When it comes to buying a home, you’ll likely need a mortgage. Qualifying for a mortgage isn’t the easiest thing to do. In fact, many potential buyers don’t qualify the first time they apply.
It’s best to make sure you qualify for a mortgage before you start shopping, or you could end up wasting quite a bit of time. In addition, a pre-approval for a mortgage will help to ensure you know how much home you can afford.
Before you apply for a mortgage, understanding why you may not qualify is important. Here are five reasons you may not qualify for a mortgage.
Not Enough Saved
Although possible, it’s rare to find a home mortgage allowing you to buy a home without a down payment or with a low down payment. Typically, you will need at the very least 3.5% of the purchase price, but in most cases at least 5% will be required down. If you don’t have enough money saved, you may not qualify for a mortgage.
Bad Debt-to-Income Ratio
One of the most important factors lenders look at is the debt-to-income ratio or DTI. This ratio basically looks at how much money you make compared to how much you have going out in monthly payments. If it’s too high, which means you have too much debt, you’ll be denied for the mortgage.
Low Credit Score
While credit isn’t the only factor in the mortgage approval process, it’s still a very important one. If your credit score is lower than 600, you won’t be able to use an FHA loan program. This doesn’t mean you can’t find a lender with a program for you, but credit scores under 600 will struggle to get approved for a mortgage.
The good news with credit, it can be repaired. Often, you can do a few things to boost your score, and if you’re right on the line, it may not be that difficult to raise your score enough to get approved.
Inconsistent Employment History
If you’ve hopped from one job to another, it could send up red flags for a mortgage company. Typically, lenders want to see two years of solid work history, but this doesn’t mean you had to be at the same job for the entire two years.
What they don’t want to see is large gaps in between jobs or changing fields of work. Another red flag may be a large fluctuation in the number of hours worked. Any of these could keep your application from being approved.
Unreliable or Hard to Prove Income Sources
While there are programs to help those with hard to prove income sources, you will need to have great credit and a good DTI to qualify. If you have unreliable or hard to prove income, it can be very difficult to get approved for a mortgage.
It’s best to make sure your income is consistent and traceable through bank statements.
If you’re looking to buy a home soon, and you want to make sure you get approved for a mortgage, make sure you understand the qualifications. Check your credit through a local mortgage lender, start saving for the down payment immediately, and make sure your financial situation is desirable. All of the above reasons you may not qualify can be fixed if you start working at it now, instead of after you’ve found out you can’t get approved for a mortgage.
Often, doctors are not aware they can get a mortgage loan right after completing medical school. It’s not uncommon for a doctor to carry a massive student loan debt, which makes it very difficult, if not impossible to get a conventional mortgage. However, this doesn’t mean they cannot get a mortgage at all.
Doctors can use a special mortgage program, which will not factor the student loan debt the same way. It’s designed specifically for the unique situation doctors face, giving them a solution to this issue.
Many banks and lenders now offer physician mortgages to help doctors get the home loan they desperately need. These banks have seen a rise in their business for these programs over the past few years.
With more doctors seeking home loans, it’s important to understand why student loan debt won’t get in the way. Here are some of the things you should know about these special physician loans if you’re a doctor looking to buy a home.
Why Doctors May Struggle to find a Mortgage
It seems like doctors would have no issue qualifying for a loan due to their higher than normal income. But the general public doesn’t understand that physicians don’t make high incomes right outside of medical school. Normally, there is a period of additional training from 3-5 years afterwards where physicians make a much lower salary.
Also, doctors face unique challenges with well above average student loan debt. This factors into the debt-to-income ratio making the doctor high risk for a mortgage. With a good amount of savings, doctors can mitigate this issue, but this may not completely solve the issue.
How Special Physician Mortgages Help
With a physician mortgage, doctors can get the loan they need to buy a house. These programs may have a bit higher interest rate compared to a conventional mortgage, but they often don’t require a down payment or may only require a small down payment.
One of the requirements of this special mortgage loan is a future work contract. Doctors have to be able to show they will have a steady income in the future.
While the loan may come with a bit higher interest rate, it does come with the benefit of no private mortgage insurance requirement. Typically, if a home buyer puts less than 20% of the purchase price down on a home, they must pay for private mortgage insurance. Physician loans don’t have the same requirement, which saves doctors thousands of dollars each month.
