Do doctors have better mortgage opportunities than other people looking to buy a home? Absolutely! Becoming a doctor is an accomplishment in itself! From surviving med school to making your way through residency, becoming a physician takes a lot of work, but it comes with some much-deserved rewards. One benefit of becoming a doctor is being able to take advantage of the unique home financing opportunities that are available to physicians. Doctor loans, otherwise known as physician loans, give new doctors great financing options despite their specific financial situation.
If you are getting ready to approach the important milestone of purchasing a home, it is important to consider all the different aspects and options related to your financing options. By educating yourself on all of your possible options, you can make the best choice possible when it comes to financing the purchase of a new home.
Doctor loans can be a great tool to help you achieve the goal of purchasing a home and are a flexible option for new doctors to consider as they enter the home-buying process. There are lenders available that are eager to help physicians purchase homes.
Learn the impressive mortgage options that are available to you as a doctor with this helpful guide on physician loans.
Understanding Physician Loans
What Is a Doctor Loan?
When a person is applying for a home loan, there are many factors that bank brokers examine in the financial portfolio of the potential applicant. Physicians, specifically new doctors, often have an extremely limited work history and high amount of debt from student loans. While this type of portfolio would usually mean that an individual would not be able to receive a loan, there are unique mortgage opportunities for doctors in these specific circumstances: doctor loans. Physician home loans are not only a benefit for physicians but can also be extremely beneficial for banks and lenders as well.
What Are the Benefits of Offering Doctor Loans?
Typically, lending to such a high-risk portfolio would be a financial concern, but this is not the case for lenders offering mortgage opportunities to physicians. Doctor loans can be cost-effective options for financial institutions as well as physicians.
- Referral Programs: Becoming a doctor allows you to join a network of like-minded medical professionals. Banks and lenders know this! When a lender helps you finance a home, they are optimistic that you will recommend them to fellow physicians and other colleagues. This is why lenders are so eager to work with physicians and also why you should expect a high quality of customer service when seeking out a doctor loan.
- Default Rates at Low Levels: For physicians, default rates are often at levels that are much lower than average.
- Cross-Selling Opportunities: Choosing to work with a lender can lead to many other financial opportunities. As you seek out a bank or lender to work with, be aware that this relationship may be something that can be beneficial to both the lender and you in the future. You might not be choosing a loan — you may be choosing a long-term financial relationship that can benefit you along the road as well.
How Can I Become Eligible for a Doctor Loan?
Physician home loans are an exciting financing option, but only for a select few. In order to have these options available, banks and lenders must set specific guidelines to determine an individual’s eligibility for a doctor loan. Physician loans often operate under these unique qualities and circumstances:
- Physician loans are offered only to dentists, veterinarians, and physicians.
- They require minimal down payment options, in the 0-5 percent range.
- Typically, they do not require PMI, also known as private mortgage insurance.
- Financial institutions keep payments on student loans out of debt-to-income ratio calculations.
- A contract listing a salary or future can be used in substitute of pay stubs or W-2 forms from previous employers.
- Loan interest rates are similar regardless of lending amount.
A doctor loan is ideal for an individual that has just entered the medical field. These lending options are often available to physicians that are only 5 to 10 years out of residency. Purchasing a home can be achievable even early in life with the help of a doctor loan.
Is a Physician Loan the Right Idea?
The exceptional opportunities that a physician loan can give you might sound too good to be true. Let’s take a look at some of the top benefits of doctor loans:
- Minimal down payment.
- No need for Private Mortgage Insurance.
- Student loan debt isn’t a factor in your debt-to-income ratio.
- A job offer can be sufficient as proof of your earnings.
That being said, physician loans do come with some cons:
- May be restricted to certain types of properties.
- May be associated with higher fees and interest rates.
- Often only available to new grads.
- Certain banks may have requirements like opening a checking or savings account.
