Physican Loans for PT's
I recently relocated for a permanent outpatient PT position at a hospital after being a travel PT and moving around the country for a few years. I knew I wanted to buy a house as my family is planning on staying in our new location for the foreseeable future but was unsure if we would be able. As a relatively recent graduate (4-5 years) I was in tough spot. I have large student loans, minimal savings, and a high debt to income ratio. It seemed I either had money for loan payments or savings but not enough to spread around to both and still live where I wanted to.
Long story short, after doing some research and looking around on the internet, I found out PT's qualify for a physician home loan. (About time that Doctorate came in handy!) I don't think many physical therapist's know that we qualify for this type of home loan and wanted to share as it really helped my family buy our first house. The pro's included only 3% down payment, no mortgage insurance, they were willing to qualify me with my high loans, and I could close before starting my next job.
I used Fairway Mortgage and was absolutely pleased and would recommend to anyone looking. They were extremely helpful and knowledgable, (I had lots of questions), great at communication, and quick. We put them under a time crunch and they came through.
I asked Josh Mettle of Fairway Mortgage to give some more information so that I can share with the rest of you.
(I get no reimbursement for this post, sharing out of the kindness of my heart)
The Medical Professional Mortgage & How it Can Help You
What is a medical professional mortgage and what makes it different than a FHA, conventional or jumbo mortgage?
We have a long history of providing advantageous mortgage financing options for physicians, doctors, CRNA, and other medical professionals. Recently we have been able to provide a few of these same solutions to our clients with a DPT degree.
There are three primary benefits of a medical professional mortgage that you need to be aware of:
- ) Medical professional loans TYPICALLY do not have monthly mortgage insurance premiums. In many instances the medical professional mortgage will allow you to finance up to 97% of the purchase price of the home without monthly mortgage insurance. Mortgage insurance is a forced insurance policy that protects the bank in case of borrower default; it is paid by you the borrower but only protects the bank making the loan. This insurance is expensive and in most cases is not tax deductible like mortgage interest is.
These lower down payment programs for DPT can be advantageous as they allow you to minimize your down payment and maximize the amount of capital you keep to pay down student loans or invest. The medical professional mortgage affords you the ability to get into a home while still preserving your savings and retirement funds for other diversified investments.
2.) A medical professional mortgage can allow you to close up to two months before you begin a new employment contract using future income. This is huge for DPT relocating across the country, needing to get their family settled and house in order before they start a busy work schedule. Most conventional and jumbo loans require 30 days paystubs before you can close on a purchase of a new home.
Bear in mind, no two employment contracts are created equally. When applying for a home loan, you should have your employment contract reviewed by the lender as early as humanly possible so you can plan accordingly. I recommend you INSIST that your employment contract is not only reviewed and approved by the loan officer, but also by the underwriter who will eventually have the final say on your approval.
Remember this – the mortgage loan officer is compensated when the loan closes and is more likely to say yes. The mortgage underwriter is responsible for quality control and is paid to say no. Truly, the underwriter is the gatekeeper. They are risk control for the bank and they are literally paid to say no if certain risk factors are present. You should know this and I recommend you INSIST an underwriter review your application and employment contract before making an offer on a home. This step can save you an incredible amount of heartache and stress once you find and fall in love with a home.
3.) Some medical professional mortgages will allow you to use an IDR (income driven repayment) payment amount to qualify; even a zero payment may qualify. This can make the difference between qualifying and being declined for a mortgage. Conventional loans typically require you qualify at either the fully amortized payment amount or they default to 1% of the outstanding balance as a monthly payment amount if a fully amortized payment is not available.
For DPT early in their careers or with high student debt loads, this factor can make a medical professional mortgage the only option, as FHA, conventional and jumbo mortgage loans are not nearly as accommodating to student loans and how they calculate their impact on the overall debt to income ratio limits.
How do you choose a lender that can best meet your needs?
As I write this article there is less than 4 months supply of homes on the market nationally. That means the pace of monthly sales would completely eliminate the supply of listed homes for sale in less than 4 months (if no new homes were listed for sale). Anything less than 6 months supply is considered a sellers market. Many areas of the country are in an extreme sellers market, which means sellers dictate the terms of the deal and the speed they want the transaction to close. You either have to agree to those terms or they pass you up and find another buyer, often a cash buyer, who can meet their terms. This can be a monumental challenge for mortgage companies and you, their perspective clients.
There are a couple reasons why medical professional mortgage loans tend to move slower than traditional mortgages. First, most medical professional mortgage programs are available through large national (think too big to fail) banks and they are layered with bureaucracy, government regulations, antiquated IT systems, and status quo (good is good enough). They mean well, but they can only do what they can do with the resources they have. Nimbleness and speed to respond might not be how you would describe them.
The fact is, many of the larger banks simply cannot keep up with the fast paced real estate market. Check out this list of the top ten hated companies in the U.S.. Not one, but two of the biggest banks in the country make that list. I can tell you we receive an unfortunate amount of business from clients that are declined the week of, or worse, sometimes several weeks after their settlement deadline. It’s sad but true.
You can protect yourself from this by carefully reviewing the client experiences of each company you consider. Do some Googling about client experiences, ask for references, and request your lender put in writing how long it takes on average to close their home loans. This is rarely thought through in detail but can make all the difference between you getting a home and the home getting away from you.
A medical professional mortgage can be a powerful tool to help you into a home with the least amount of cash possible, sooner than most conventional loans; in many cases with less overall expense as you will likely avoid mortgage insurance. This does not mean they are the right for everyone. You should speak to several lenders and find one that you feel offers a balance of the important issues discussed in this article. In the end, a trusted advisor that can help you navigate the mortgage and real estate process is ultimately going to offer you the highest probability of successfully closing on your new home. Good luck!
Josh Mettle NMLS #219996 is an industry leading author and mortgage lender, specializing in financing physicians, dentists, CRNA, and physician assistants. You can get more great physician real estate and mortgage advice here or his by visiting his book site. Josh is also a fourth generation real estate investor, and owns a number of rental homes, apartment units and mortgages. Josh is dedicated to helping physicians become more financially aware and able; listen to “Physician Financial Success” podcast episodes or download Josh’s latest tips and advice here.
Copyright©2017 eJLM LTD. Fairway Independent Mortgage Corporation NMLS#2289. 4801 S. Biltmore Lane, Madison, WI 53718, 1-877-699-0353. All rights reserved. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Lender. Disclosures