Everything You Need to Know About Doctor’s Mortgages
The average medical graduate owes $241,600 in total student loans. Not only that, they have to pay quadruple the amount because of the interest rates. It often makes it hard to pay off the loans, raise a family, and buy a house.
Because of that, doctors have difficulty obtaining a traditional mortgage that fulfills their requirements. Fortunately, a physician mortgage was designed to address the high debt-to-income ratios from the doctor’s college loans. Continue reading to learn how a doctor mortgage can save the day.
What is a Mortgage Loan for Physicians?
A physician mortgage is a kind of house financing reserved for qualified medical practitioners. There are fewer limitations than with regular mortgages, since they are mostly based on the doctors’ projected future incomes. This is an appealing proposition for novice physicians, and there are more helpful guide on doctor loans.
As a resident or fellow, your compensation is far less than it will be as an attending in the next several years. Lenders may even accept a letter of employment as evidence of income in rare situations. This may have a significant effect on your overall debt-to-income ratio in the eyes of a mortgage lender, particularly if your career progresses.
Payment in Advance
When applying for a traditional mortgage, you must put down as least 20% of the entire purchase price. This is to avoid paying Private Mortgage Insurance (PMI). PMI is a monthly charge added to your total mortgage payment to protect your lender from nonpayment.
With a physician mortgage loan, you may avoid PMI, even with a small down payment. You may put no money down and lock in a low rate. Naturally, if you can, making a down payment will reduce your total monthly cost and interest paid.
Debt-to-Income (DTI) Ratio
When applying for a traditional home loan, lenders often need a DTI ratio of 43% or less. If you’re loaded with medical school debt, maintaining under that proportion may seem impossible. Physician mortgages use an Income-Driven Repayment Plan (IDR), not a DTI.
For example, let’s say your monthly payment on your loans is low owing to a lower beginning wage. When you apply for your mortgage, your total DTI will be substantially lower than using an entire loan amount.
The maximum loan amount available via conventional mortgages is $647,200 in most places and $970,800 in high-cost areas. Physician mortgages do not have this borrowing limit, allowing doctors and their families additional freedom.
Just because you may borrow more than a typical loan does not imply you should. Physicians should continue to borrow within or below their means to optimize their pay.
Physician mortgage rates are comparable to conventional jumbo mortgage rates. Your interest rate will depend on your individual financial circumstances. It might be beneficial to use a physician mortgage calculator to understand the range.
Learn More About Doctor Mortgage
Buying a home and raising a family can be a challenge if you are in massive debt. That’s why physician mortgage lending and loans exist to help doctors. These mortgage loans do not have borrowing limits, no PMI, and no debt-to-income ratio.
It helps the doctors prepare for the future without getting into more financial turmoil. After all, we want to keep the medical professional alive. To do that is to check out our blog posts for more insight on doctor mortgage.