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The Physician Mortgage Loan Program is designed to help persons in the medical field qualify for a mortgage loan with zero to little money down and no private mortgage insurance (PMI.)
Lenders understand that the process of becoming a physician is a multistage process. Therefore, criteria for physician mortgage lending varies depending upon how far along a potential qualified borrower is in their career.
Typical first-time homebuyers in the U.S. are 34 years old. However, potential home owners in the medical field contend with four years of medical school, a minimum of three years for residency, and more if there’s a specialized fellowship. Therefore, most medical students have not even become independent physicians by the time they are in the first time home-buyer age-range. While the average 34 year old has spent 12 years in the workforce, medical students and residents are at a disadvantage.
A “qualified borrower” is defined as a Licensed Medical Resident, fellow or attending physician with a signed contract for employment. Though these doctor programs tend to have higher maximum loan amounts for attending physicians, than for interns, residents and fellows, they do offer those who are moving from medical school to residency a chance to own a thome.
These loans provide some leniency with securing a license. While a typical loan will usually require a physician to be licensed, with a physician loan documentation that indicates a physician has matched with a residency program is usually enough. These doctor’s loans may also be available to residents so that they may be able to close on a home before starting a position.
Residents, who are yet to realize their full earning potential, are a good bet for the future and doctors who are just starting out will normally see a substantial increase in their income as they progress through their career. Therefore the financial break at the beginning of the loan is not a risk for lenders who participate in the physician loan program.
Additionally, the typical doctor loan makes allowances for med school debt and, therefore, these loans are more flexible when it comes to debt-to-income (DTI) ratios. As most physicians carry a six-figure med school debt, doctors – especially residents – would be at a disadvantage using more commonly lenders’ preference for low-DTI. For this reason, doctor loan programs do not count med school debt into DTI if payments are deferred, in forbearance or being made in a timely manner. Most participating institutions offer loans to physician borrowers with a credit score higher than 700.
The other major advantage of this type of loan to residents is that lenders can sometimes offer a mortgage with zero to very little money down. On average, a down payment ranges from 0% to 10% for physician loans, down depending on the lender.
However, residents need to keep in mind whether they will be staying put for a few years. This type of investment makes sense for medical workers who are looking to build their careers in a certain region. It can also be a favorable option for both relocating residents and those who are a year or two into training. Basically, the longer a resident is going to live in the home, the more the numbers are in favor of buying versus renting. Typically, residents will be somewhere for four or five years or even more, and therefore buying makes good financial sense.
Additional advantages of a Physician Home Loan include:
Fixed rate options
Up to 100% financing and no monthly mortgage insurance payments
Employment contracts can be used as evidence of income – especially for a resident.
Each state has their own requirements and locating a qualified lender who works with Residency status is important. Since not all financial institutions offer Physician mortgage loans, MD Mortgage Loans can help Residents find potential lenders while also taking into account the pros and cons of the program for each individual.
MD Mortgage Loans have compiled a list of Physician Mortgage Lenders and Banks by both state and qualifications. MD Mortgage Loans can also help narrow it down so potential borrowers find the right fit for their individual needs. Sorting through industry-leading competitive rates that fit a variety of financing needs is the first step to finding a program that works for the individual and their specific circumstances.
