A physician home loan is a type of loan designed to help medical professionals achieve homeownership. A physician home or mortgage loan is open to others in the medical field and not just doctors, as we will see later.
It is challenging to get a home loan if you are fresh out of medical school and burdened by severe student debt. Therefore, you can get the opportunity to own a home by accessing a physician home loan.
The terms would be severely against you if you were to search for a home loan from a commercial bank or any other lending institution.
The following is a guide to get a physician home loan:
Know-How a Physician Home Loan Works
When you pay less than 20% of the loan as the down payment for a conventional loan, it will include private mortgage insurance. A physician mortgage loan can provide up to one hundred percent financing without private mortgage insurance with a minimal down payment.
The payment for the insurance will constitute a part of your monthly repayments. Hence they make physician loans cheap.
Physician loans have high limits, with some going as high as millions of dollars. However, the amount of financing will depend on the lender. The limitations on financing are often dependent on how much you are financing. A lender could entirely finance a house costing half a million, while a 3 million dollar home could only receive fifty percent financing.
A physician home loan has a higher debt to income ratio requirement than most conventional loans. The main reason is they know medical students have many student loans and low incomes in the beginning.
Calculate the Cost of a Physician Home Loan
Like any other type of mortgage, you must calculate how much it will cost you to acquire a physician mortgage loan. The cost of a mortgage loan will constitute many factors.
If you have to calculate the cost of a physician home loan, you should use a mortgage calculator. A Physician Mortgage still has many of the fees and expenses of a typical mortgage. They may include more fees because of the favorable terms of the loan.
Many physician home loans do not include a fixed interest rate. Therefore, you will probably get a floating interest rate which might change occasionally, and so will your mortgage payments. The change could mean higher or lower mortgage payments.
Physician loans don’t require the borrower to have put a down payment. Therefore, you won’t have plenty of equity when it comes to selling the house.
Who Can Get a Physician Loan?
A physician mortgage loan is available to doctors with specific degrees, such as MDs and DOs. However, other lenders offer physician home loans to others in the medical field, including dentists, podiatrists, optometrists, orthodontists, and veterinarians.
You can get a physician home loan if you are a doctor currently in fellowship or competing for residency at a hospital.
Student loans are a crucial consideration in obtaining physician home loans. Student loans in Income Dependent Repayment programs (IBR, PAYE, REPAYE, etc.) get preferential treatment when pursuing physician home loans.
Your credit score will also matter significantly if you want a physician home loan. Your FICO credit score needs to be between 720 and 740. You can still get a loan with a credit score of as low as 680, but you will need to have cash reserves for at least the next six to twelve months.
Advantages vs. Disadvantages of Physician Home Loans
You will eventually have to decide whether a physician mortgage loan is worth it or not. The best way to do so is to compare the pros and cons of getting a physician home loan. Let us be optimistic and start with the advantages.
A great benefit of physician home loans is that you can get 100 percent financing. Moreover, you can get it with little to no financing.
There is no private mortgage insurance required, so your monthly payments are reduced. Physician home loans also have a higher loan limit than conventional loans.
You can have a higher DTI ratio and still get a physician home loan. Therefore, you get special treatment for particular loans, unlike other professions.
You will be charged adjustable rates for a physician home loan which usually means more interest payments. Moreover, if the value of your house drops, you still have to pay the same amount you borrowed.
You cannot get a physician home loan for commercial property, only residential ones. Without a down payment, you also have no equity in the house.
In conclusion, if you want to get a physician home loan in 2021, there is much to consider. The above is a guide for physician home loans, including who can get one, how much it costs, and the pros & cons. However, you need to know much more before making a decision, so do your research.