For new doctors, recent graduates from medical school or even residents, one of the challenges of starting this new chapter of their life is getting access to housing. Fortunately, there is a special kind of mortgage loan available just for those in this career field. A physician loan can make the dream of home ownership a reality for many new physicians. But with the challenges of starting a new practice, completing medical school, or finishing a residency, applying for a loan can be tricky to do. Fortunately, The Mortgage House, LLC. is here to help. We’ve outlined some of the things you need to do and should keep in mind while applying for a physician loan in Fayetteville.
What are Physician Loans?
Physician loans are a special kind of mortgage product that is available only to doctors. Lenders see doctors as more responsible borrowers, so these loans are structured differently and have limited restrictions. These loans can be taken out while a physician is still in school or is recently graduated. This is possible because lenders will accept an offer letter for a new position as proof of income. Further, many lenders offer physician loans and accept zero percent down and do not charge private mortgage insurance, which allows the physician to put more money down toward their new home. Finally, physician loans do not look at student loans when considering the debt-to-income ratio, which means that their credit score appears higher.
Qualifying for A Physician Loan
While a physician loan is meant to assist new doctors in getting financial resources for a new home, there are still some limitations on these loans. To qualify for a physician loan, you’ll want to ensure that your credit score is in good shape. Typically, lenders will want to see a credit score of 700 or more before a lender will even consider extending the offer of a physician loan. Higher credit scores will also favor you in the long run, as your interest rates will be noticeably lower.
In addition to your credit score, keep your DTI ratio in mind. While students loans won’t count, if you’re carrying a lot of debt from credit cards or car loans, you might have a hard time getting a physician loan. Try and get your DTI ratio below 43 percent to improve your chances. Similarly, do your best to pay down any credit card debts before applying for a physician loan, as these will help you when applying for the loan.
Finally, while lenders will accept a letter of offer as proof of income, this isn’t the case if you’re a self-employed physician. You’ll need to show two year’s worth of income in this case. You’ll want to ensure that these records show consistent income or improving finances.
The Benefits of Physician Loans
Physician loans have a host of benefits. One of the largest benefits is that this type of loan does not require a down payment. Typically, loans require that new home buyers put down somewhere between three and five percent of the value of the home. Physician loans don’t require you to pay PMI. Private mortgage insurance is usually added to a mortgage pays a down payment of less than 20 percent, and the annual costs of PMI can cost you. By avoiding this, you can save hundreds, if not thousands each year. Additionally, there is no limit to how much a physician can borrow with this type of loan and the interest rates are generally low.
The Downsides of Physician Loans
The downsides of physician loans are limited but can be pronounced. If you choose not to make a down payment, you may be paying more for your house in the long run because of increased interest. Additionally, many lenders do not offer physician loans as a fixed rate loan. You can refinance your home to limit the effects of this, but this fact should make you consider just how long you plan on living in that house.
Physician Loans in Fayetteville
For physicians in Fayetteville, The Mortgage House, LLC. is here to help. We’re here to help you get access to the financial resources you need to make owning a home a reality. Apply for your physician loan online or contact us to schedule a free consultation.