Each year almost 16,000 doctors graduate from med school and roughly the same number graduates from residency. Nearly all of them are either broke or soon to be so, thanks to the education loan system of the country. In spite of their dire finances, they will quickly purchase a mortgage they can hardly afford. For any physician, acquiring a lease is no easy task. The fact that they do not have strong personal finance does not help either. Although doctors are impressively high earners in today’s national economy, they have restricted access to cash in the early days of practice.
Why have physician loans become so prevalent?
Therefore, all leading banks of America decided to create mortgage programs exclusively for the medical professionals, which would allow only the doctors to buy a mortgage directly from the banks on particular terms. Banks took this added step since doctors have low chances of defaulting on a loan. Their probability of defaulting is about 0.2% lower than the typical borrower. At the same time, their future high-income secures their ability to pay a higher than the average interest rate. So, you will find that most physician banks charge an interest rate that is roughly 1% higher than that of the going market rate on comparable loans.
These physician loans have a few interesting traits that you will not find among other lines of credit. Here are some typical features that define these loans –
- They require little to no down payments. Some low interest, high amount loans can cost you as less as 10% down.
- These loans are pocket-friendly, and they do not require the borrower to purchase any form of mortgage insurance (PMI).
- The borrower saves money in terms of PMI, down payment, processing fee, and flat interest rate.
- The interest rate is usually the same for any sum between minimal and “jumbo loan” amount. If you are ready to commit to a 30-year repayment plan, be sure to check with your bank for a flat interest rate.
- Some programs will allow you to use gift money for covering closing costs and down payments.
- Most importantly, the lending parties do not count your student loans as a part of the debt to income (DTI) ratio.
Other than the physician loans, the doctors can avail the traditional loans that offer a 20% down mortgage, the 80/10/10 or 80/20 loans and the FHA loans that includes a 1.75% PMI. None of these options are ideal for a doctor fresh out of the residence, looking for a new home in a new city. Their best bet is to choose a suitable physician mortgage.
Currently, plenty of registered national banks offer loans exclusively to physicians, dentists, and veterinarians. The number of lenders in each state is quite impressive, but keeping track of the newly emerging agencies is tough. Just like a regular loan, a physician mortgage loan requires thorough vetting and comparison before you find the one that fits your bills perfectly