Also, as long as the student loan debt is still deferred, those monthly payments won’t be added into the debt-to-income ratio used to qualify a home buyer for a mortgage.
Lenders are Seeking Doctors
Eventually, doctors have an average salary of $300K, according to Medscape. This amount of income makes a doctor a lower-risk borrower for lenders. In addition, most lenders understand that if they create a relationship with the doctor, they will use the lender again and again for other financial needs, such as car purchases or home remodeling.
With this in mind, lenders actually seek doctors right out of medical school for these special physician loan programs. They want to help doctors buy homes and use these specially designed programs. If you’re a doctor looking to buy a home, don’t let student loan debt stand in your way. You can use a special physician mortgage and own a home instead of throwing your money away on rent.
As a first-time home buyer, you may go into the process experiencing all types of emotions. Buying your first home can be very exciting, but it can also be very scary. This will likely be one of the largest financial transactions of your life. Here are seven questions you should always ask as a first-time home buyer.
Why do I want to Buy My First Home?
Defining the reasons you want to buy your first home is vital to the process. There are several great reasons for investing in a home instead of paying rent. The biggest reason for investing in a home is that you will be building equity for yourself every month you pay your mortgage instead of building equity for your rental’s owner. Another great reason for buying a home is having your own outdoor space and privacy from neighbors. It’s important to understand why you want to buy your first home before moving forward with the process.
Have I Saved any Money Towards My First Home?
You will need more than just a down payment to buy your first home. Homes come with taxes, insurance, appraisal costs, inspection costs and more. You need to make sure you not only have money for the down payment, but also the rest of the costs associated with buying a home. If you only have enough saved for a down payment, know that you can also get a gift from a parent, or it might be possible to ask the seller to cover your closing costs in any offer.
Are there any First-Time Home Buyer Programs I Qualify For?
It’s important to check your local area for any first-time home buyer programs you may qualify for. This could include grants towards the down payment or programs to help with some of the other fees. Make sure you check before you buy, or you could be missing out on a program that may help you quite a bit.
Am I Ready to Own a Home?
Owning a home is a responsibility and comes with plenty of financial things to consider. There are several great benefits, but you also have to weigh the responsibilities you will have with the home. You will need to take care of upkeep, maintenance, any unexpected repairs, taxes and other things. Make sure you consider these responsibilities before you buy your first home.
Where Will I Be in Three Years?
Sure, this question is often asked during a job interview, but it should also be asked when you want to buy a home. If you have thoughts of moving to a different city or traveling in the near future, buying a home may not be the right move. However, if you plan to stay put for the next three years or longer, it might be the perfect time to buy your first home.
Will I Qualify for a Home Loan?
Every situation is a bit different, but you must know whether you can get a home loan or not before you enter into the home buying process. If you cannot get a home loan, you won’t be able to buy a home right now. Make sure you’re pre-approved before you start shopping, or you may just be wasting your time.
Can I Afford to Buy a Home Now?
While the down payment is important, so is the monthly payment and other expenses. You might have higher utility bills compared to an apartment or condo. In addition, you will need to consider insurance, taxes, and maintenance in your budget before you make the final decision to buy a home.
If you’re a first-time home buyer and you’re just getting started in the process, ask these seven questions first. The answers will determine whether it’s the right time to buy or if you’re jumping the gun a bit. A local Realtor can also help you answer any questions you have about the home buying process and will help you determine if you are ready to buy a home.
Often, physicians don’t have the ability to qualify for a conventional loan. When this happens, they have the option to use a physician home loan instead. While this type of loan doesn’t fit for everybody, it will work for many physicians in specific circumstances.
Why Might You Not Qualify for a Conventional Loan?
One of the main reasons physicians struggle to qualify for a conventional loan is student loan debt. After medical school, you may have a large amount of student loan debt and no real way to pay it off anytime soon. When this happens, a physician loan may be the perfect solution for you.
Another reason physicians may struggle to qualify for a conventional loan is the limited work history they have, or they may be paid on a 1099 instead of a W-2. This can make it harder to prove income. In addition, if you don’t have much saved for a down payment, it can be difficult to qualify for a conventional mortgage.
What is a Physician Home Loan?
