive tale, right? Generating down payment money by receiving gifts from family, putting away thousands of dollars sent by the federal government for aid, moving in with your parents, and forgoing childcare is not exactly replicable.

6) Someone Willing to Sell You a Home

This last section is the story of how we bought a house in 2021, the strongest nationwide seller’s market in recent memory.

Once we moved to CA in August 2020, we saved a few searches on real estate websites that pull from the Multiple Listings Service and started passively figuring out in what areas of North San Diego County we could buy a single family home in our price range. We narrowed down our search to about 5 cities/areas. We also compiled a short list of must-have and nice-to-have features of our future home and property. That fall, we worked on making sure that the financial items I talked about earlier in the episode were all in order.

I read Home Buying for Dummies that fall to put together a game plan for getting a real estate agent and lender and so forth. Because at that time we thought we might need my income to qualify for a mortgage of the size we wanted, we agreed to file our 2020 tax return ASAP in January 2021 so that we could give that to our lender. In December and January, we also started contacting local real estate agents with the plan to interview several before choosing one.

That plan went completely out the window when we saw a property pop up in our search in mid-January. By that time, we were primarily using Redfin because we liked its search functionality best. So we saw this property come up in our search that met everything on our list and was well below the maximum of our price range. During the pandemic in California, there are no open houses, and you need a real estate agent to book a private appointment to see anything. We didn’t have an agent yet. Redfin, however, anticipates this exact situation, and so has a feature where you can request to see any property and you’ll be assigned a Redfin agent to go with you. So we did that. We also got a quick prequalification letter from the mortgage arm of our bank, Ally, for the amount we would need.

I’ll spare you the blow-by-blow, but we did end up putting in an offer on that house. The home’s list price was $675,000. Our offer was for $726,000. It sold for $746,000.

It’s very, very involved to decide whether you want to buy a particular house and put together an offer, especially a first offer, so we were working closely with the Redfin agent through that process. Ultimately, we decided that we liked working with her and she was doing a good job, and that’s how she became our agent. So that aspect of Redfin’s business model totally worked on us.

I want to take a small sidebar here about Redfin and why we liked working with one of their agents. Since we didn’t work with any agents outside of Redfin, these perks may exist elsewhere, too, so I’m not saying they are exclusive. 1) Redfin’s search engine is really nice to work with, definitely our favorite, and their app is good, too. 2) It’s seamless to view a property on the website or app and communicate with either your co-buyer or your agent. 3) Redfin takes a smaller-than-standard commission on the buy side, and the difference is refunded to the buyer at closing. 4) Our Redfin agent was on salary, so she got paid whether we bought a particular house or not. We didn’t like the commission-based compensation model of traditional real estate agents because it misaligns the incentives of the agent and buyer, so we felt much more comfortable with Redfin’s salary model. 5) If our agent was ever unavailable to tour a home with us, Redfin assigned another agent to sub in. So we never missed out on seeing a home because of our agent’s schedule.

So our first offer wasn’t accepted. But what we learned from that offer is the power of the appraisal contingency waiver in this market.

There are several contingencies in place in a standard home purchase offer that are in effect once the offer has been accepted and the house goes under contract. A contingency is a way for the buyer to back out of the deal if the contingency is not fulfilled. If you’ve talked with people going through the home-buying process before, you’ve probably heard about the inspection contingency. Once you go under contract on a house, there will be an inspection that will probably turn up a bunch of things wrong with the house. This is a chance for renegotiation, such as asking the seller to make certain repairs or give the buyer money at closing to make the repairs. If that negotiation does not go the way the buyer wants it to, the buyer can exercise the inspection contingency and get out of the contract without penalty, or even do so without negotiating. There are numerous contingencies that are standard for a contract, including the inspection, financing, and appraisal.

So that’s how contingencies work once you’re under contract. When you make an offer, in a strong seller’s market it’s common to waive as many of the contingencies as the buyer is able to and comfortable with. In our case, we could not waive the financing contingency because we were using a mortgage to buy the home. We would not waive the inspection contingency, and the market wasn’t quite strong enough to make that a common tactic. One of the reasons we lost out on that first offer was that we did not waive the appraisal contingency, whereas the winning offer did.

So what is the appraisal contingency? The buyer and seller agree on a price for the home, and during the contract period the home is appraised, which means that it is assessed by a professional and assigned a value that it could be sold for. In a not super hot market, this value is typically at or above the agreed-upon sales price, and everyone is happy. In a rapidly rising market, like we’ve seen this year, it’s typical for the agreed-upon sales price to be above the appraisal. That becomes a problem if you’re using financing, because the bank will usually not lend you more than its assigned fraction of the appraisal value.

