Mortgages have been around since the 1930s and today there are many providers and types of home loans.
Some loans are based on fixed or variable interest, while other products target specific borrowers e.g. mortgages for veterans which are called VA loans. This blog article focuses on home loans for doctors, which are also known as ‘physicians mortgages’.
One of the main reasons these loans where created was to give new doctors a chance to get into their first home. Graduating as a Doctor takes many years of study and during this time, the student debt has grown.
Standard mortgages are less flexible than Doctor home loans and with a standard home loan, the student debt would get in the way and in many cases disqualify the borrower altogether. The huge benefit of the tailored physicians’ mortgage is it offers a lot more wiggle room on preconditions or qualifications to secure the mortgage.
The professional medical mortgage has been custom designed to allow for no deposit or down payment, limited assets and student debt. This may seem like favouritism but remember the attributes of physicians and also their earning power as their career progresses. Also, let us not forget, we all trust doctors and so too do the lenders. 🙂
How To Get A Physicians Mortgage
The minimum education requirement for this funding is a bachelors degree of D.M.D, D.D.S., D.O., D.V.M., or M.D. What you don’t need when you apply for the loan is an actual job! Yes, sound too good to be true and that’s because there’s a catch. You need to have a job ready to go within sixty days. You will need to show your employment letter with the start date.
Even if your job is in another state or at any time you need to move interstate your physicians’ mortgage in most cases will remain, but as there are many different providers, you’ll need to know the loan’s terms. It is at this time when we recommend getting professional advice from your accountant, lawyer and financial advisor.
Standard Home Loan Versus Physicians Mortgage
Here are some of the key differences of a standard mortgage versus a Doctor loan from the guide to physicians loans:
Standard loans require a down payment. It can be as much as twenty per cent of the sales price of the home. The opposite applies to physicians loans where little to no deposit is required.
No Two-Year Employment Proof Required
Typically, standard loans require a work history of two years in the same industry before you apply for a mortgage. As a Doctor, you may be just starting out and this is no barrier to securing a home loan. To apply for the doctor loan, show an employment contract, with the guaranteed hourly rate or salary, and the number of hours you will work.
Private Mortgage Insurance
There are varying rules for PMI with standard mortgages but the rule of thumb is if as the borrower you’ve put less than twenty per cent of the sales price as a down payment, then you’ll need to pay PMI which can be as high as 1.2% of the loan amount. With doctor loans, PMI is not required at all.
A loan is a loan and it affects the borrowers serviceability and what is known as DTI (debt to income) ratio. Standard loans include the student debt in the calculation whereas the physicians’ mortgage does not.
No Rate Jumb On Jumbo Loans
Standard loans that are over say $450,000 can incur a higher interest rate whereas this does not apply with the Doctor loan.
Whatever your profession, always consider the pros and cons with all loan agreements.
When you’re ready to take the next step on the property ladder to consult the professionals. Your profession may qualify for a custom loan, that better suits your position.
However, as we all know, ‘one size doesn’t fit all’, there may be other factors, pertinent to you and your family, that require your accountant’s input before taking on debt. Plus if you’re buying a home also get advice from your lawyer before you sign on the dotted line!