There are three different ways borrowers have to pay mortgage insurance. The most common way is the monthly mortgage insurance premium. This typically falls off your loan 10 or 15 years into the loan.
Another way to pay the insurance is through paying a higher interest rate. The premium is used to buy out the mortgage insurance so it is gone for the life of your loan, but you pay a slightly higher rate.
The third way is it can be paid as a one time up front fee. This way you pay the lowest interest rate but pay a one time fee up front – typically 3 to 4 years worth of the monthly insurance premiums. Then that insurance fee is fully paid. This is the best way to go if you think you will be in the home for more than 4 or 5 years.
An APR is one of the most misunderstood concepts in mortgage. An APR is your interest rate plus your closing costs related to getting your loan added together and then divided over the term or your mortgage. So if you have a 30 year mortgage it is divided over a 30 year term, if you have a 15 year mortgage, it is divided over a 15 year term.
Do you pay the APR each year going forward? No, you pay your closing costs up front, whether you pay them in cash or they are paid by the seller. Each year thereafter, you pay your interest rate. The reason we show an APR is the federal government wanted a way to show the total cost of the loan – interest rate plus closing costs over the term of the loan.
Q: So what gives? Why do banks and underwriters treat doctors and dentists differently than other potential borrowers?
A: Lending institutions know that most new physicians’ income will increase dramatically once they complete residency and that they are a low risk for defaulting on their mortgage. Some also want to create and build relationships with doctors and dentists, hoping to be able to provide other financial services to them when they are more established.
We’d love to answer any questions you might have about physician mortgages. Please write to us below.
High student loan debt, needing to move before starting a new job, haven’t filed taxes – all these can become issues for physicians who would like to buy a home in residency. One of the many advantages of a doctor mortgage is that lenders adjust their debt calculations to account for the doctor’s future earning potential. Another is that there is no mortgage insurance required, and often doctors can close on their home before starting a new job.
Depending on where you are buying a home, a smaller down payment is often required, sometimes as little as zero down or 5% down. Some programs allow the borrower to use gifted money as a down payment, which can be extremely advantageous. Most don’t count student loans in the debt to income ratio, and that can allow many doctors to qualify to be homeowners, where they could not qualify for a conventional loan because of high student loan debt. Another advantage to working with a loan officer who specializes in physician home loans is that they understand how to work with IBR and deferred student loan payments, so there are not issues getting your loan.
Please contact one of the specialists listed on our map to get the best doctor mortgage experience.
From the NY Times:
Heavy student loan debt is often cited as a barrier to homeownership for 25- to 34-year-olds. But many mortgage lenders are eager to extend credit to one category of debt-burdened graduates: those coming out of medical school.
Special mortgage products for physicians are designed to meet the needs of doctors just starting out. New doctors typically have heavy student loan debt and very little money saved, given the modest salaries typically paid to residents, said Josh Mettle, who runs the physician home loan division of Citywide Home Loans, which is based in Salt Lake City. “They almost always have a negative net worth when they begin attending,” he said.
Eighty-four percent of graduates from medical school this year reported having student loan debt, and the median amount was $180,000, according to the Association of American Medical Colleges.
But at the same time, Mr. Mettle said, after long periods of “delayed gratification,” these young doctors are also eager to buy their first home.
Physician home loans make it easier for them to qualify. The down payment is typically 10 percent or less, with no private mortgage insurance required. Citywide Home Loans offers 100 percent financing on loans up to $850,000, Mr. Mettle said.
To read the whole article, click here.
We realized that there are not many resources showing doctors where to go when they are in the market for a physician home loan or doctor mortgage. We’ve read the requests from doctors in student doctor forums when docs are scrambling to get settled in a new city for residency, when beginning a new contract or becoming a Fellow. That is why we decided to create this site – so that there is a resource to find the loan in the state you are buying in when you need it.
Please use this map as a resource to compare physician loan lenders in your state. All are experts in doctor mortgages.
We hope you find this physician loan map useful and tell your friends about it.