A lesser-known home loan may help your clients in the medical industry better afford a home purchase. Known simply as a "physician loan," these mortgages have less stringent credit and debt-to-income requirements than other loan products. They require down payments as low as 10 percent or less—even zero money down in some cases. They also don't require borrowers to pay private mortgage insurance.
Why is their a mortgage targeting doctors, you ask? While the average physician earns $187,200 per year—one of the highest salaries in the nation, according to the Bureau of Labor Statistics—they also graduate with an average of $180,000 in medical school debt, according to a 2016 report by the Association of American Medical Colleges.
"It costs a lot of money to attend medical school, which saddles these graduates with mountains of student loan debt," says Heather McRae, a senior loan officer at Chicago Financial Services. "This causes [doctors] to be unable to qualify to purchase or refinance using a traditional loan program."
But not every medical professional is eligible for this special financing. Physician loans are available only to medical physicians (MD), doctors of osteopathy (DO), dentists (DDS/DMD), and veterinarians (DVMM), McRae notes. In some cases, podiatrists (DPM) and optometrists (OD) can also apply. Physician loans are often restricted to those who graduated from medical school within the past three years.
Only a few lenders offer this type of loan product, McRae says. Borrowers, therefore, will need to shop around. Another appealing perk to physicians with this type of loan is that deferred student-loan payments won't inhibit borrowing power. Student-loan payments that are in deferment for a year or longer aren't factored into whether the borrower can qualify for the mortgage.
Source: “A Home Loan for Doctors? Yup, Physicians Get Their Own Mortgage,” realtor.com® (March 17, 2017)