To use round numbers, let’s say that you go under contract on a home for $220,000. You were planning to put down 20%, which is $44,000. But the appraisal comes back at $200,000. Your lender is going to say, nope, we are going to lend you 80% of $200,000, which is $160,000, not 80% of $220,000. Your choices at that point are to 1) get another appraisal that you hope comes back higher, 2) bring to the table $60,000 in cash to make up for the appraisal shortfall, 3) decide to redistribute your cash to fully cover the appraisal shortfall and instead put down less than 20%, or 4) exercise your appraisal contingency to get out of the contract if the seller doesn’t renegotiate the purchase price.

Now, it is apparently possible in some cases for the lender to give the buyer the go-ahead to waive the appraisal contingency with the agreement that the lender will still put up their agreed-upon percentage of the sale price, no matter how high the price goes. Our lender did not agree to that.

In our experience in the San Diego housing market in 2021, appraisal waivers are commonly used, and when multiple offers are in play, it’s likely that the seller will pick one that has this particular waiver. We didn’t use an appraisal waiver in that first offer, but we did in our second and third offers.

Speaking as a layperson and first-time homebuyer, waiving the appraisal contingency really scared me. Not only am I coming to the table with my 20% down payment plus closing costs, but now I have to potentially bring even more cash to the table just to make the deal go through, and that cash is above and beyond what an unbiased professional thinks the home is worth. And there’s no real upper limit to how much cash you could be asked to bring because you won’t know for sure what the house appraises for until you’re under contract. Suddenly the cash that we had saved and been given that far exceeded our projected 20% down payment seemed like it might not be enough.

Our agent and lender reassured me that even if we waived the appraisal contingency, we could still get out of any contract that we go into on the financing contingency. Apparently they are somewhat redundant. If the appraisal comes in lower than we expected and we didn’t want the house any longer, we could ask our lender to say they won’t lend to us the needed amount and use the financing contingency to cancel the deal. Of course, nobody wants a deal to be canceled in this way, so Kyle and I had to decide for each of our subsequent offers where we used an appraisal contingency waiver how much of an appraisal shortfall we were willing to make up with cash and consequently how low the appraisal would have to come in for us to exercise the financing contingency.

The second house we put in an offer on was listed at $769,000. Our offer, assuming the escalation clause was exercised, was for $860,000. That house received 21 offers, and the seller’s agent counted with 7 of the them, including us. He asked for certain changes to everyone’s contracts and to submit our highest and best offer, no more escalation clauses. We stuck with $860,000. The house sold for $861,000. It turns out that the winning buyer agreed to “beat any other offer,” and retained a tacit escalation clause following the counterofferr. That one was a heartbreaker.

The third house we put in an offer on was listed at $675,000. Our offer was for $746,000 with an escalation clause up to $756,000. The winning offer was all cash for $730,000.

At that point, we were totally emotionally exhausted. We had toured 13 homes and made 3 offers. Each one was completely wrenching for us. Quick decision making is not our strong suit, but it is necessary in a fast-moving market. Typically homes would be listed between Tuesday and Friday. We would tour them on Saturday, usually, and then have to submit an offer by Sunday or Monday. Each tour day involved at least 90 minutes of driving each way between LA and SD plus more driving to each of the homes. Every week and weekend were consumed with this process, and we were getting tired.

Remember that list of must-haves and nice-to-haves from before we started the search process? It had about tripled in length by that point. Touring houses and making decisions about whether or not to make offers really helped us clarify what we were looking for. We were able to become much more specific about our search parameters and could better decide based on a listing whether it was worth it to tour a home. We had also increased the top end of our price range by about $150,000.

On our last weekend of touring, we saw six houses on Saturday! Even though we had gotten a lot more specific about what we wanted, those six all made the cut. We noticed while we were out that there were way fewer buyers around than there had been on other weekends. Usually, we would show up for a 15- or 30-minute appointment and there would be someone finishing up their appointment just as ours was starting or would be waiting for ours to finish, often both. Sometimes, houses would be 100% booked for showings. However, that weekend, we had several appointments where no one was seeing the house immediately before or after us. It was a very noticeable aberration.

That was a very long day and very long weekend. After seeing the six homes, we only immediately ruled out one, so we debated putting in an offer on any of the other five. We slowly whittled down the list until we had just one remaining, but we simply didn’t feel strongly enough about it to put in an offer. We were very disappointed that we weren’t seizing our opportunity to make an offer on the low-volume weekend, but we just couldn’t do it by the end of the day on Sunday.

All day on Monday, we wondered if we had made a mistake by not making an offer on that last-to-be-ruled-out house in particular. On Tuesday, when the houses that went under contract over the weekend change their status to ‘pending,’ we saw that house’s status changed to ‘back on the market.’ We immediately contacted our agent, who told us that she had spoken with the listing agent and that the house had not received any offers. We knew this was our second chance and we moved fast. We put in an offer for below list price that day. We didn’t waive any contingencies because we knew we we weren’t competing with any other buyers. The sellers countered for asking price, and we went under contract for $700,000.

