You may have heard about mortgages specifically for physicians (known as physician loans) and are thinking of buying a home. They are attractive, but make sure you totally understand them to decide if you should take out a physician loan. There really are three main components to understand, so let’s go through them.
Important components of physician loans, when you buy a house:
1- Who is eligible?- Physician loans are targeted for MDs, Dentists, Dental Surgeons, Vets, Newly licensed residents, Newly licensed medical students.
2- How much you can borrow – With physician loans you can borrow up to $2M to buy your primary residence.
3- Do you have to qualify with your student loan debt? The answer is no, well maybe. You see you can if the student loans are deferred or in forbearance for a year from closing.
Another beautiful thing is that you can be getting ready to start your job and actually be able to close on a home before you start. This can be great if you are moving into a new community for your job and want to buy right away. I do speak with caution here. The reason I do is that you’ll want your lender to review your contract from the employer. Make sure your loan officer offers to have their underwriting team physically review it and approve it. I say this because loan officers can’t approve your loan. The underwriter determines this. So make sure the loan officer offers to have their underwriter look it over.
Physician loans have points to consider, there are additional things to think about. The hot word is No Mortgage Insurance! This is pretty awesome to be able to put a fractional down payment and have no mortgage insurance. What are the trade-off you may be asking? Lenders are protecting their investment when you have mortgage insurance. If a lender is going to waive that protection, they are going to want a higher return on the investment. If you have no mortgage insurance, expect the interest rate on the loan will be higher. Student loan payments can be omitted in certain instances, but make sure to ask the lender what the requirements are. Have your loan officer discuss the potential of qualifying for a traditional loan. Can you, and you just don’t know? If so, you may be in a better financial position after closing. I came across a good blog on this topic on CBC, with some good food for thought on physician loans; check it out here.
If you’d like to learn more about physician loans and if you should take one out fill out this form: