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.
Lenders make adjustments to their debt calculations to account for the doctor’s future earning potential. “We would not count the student loan debt if they’re in a residency,” said David Gunn, the retail mortgage sales director for Fifth Third Bank, which is based in Ohio and has had a physician loan program for the last five years. “We know their income’s going to jump dramatically when they get out.”
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