Mortgages For Champions – Best Mortgages for Doctors

Mortgages for Champions = Best Mortgages for Doctors

We Offer Some of the Best Mortgages for Doctors

Applying for your mortgage can be one of the most challenging, and most stressful, parts of buying your new home. The good news is that it doesn’t have to be.

One of the bizarre things about the process is that people who make a good, often very good income, can have trouble getting a mortgage for their home. Certain mortgages work best for people that make their own income. This is especially true when it comes to mortgages for doctors.

Many people think as long as my credit is good, and I make enough money, I’m golden. Unfortunately, that’s not the case. Your bank or lender may want some additional information to support your file.

If all of this seems a little troublesome, don’t worry. We’re here to help. Today, we’re going to talk about mortgages for doctors and other medical professionals. By the end of this article, you’ll be able to confidently apply for the mortgage that’s perfect for you.

Let’s get you a house!

What’s the Problem?

So, what’s the problem? Most doctors and medical professionals make great salaries, right? So, it would stand to reason that mortgages for doctors shouldn’t be a problem at all.

Well, that’s not exactly true. See, banks and lenders need to know a little more about their borrowers. An 800 credit score and a yearly salary of $150,000 isn’t enough for them to lend you their money.

Think of it this way, when a bank or lender gives you a mortgage, they’re essentially “betting” on you to pay it back. And financial institutions only want to bet on sure things.

Now, obviously, that’s a little bit of an exaggeration. There’s no 100% guarantee that someone is going to pay back their mortgage. No matter who they are.

However, your bank or lender wants to feel as confident as possible. This is why they will look at things like income history, debt to income ratio, etc. Any information you can show them to prove you’re as close to a “sure thing” as possible helps your case.

Once you gather up all of your “proof” the next step is applying for the right loan. There is a wide variety of loan products out there. Your job (with the help of a professional, of course) is to find the loan product that’s right for you. This is especially true as a doctor or medical professional.

Mortgages For Doctors

As a doctor, you’re in luck! There are loan products available that cater specifically to people in your field. These loans are called physician loans.

Physician loans are different than traditional mortgages. They are more flexible and have some other features to help doctors purchase a home and start their life. One of the main reasons for these unique loans is med school.

Unfortunately, med school is unavoidable. The high price tag of med school is also unavoidable. This is why doctors enter the workforce with higher amounts of student debt than almost any other profession. Physician loans account for this “occupational hazard” of becoming a doctor and aim to make life after med school easier for newly-graduated physicians.

What Is It Exactly?

So, what exactly is a physician loan? Let’s dive into the details.

One of the perks of physician loans is that they typically don’t require PMI. PMI stands for private mortgage insurance.

Normally, homeowners have access to loan products that allow you to buy a home with as little as 3.5% down. While these are great programs for people just starting, lenders get a little uncomfortable when their borrower has less than 20% equity in a home. As a result, your lender will usually tack PMI onto your loan until you hit that 20% equity mark.

With mortgages for doctors, however, there is no such thing as PMI. Even if the down payment is low. This is huge because PMI can get expensive. It can add hundreds of dollars to your monthly payment. Depending on the size of your loan amount.

The idea is that giving young physicians a break like this will free up more money to help them pay off their student debt. Which, depending upon your area of study, can be well into six figures.

Debt to Income Ratio

Another area where physician loans are flexible is the debt to income ratio. Again, the idea is to help new physicians pay off their student debt.

Traditionally, if you’re debt to income ratio is high, you’re seen as a risky borrower. The way a lender looks at it is if you have high debt, you have less disposable income to pay toward your mortgage.

Because doctors go to med school, have to do an internship, and have to do a residency, they wouldn’t qualify for most loan programs’ debt to income (DTI) requirements. Their student debt takes up the majority of the money they make shortly after graduating.

Physician loans help out by treating DTI requirements a little differently. These loan products expand their DTI to accommodate the higher ratio that doctors typically have. Some physician loan products also assist doctors by not counting medical school expenses toward their DTI ratio. This can be a huge help when the lender is reviewing a doctor’s application.

Proof of Income and Employment Verification

In addition to debt to income and credit score, lenders also want to see that applicants are working and earning income. This is where proof of income and employment verification come in.

Lenders want to see a history of stable employment and stable income to issue a loan. This is why mortgage professionals will tell you not to switch jobs or anything during a loan application process. Even the smallest change could throw off your chances of approval.

You also can’t apply for a loan with the promise of a new job and a steady income. However, this isn’t the case for physicians.

Most people can’t go to a mortgage broker with a signed employment contract and get approved for a loan. With mortgages for doctors, however, a signed residency contract may be good enough as proof of income and employment. It depends on the lender, but some physician loan products will move forward with a residency contract as sufficient proof.

Some lenders will also lend to applicants with a shorter term of employment. Typically, lenders like to see two years of employment history. Certain lenders, however, will lend with less than two years of self-employment history. This comes in handy as an entrepreneur, independent contractor, or a doctor who is opening their own practice.

Who Can Qualify

Physician loans are available to the majority of doctors and nurses, but they may not be available to all. Medical professionals with an M.D. or D.O. degree qualify for physician loan programs. These individuals have access to all physician loan products.

Some products may also be available to dentists and orthodontists with a D.D.S. or D.M.D degree. Certain lenders may even make their physician loan programs available to doctors with a D.P.M. degree.

Physicians go through a unique process to start their careers. For starters, they are taking six figures of debt. But it doesn’t stop there. Physicians also go through one of the more unique paths to becoming a practicing doctor.

In addition to med school, physicians are required to do an internship and a residency to complete their program training. Lenders are sensitive to this fact when underwriting mortgages for doctors. Most lenders will adjust the approval criteria on a case-by-case basis.

The lending criteria can change depending on how far along a physician is in their training. The loan amount also adjusts as well. Attending physicians can enjoy access to higher loan amounts than med school interns or fellows.

It’s important to note that these loans are for primary residences only. Physicians can’t use these loans to buy or refinance investment property. They also aren’t allowed to use these loans for vacation homes.

Should You Apply?

So, you’re probably wondering if a physician loan is a good idea for you. Well, the first question is “are you working toward being a physician?” If you’re reading this, the answer to that is probably yes.

If that’s the case, then you’ll want to take a look at your financial situation before applying. How much money do you have saved up?

The biggest benefit of a physician loan product is to get into a house with very little money out of pocket while avoiding PMI. Most first-time homebuyers, regardless of career, don’t have a lot of money to put down on a home.

If this sounds like you, then a physician loan would be a great place for you to start. If, however, you have 20% to put down then a physician loan may not make sense. You may want to consider applying for a traditional or jumbo loan.

Just What The Doctor Ordered

We hope you’re walking away from this article with a better understanding of physician loans. Mortgages for doctors can be a useful tool while you’re working toward your goal of becoming a practicing physician.

If you want to get started living a life of home ownership right away, then take advantage of the benefits physician loans can offer you. If you’re ok with waiting and saving, then it may not be for you.

Working with a professional can help you make that decision. If you have questions about physician loans or any other mortgage products, contact the team at Mortgages for Champions. We are part of your home buying team and are happy to help in any way we can.