When you find out you cannot qualify for a conventional loan, you may be ready to turn to a physician home loan. This type of loan is also known as a special portfolio loan. It’s designed to help you quality even though you have specific obstacles in your way.
Typically, physician home loans are used for existing fellows, residents, and new doctors looking to buy a house. Banks offering these types of portfolio loans understand why physicians are such good candidates. A few of the top reasons they are willing to offer a physician home loan include:
– Physicians have very low default rates
– Physicians have current and future high earning power
– Physicians have jobs less affected by changes in the economy
Benefits of a Physician Home Loan
When you want to buy a house, but a conventional lender tells you that you can’t, a physician home loan is the answer. This loan will offer several key benefits including:
– Lower down payments – Often, you will only need to put 0% to 10% of the purchase price down on the home.
– No PMI – PMI or private mortgage insurance is usually required for down payments lower than 20% of the purchase price.
– Great Interest Rates – Even though it’s not a conventional loan, you’ll still get a good rate.
– Very flexible with Student Loan Debt – As the most common obstacle of getting a mortgage for physicians, the physician home loan doesn’t consider student loan debt as heavily as a conventional loan will.
While you won’t find physician home loans from just any bank, there are several that offer this type of program. The guidelines may vary a bit from one lender to another, but these loans are designed to help physicians buy a house. They cut through the many obstacles you will face and give you the financial ability to own your home now instead of many years in the future.
It’s not uncommon for buyers and sellers to have plenty of misconceptions about real estate agents. From the way they work to what they get paid, there are several myths floating around out there.
Before we get into some of the myths you should ignore, it’s important to understand, most real estate transactions probably involve two real estate agents. One agent will represent the buyer, and one will represent the seller. Now, let’s look at five of the most common real estate myths you should ignore.
Myth #1 – Once You Start Working with an Agent, You’re Stuck with Them
When you sell your home, you will sign a contract with a brokerage and an agent. Typically, the terms of this contract will last for six months to a year. While you may be stuck with the agent after signing a contract, it’s not always the case. Often, if things aren’t working out with the agent, you may ask them or the manager of the brokerage to release you from the agreement.
When you buy a home, you will often sign a contract with a brokerage and an agent. The terms of this contract will last for three to six months. Most buyers’ agents will work free for you until you find a home. While this process may take some time, the agent won’t get paid until you purchase a home, and the seller usually pays your agent’s commission too!
Myth #2 – All Real Estate Agents are Created Equal
Often, buyers and sellers think of real estate agents as the same as each other. However, they are not all as good as each other, and some are far better.
Sometimes, the agent you choose will be better at what you need than anybody else in town. For example, if you’re a physician and you’re relocating, choosing an agent that specializes in working with relocating physicians will be far better than just choosing any old agent.
In addition, a local agent provides advantages, and some simply work harder for you than others. Not all agents are created equal, and you will find this out if you hire an agent that doesn’t work as hard as another.
Myth #3 – Agents Get Paid a 6% Commission Every Time
Many buyers and sellers assume the agent they work with is making 6% of the deal no matter what. This isn’t the case.
First, the seller often pays the commission, and it will likely be split four ways. Each agent will get a portion, and so will each brokerage involved. In addition, the brokerage commission isn’t set in stone, and sometimes can be negotiated, if you are a repeat client or will complete more than one transaction with the agent.
Myth #4 – It’s Fine if You’re a Buyer and You Use the Home’s Listing Agent
Simply put, the listing agent for the property doesn’t represent you as the buyer. Unlike many things in our world today, real estate cannot just be purchased with a smartphone; especially if you want a good deal.
It’s important, as a buyer, to find your own real estate agent to represent you. Without proper representation, you may not get the best deal on the property you’re interested in.
Myth #5 – FSBO (for sale by owner) Homes are Off Limits if You have an Agent
This is simply not true. While some sellers of FSBO homes may prefer not to work with an agent, the majority will work with an agent if the deal is the right deal. Many FSBO sellers today understand it will be much harder to sell their home without allowing the buyer to have a real estate agent.
When you’re ready to buy or sell a home, make sure you have the right real estate agent on your side. The right agent can make a huge difference. Don’t believe everything you hear and before you believe a myth about agents, make sure you get the full story.