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.
The decision to own or rent greatly depends on where you are in your career. Whether you’re a new resident or you’ve retired from practice will have a huge impact on the decision to rent or own as a doctor. For most doctors, after residency, it will make sense to buy, but not always.
Those in residency have a much different decision as they may be moving as soon as they complete their residency. There are several factors to consider before deciding to buy or to rent. Here’s a look at some of those factors to help you decide if it’s the right time to buy a home or if you should continue to rent.
How Permanent is your Position?
For many doctors or future doctors, moving is just a part of the territory. You may have moved when you went from your undergraduate degree into medical school and you may be preparing to move again as you complete your residency. Even once you’ve entered your field of work; it’s possible you could move every few years, depending on the opportunities and the type of medicine you practice.
One of the biggest factors in the decision of a doctor to rent or buy is how permanent the position you currently hold is and will be in the future. If you believe you will be working at the same location, in the same city for several years, buying makes sense. However, if you’re unsure if you’ll still be working at the same place, renting may be a better choice.
What’s your Financial Situation?
The financial situation of a physician changes over time. Often, you’re dealing with paying off massive student loans when you first graduate from medical school, but these loans won’t be there forever. Your financial situation will also play a rather large factor in the decision to rent or buy.
However, it may not play as big of a role as you might think. With the ability to use what is known as a doctor loan or physician loan, you may be able to buy with little or no money down, even if you have huge student loans to pay off and you don’t make a ton of cash yet.
The doctor loan program mitigates the risk for the lender by using future earnings as a factor. They come with several benefits, such as no need to purchase mortgage insurance and you don’t necessarily have to have paystubs to prove your income. Often, these loans will use an employment contract showing proof of future earnings and you will likely be required to keep an account with the lending bank for automatic electronic payments.
There are benefits to buying a house and renting a house for doctors. Not every situation is the same. However, if you plan to stay put for at least a few years, it makes more sense to buy than rent, in most circumstances.
Buying a home is an investment and allows you the ability to actually put your money into something you own instead of something your landlord owns. However, if you’re not sure how permanent your current position is, renting until you have a more permanent situation might be the right choice.
There is no wrong or right answer, but doctor loans do make it much easier to buy. When you buy, you also have the opportunity to turn your first property into a rental property when you’re ready to upgrade. This is also possible if your situation changes and you need to relocate for a new position.