Lower Down Payments
Instead of the typical 20% expected by most lenders, obtaining a physician home loan with a down payment of 3% or less may be the right move for you. In some cases, the applicant can qualify for a down payment grant that helps the home buyer pay the down payment without having to worry about repaying the money. The individual also won't have to worry about paying income taxes on the grant, since it's not considered income. The grants can also be used to pay closing costs.
Buy Your Home Before You Start Working
Many new doctors take positions in a new city or state, requiring them to relocate far from home, which means they need to find housing before they begin their new careers. A physician home loan lets the individual qualify for a mortgage up to 90 days in advance of starting their new position. To qualify for this benefit, the buyer should provide the lender with a copy of his or her employment contract as soon as possible.
Deferred Student Loans Are Exempt
The third benefit is that a physician home loan won't add deferred student loans as debt in determining the individual's income versus debt ratio. This factor is huge since most FHA home loans are disqualified as a result of the high amount of student debt. Physician home loans calculate student loan debt differently, which helps the applicant qualify.
The Downside of Using a Physician Home Loan
A look online for where to find a home loan for doctors can help you find lenders offering these services. However, before you consider applying for this type of loan, it's important to recognize that there are drawbacks. While many people accept these drawbacks as a necessary evil, you should familiarize yourself with them in advance, so you can determine if this is the best option for you.
While you won't have to pay a large down payment, the lender makes up for the risk by charging more interest. The lender may require mortgage insurance in this instance, which is equivalent to 1% of the total loan amount and is charged annually. This will help regulate monthly payments and provide an ability to deduct interest payments.
Longer Closing Process
Sellers are in a rush to close, so delays by physician home loan lenders might negatively impact your ability to buy the home you want. There's no way around this since most lenders go through similar processes in approving this type of mortgage. While you can search for customer reviews of various physician home loan lenders to determine which ones offer the best level of service, you may mainly have to depend on luck. If another interested buyer doesn't come along while you're awaiting approval, you may be able to buy the home you want.
While there are downsides to a physician home loan, it often can be the only option open to new doctors. A lack of net worth and poor proof of income prevents healthcare professionals from buying homes, but a physician home loan opens this possibility by lightening the qualifying requirements. As the physician establishes their career down the road, they may be able to refinance for better mortgage terms. In the meantime, these types of loans can get young professionals into their first homes.