Almost every day, I am asked about student loans. Most of us have it. Most of us have A LOT of it! And most of us have a hard time qualifying for a conventional home loan as a result of it.
According to the most recent number I’ve seen, medical students graduate with an average of $183,000 in student loan debt (Association of American Medical Colleges, 2015). This means that there are many of you who see this number and think, “I wish I only had that amount!”
Depending on what stage you’re at in your career, you might be in one of three phases of debt repayment:
- Deferment / Forbearance: Deferment and forbearance are typically considered the same to lenders. Even though you’re not currently paying off these loans, banks know that they will affect you some day. So, they typically take 1% of the full loan amount and add that to your monthly debt burden.
- Income Based Repayment (IBR): Banks know that your payments will increase as you get paid more, so they typically still like to use that same 1% amount of your loan in calculating your monthly debt payments.
- Full Repayment: Simple, they use the exact amount of your payments in calculating your monthly debt payments.
While nearly impossible to qualify for a home loan using conventional metrics, young physicians may be able to qualify with a physician loan provider because of the alternative way such lenders handle repayment of student loans:
- Deferment / Forbearance: They may not count these loans at all towards your monthly debt payment.
- Income Based Repayment (IBR): They may use the exact current amount you are paying. This is typically much better than using 1% of the total loan amount.
- Full Repayment: Same as with a conventional loan, but hopefully your income has increased by this point to safely qualify.
If you’re a physician searching for a home loan, please don’t hesitate to contact me for assistance.