One of the more unique ways borrowers in the health care industry can get a mortgage is the doctor’s loan. Yes, there’s special mortgage financing options available just for doctors.
One of the benefits of being a physician is being able to get a mortgage even with a lot of debt. That’s because doctors can get a little bit more flexibility than traditional underwriting otherwise allows. This can help bridge the gap between renting and owning a home. This financing vehicle allows physicians to borrow money more easily.
Here’s how this program works.
Most mortgage loan programs take the minimum payment on a student loan and apply that into the qualifying ratios when computing the debt to income ratio for the homebuyer. This can limit borrowing power, especially if the payments are several hundred dollars per month. If you have a student loan that is in deferment for year or longer, the doctor loan allows you to have that student loan payment not count in your debt-to-income ratio, allowing you to borrow more on a mortgage. To have monthly debts not hurt your borrowing chances, you’ll need $2 of income per every $1 of monthly debt. For example, if your student loan payment is $500 per month, you need $1000 per month of income to offset $500 per month on a student loan payment or any other monthly payment other than mortgage loans.
The program also allows you use just 5% down and allows gift funds to be used for closing costs. This program is good all the way up to the maximum county conforming high balance loan limit in the county in which you’re looking to buy a home. So, in Sonoma County, California, for example, $554,300 is the maximum high balance loan limit which is eligible for this program.
The basis of the doctor’s loan is to allow doctors, specialty doctors, and dentists to have an easier time with securing financing to purchase or refinance a home.
Doctors Can Also Use Future Income
The program also allows doctors to use future income to qualify. For example let’s say you’re in your residency. Within 30 days you have an employment contract to earn substantially more. Lenders that offer the program will allow you to use the future income to qualify to buy the house. This is something FHA, Conventional, VA and Jumbo financing do not allow.
The doctor’s loan requires a minimum credit score of 680 and supporting income and asset documentation certainly will be required. If you don’t know what your credit scores are, you can get two free credit scores, updated every 14 days, on Credit.com. It’s completely free and you’ll never be asked for your credit card information.
If you’re a physician and are looking for some mortgage options, the doctor’s loan is flexible choice. Ask your lender if they have this program. If they do not offer it, find a mortgage company that does. Remember, it’s incumbent on you as the homebuyer to make sure you’ve done your research as to what’s available in the marketplace to tip the scales in your favor for securing the best type of mortgage financing available.
Image: Justin Horrocks
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