With any lending opportunity, it is important to factor in all of the considerations and to take a good look at your plans as well as your personal finances. When done the right way and for the right reasons, physician loans can be a valuable tool to help you find a mortgage that you can afford alongside your student loans. A student loan can also help you build a relationship with a bank that can benefit you for years to come. These types of relationships with banks can have a positive impact on your financial goals and lead to other opportunities later down the road.
Finding Physician Loans the Right Way
If you’re ready to take on a physician lending opportunity, you need to make sure that you are seeking physician loans the right way. Common mistakes can actually end up costing you big dollars, so it is important to find a physician loan correctly and to avoid these common errors.
Find an Expert Realtor
Do your homework when you are choosing a realtor! It’s best to pick an individual or real estate group that has years of experience in the business. When you do this, you can know with confidence that you’ve chosen an individual with experience in the area you are interested in buying a home. A good realtor can also be a great resource for finding referrals and will have a solid portfolio of past deals.
When you choose a low-quality realtor, you may be saving money initially but this will cost you in the long run. Low-quality realtors will not have strong negotiation powers and will be poor communicators. They may even waste your time looking at properties that don’t meet your expectations or requirements.
Choose a realtor that will help you identify the property of your dreams and can run a comparative market analysis to ensure you find the perfect home to buy.
Consider All of Your Expenses
With physician mortgage loans, financing your future home is easier than ever. That being said, there are a lot of costs associated with purchasing a property. Make sure that you are considering the current costs of your student loan and that your future wages in your physician career can help accommodate these expenses.
Also be aware of the right times to buy! The real estate market is constantly changing, so you should do all that you can to be mindful of these changes. Careful planning can help you determine the right time to purchase your home.
Understand the True Cost of Owning a Home
Some cities and homeowners associations (HOA) have certain associate fees. Property taxes and other costs are all factors that you should be mindful of as a new homeowner. From property taxes to typical fixes expenses, it is important to factor all of these costs into your physician loan mortgage.
Don’t Focus Too Much Attention on Interest Rates
Doctor loans are an extremely valuable lending option for future home buyers that happen to be a physician. A financial planner can help you find the right doctor loan from a lender that is perfect for your needs. Financial advisors are happy to work with doctors and can help guide you in the right direction as you purchase a new home.
Are Physician Loans Available in My Area?
Now that you’ve looked out for some common mistakes and know the benefits of choosing a doctor loan, you can check out physician loans in your area. Doctor loans are available in the majority of states in the United States. There are many growing programs that are beginning to offer doctor loans because of their convenience and unique attributes.
Finding the Best Physician Loan Rates
With any lending opportunity, you are going to want the best rate possible. Physician mortgage opportunities can lead to great rates on a mortgage. However, there are other tips you can follow to get an even better rate on your mortgage.
Work on building a good credit rating and having a high credit score. If you can repair your credit and save up for a down payment, you will be on your way to getting a great mortgage rate and purchasing a new home. Specifically, you should do the following before seeking a physician home loan:
- Work on repairing your credit. While you can get a good mortgage rate as a physician, a stronger credit rating and higher credit score can be extremely beneficial. This can also help you get the best mortgage rate possible on doctor loans.
- Educate yourself about physician mortgage loans and other lending options. You need to be well-prepared on every aspect of the home buying process. From the purchase of your home to your financing options, it is important to be as well-educated as possible about all aspects of the process. This can help guide you as you ask questions of any financial advisors you might be working with.
- Every moment can be a learning opportunity. Physician relocation is not uncommon, so the first home you buy out of residency may not end up being your forever home. This home-buying experience can still be a valuable learning tool and serve as a great milestone in your life.
- Weigh the pros and cons of all of your lending opportunities. There are a variety of different options available to you for financing a home. Whether you choose a doctor loan or not, it is important that you consider all factors carefully and are educated on all of your options. That’s the only way you can make the best choice possible.
Choosing a Physician Lending Opportunity
If you are working as a doctor or are an upcoming physician, you should consider taking advantage of the unique lending opportunities available exclusively to physicians. Banks and lenders are eager to work with doctors for good reason! You’ve achieved the goal of becoming a doctor. Let these unique lending opportunities allow you to achieve the goal of financing a home.