Kyle and I have speculated about why we got this house for asking price, which the house also appraised for, when virtually all the other ones we were interested sold for so far above asking and appraisal. I know we got lucky, but maybe our luck could be strategy for someone else. The following are some pieces of maybe advice for a hot market.

1) We stayed in and kept pounding the pavement. Even though we were tired, we didn’t take a break, we just refined our process.

2) Because we were out there just about every weekend, we recognized that weird low-volume weekend as an outlier and our chance to win a bid with less competition than usual.

3) We overlooked our house’s poor showing. I honestly think the listing agent made a major strategic blunder by listing when she did, which we benefitted from. The house was renter-occupied when it was listed, which meant 1) it was only shown for four hours total that weekend and 2) the house was not empty or staged, but rather cluttered with the renters’ possessions. The garage and living room were all but inaccessible due to the volume of stuff crammed into them. The windows were covered with a thick tinting film, so the house appeared very dark. It had a strong smell from the renters’ cooking. Finally, there was a necessary and obvious repair that had been neglected by the owner. The house apparently did not make a good first impression on the limited number of people who were able to see it that weekend, which resulted in there being no offers until we changed our minds. If the agent had waited to list until the renters had moved out, which they did a couple of weeks later, I think the sellers would have had a completely different result. On our end, none of the items that I just listed were the reasons we initially passed on the house. We really were able to overlook those cosmetic issues and focus on the fundamental attributes of the house.

The next month, between going under contract and closing on the house, is not something I hear people talk about as much as the first stage. It’s not as thrilling as house hunting, but a lot more work get done. I definitely developed a new appreciation for our agent. There is a lot of communication, negotiation, and paperwork, and we were really glad to have a professional guiding the process as well as support from numerous other professionals. On our side, we almost pulled out of the deal like three more times as new information came to light, but we ultimately decided to stick with it, and we now officially own that house.

My advice for you on finding someone willing to sell you a house is:

1) Start early figuring out where you want to live. Research your market thoroughly months or years in advance of when you actually want to start house hunting. You can do this through tracking prices, visiting the various target areas, and talking with people who live there. Ideally, you would actually live there for a while before buying. We wish we had been able to do this.

2) In non-pandemic times, I suggest going to a lot of open houses. I think we would have really benefitted from a period of casually seeing houses in person to expand and refine our list of must-haves and nice-to-haves. For example, a big difference for us between simply visiting someone’s home and evaluating whether or not we wanted to buy it is that in the latter case we brought a range finder to measure distances and calculate square footages. We developed opinions on how large a bedroom or a dining area or a backyard should be for our home that we didn’t have prior to starting house hunting.

3) Interview real estate agents. I am happy with the agent we worked with, but I’m not happy about how we sort of defaulted into working with her. And do consider Redfin. We had a great experience with the company.

4) Shop around for a loan, again well in advance of when you make your first offer. On our agent’s suggestion, we worked with a local mortgage broker, which was a great experience. But we also got our own quotes from several lenders and even one other broker to make sure we were getting the best rate. A piece of advice I got from Sam Hogan was to ask each potential lender for the official loan estimate. Quotes can take on any format, so a potential lender might be able to make theirs look more attractive by omitting or shifting around some of their fees. Loan estimates have a consistent formatting across the industry, so it’s actually possible to compare them directly.

5) Once you’re ready to submit offers, as I said earlier, pound the pavement consistently because you never know when conditions will align for you to get an offer accepted, like in our case.

6) Trust your agent, or rather find an agent that you can trust. Our agent was not super directive in telling us how much we should bid on a particular house, but she did provide us with information and market insights and to help us make the decisions. She helped us respond to shifting market conditions, like starting to use the appraisal contingency waiver.

Conclusion

We’ve come to the end of the episode! I hope this gave you some insight into what it takes to buy a home, particularly in a HCOL area in a strong seller’s market. Please know, however, that it is often possible to buy a home without all of the advantages that we had. Our financial profile is quite strong at this point because of our age, post-PhD incomes, and the gifts we received, but if you don’t have those things going for you, you may still be able to buy a home. Of course, that depends a whole lot on where you’re trying to buy. In fact, buying a home at an early age could put you in an even stronger financial position by your mid-30s than we are in, especially if you house hack or force appreciation in your home.

Best of luck to you in your home-buying journey! Sam Hogan and I will be answering any question you have about being a first-time homebuyer as a grad student or PhD this coming Thursday, May 6, 2021. Register for the call at PFforPhDs.com/mortgage/. Please join us!