There has been a lot of debate of late over student loan forgiveness. When it comes to these loans, it’s hard to imagine what the debt wracked up by each of 28,337 students who graduated from medical school.
Let’s face it, when it comes to student loans, these former students have a lot of debt and not a lot of provable earnings. Despite this, many want to finally settle down and purchase a home.
And, their newbie-ness in the medical field, a blank credit history or heavy student loan debt won’t stop them from getting a mortgage. Why?
Because of their potential earnings – that’s what lenders care about when it comes to new physicians, dentists, and veterinarians. They know that only 1 percent of physicians default on their mortgage – substantially fewer than the general public, at 10%, according to Ryan Inman at FinancialResidency.com.
Lenders want this business – badly – so they created the doctor loan, also known as the physician loan.
Here are a few of the offerings, which vary by the way, by lender:
- Typically there is no or a low-down payment requirement.
- Private mortgage insurance (PMI) is waived, even if you put down less than 20 percent of the purchase price.
- Debt-to-income ratio restrictions are more relaxed than they are with conventional mortgages.
- Lending limits up to $2 million.
- Low credit score requirements.
- All physician loan programs are available to those with a D.O. degree. “Some lenders also offer loan programs for medical professionals such as dentists, orthodontists and veterinarians with the following degrees: D.S., M.D., P.M.,V.M.,” according to Sidney Richardson at RocketMortgage.com.
Are there drawbacks to these mortgages? Yes. They are commonly not fixed-rate mortgages, but carry adjustable rates (ARM). “With an ARM, you typically pay a lower, fixed interest rate for the first few years of the loan,” explains Richardson.
“After that initial period, however, your interest rate will fluctuate and often increase,” she concludes.
Then, interest rates may be higher for this loan product than the current average mortgage rate.
If you’ve dreamt of purchasing a home and didn’t think you could at this point in your career, we urge you to speak with a lender about physician loans.