Physician Mortgage Loans
On average, one year in private medical school can cost up to $63,692, and one year in public medical school might cost up to $62,995. It’s no secret that going to medical school is expensive and leaves young doctors in debt.
When you graduate and get a job as a physician, you carry the debt around with you which makes it harder to receive loans.
If you want to purchase a home right out of school, all hope is not lost! You can apply for physician mortgage loans made specifically for your situation.
What should you should about this type of loan before applying? Keep reading to learn the dos and don’ts of physician mortgage loans.
1. Do Shop Around
Although you are getting a better deal with physician mortgage loans, you should still look at different lenders. When you look into various loans, you’ll get a better idea of all the options you have.
Compare interest rates and terms to find the best deal for your needs. Some lenders let you close on a home before you start working if you have the right contract and documents to prove earnings.
Keep in mind that a mortgage might not be worth the trouble if you don’t plan to stay in your city or town. Just because you can afford a mortgage, doesn’t mean it is the best option if you don’t plan to stay for at least a few years.
2. Don’t Buy More Home Than You Need
Before settling on a physician loan mortgage, decide how much space you need. How much money you can afford to spend and your lifestyle will dictate the amount of space that works for you.
Spending a lot of time in medical school to buy yourself a dream home when you get a job is ideal for many. However, it isn’t always practical.
If the real estate market begins to plummet, you’ll have a harder time selling a large and lavish house. Your investment could decrease in value over time.
Don’t go overboard, only buy what you need.
3. Do Understand the Difference Between Doctor Loans and Conventional Mortgages
Physician home loans and conventional mortgages differ in many aspects. A doctor loan is offered to physicians, dentists, and other medical professionals. Those in residency can also apply for this type of loan.
The key differences between the two loan options are:
- You can put little or no money down
- The interest rate is slightly higher
- No private mortgage insurance (PMI) is required
Private mortgage insurance is available to protect lenders if you stop making payments on a home loan. Most lenders require this insurance, but not for those applying for a doctor’s home loan.
This allows the applicant to focus on paying off school debt even if you don’t pay a down payment on the home you are buying.
Although income is a huge factor to qualify for a physician mortgage loan, you’ll have a high-interest rate because of your debt-to-income ratio.
Even if you receive a high-paying salary early in your career, your debt is likely to outweigh your annual income. When you apply for any home loan, the debt-to-income ratio is an important factor.
In a lot of cases, young doctors who want to buy a home can only get approved for a physician mortgage loan because of their debt.
Don’t let a high-interest rate keep you from buying a home straight out of school. You’ll have the option to refinance your home to a traditional mortgage with a lower interest rate later on.
4. Don’t Freak Out if You Get Denied
If you get denied by one lender, don’t freak out! Different lenders assess criteria differently.
The loan amount you receive will be determined by the following:
- House condition
- Credit score
- House condition
Banks might have different credit score requirements and offer varying loan amounts depending on the physician loan program they run.
Some banks provide construction loans for doctors who want to build a new home or buy one to fix up.
5. Do Find the Right Bank
There are national and regional banks that offer physician mortgage loans. Each bank will have its own structure, terms, and requirements.
Huntington Bank is a top option in multiple states, including Utah, Colorado, Illinois, Wisconsin, and Michigan. Dr. Home Finance allows you to find a lender by state and connect with all banks in one form.
This process lets you locate the best lenders for a doctor home loan in your area. You can use this marketplace when you decide to start shopping around and comparing lenders.
6. Don’t Stop Saving Money to Buy a Home
Even though a physician home loan provider often doesn’t require you to pay a down payment or PMI, you should still try to save money for a home.
If you have the money to afford a 20% down payment, you will benefit when qualifying for a mortgage. Doing this also opens the door for other options, like a conventional home loan.
However, qualifying for a traditional mortgage will also require you to bring your debt-to-income ratio down. For a traditional home loan, you’ll likely have to wait until later on in your medical career.
Saving money and putting a down payment down can help you lower interest rates and give you a bit of a bonus when getting a physician’s mortgage loan.
Are Physician Mortgage Loans Right for You?
If you want to buy a home right after medical school despite your debts, you can with a doctor home loan. Physician mortgage loans are made specifically for doctors or residents who want to buy a house.
With this loan program, you benefit from little to no down payment and don’t have to pay private mortgage insurance, but the interest rate is slightly higher. For most, the pros outweigh the con.
Think a physician home loan is right for you? Contact Dr. Home Finance today to get started or to answer any questions you might have.