Medical school isn’t cheap and so are the expenses related to it. Almost all the new doctors and residents are usually very low-paid and neck-high in debt. In these circumstances, it’s not possible to get a loan from a bank, especially without a downpayment. However, even the downpayment is too much to ask at this time from these doctors and this is where the physician mortgage loans come in. This kind of loan will even help you avoid having to pay the downpayment and PMI (Private Mortgage Insurance). There are many other benefits to these loans as well, which we’ll be discussing in this article.
For doctors, these types of little things help in the long term since they can’t afford almost anything expensive early in their careers. These are beneficial to both the newer and the more experienced doctors but in the case of newer doctors, it’s especially very helpful. So without any further delay, let’s get into it and learn all the basics of physician mortgage loans.
1. How it Works
The way that these loans work isn’t very difficult to understand, in fact, it’s arguably easier than a conventional loan to break up. In a conventional loan, you have to provide a downpayment or collateral in order to be eligible for it. However, in the case of a physician mortgage loan, you don’t have to provide any type of downpayment. Usually, if you pay less than 20% of the downpayment to the lender, you have to also pay for PMI but if you take a physician loan then that fee is waived. This means that 100% of the loan amount can be financed so that you can get to work quickly. These money provisions usually have a higher ceiling than the usual loans too so you can borrow much more money than what would’ve otherwise been possible. Basically, these are meant for new doctors who haven’t yet established themselves and this is why the banks allow a higher debt-to-income ratio on these compared to the standard options.
2. The Benefits
Perhaps the greatest reason behind taking the physician mortgage loan is the relaxed standards adopted by the lenders. However, these aren’t the only benefits to taking this type of loan and there are many other things like more savings as well.
Since young doctors don’t really make a fortune, it’s important for them to seek a loan that doesn’t exhaust their existing funds by asking for a downpayment or charging a high PMI. These loans give a doctor the required time and resources to set up their practice, to grow it, and reach a comfortable point from the financial view. Even the mortgage turns out to be lower when compared to a usual loan. To help you understand the difference, utilizing a physician mortgage calculator can be helpful to find out an estimated amount. These loans also have a higher DTI (Debt To Income) ratio which means that you can get a higher amount from your lender as compared to a traditional loan where you usually don’t receive large amounts that often. The conventional loans require the borrower to have a remarkably clean history and it’s not possible for a young professional as they don’t have a history at all. However, this issue is simply resolved by the physician loans that give the loan based on the doctor’s qualifications.
The eligibility of physician loans might be considered lenient by some, however, it’s a very strict one as the basic requirement is to be a doctor. If this single requirement isn’t met then it’s generally not possible to avail of this type of loan. The degrees like M.D. and O.D. are widely recognized and all the companies provide loans to the people possessing them. Whereas, some other degrees like D.D.S, D.M.D, D.P.M, and D.V.M. are usually dependent upon the lender’s lending policy. However, being in possession of these degrees isn’t enough and you’ll still need to provide proof of your income as well as employment. The lenders will usually be considerate of your residentship or lack of W-2s and this wouldn’t be much of an issue.
These are some of the most important things one should know about physician mortgage loans before deciding to go for one. These loans are some of the best tools available to any doctor and utilizing them will help you establish your clinic or name much faster. Add to that, the various bonuses over the basic lack of downpayment and you get a lucrative option that’s limited to the medical practitioners only.