It’s no secret that purchasing a house is definitely one of the biggest investments you are ever going to have. A vast majority of people do not have the means to buy a home right away, instead, they are forced to get a mortgage in order to obtain a property.
A lot of physicians are in different financial situations from other people who are trying to acquire a house. Namely, many doctors have a huge medical school debt which makes it difficult to get a conventional loan, although they generally have higher incomes.
That’s precisely one of the reasons why lenders have decided to offer them physician home loans, to help physicians buy a home without any issues. So if you are not familiar with this type of loan, then scroll below to see how it differs from the conventional one.
The Main Difference Between Physician Mortgage Loan And Conventional Home Loan
What Do We Know About A Physician Loan?
As previously stated, it is the type of loan made precisely to meet the needs of doctors. Although these people normally earn lots of money or expect to have higher salaries, at times, they have high debt, little credit, or didn’t have enough time to set some money aside for a house.
This is particularly the case with those who have recently graduated from medical school. Generally speaking, most lenders want their borrowers to have steady jobs, good credit, and to be able to make a down payment when they decide to purchase a home.
Even though loans for physicians are somewhat similar to the conventional ones, there are still some differences that should be discussed. Namely, these days, you can come across excellent physician home loan mortgage programs that were developed to help doctors obtain a residential mortgage loan from lenders. What’s great about this type of loan is the fact that a physician can qualify with a down payment of less than twenty percent and is not obligated to pay for Private Mortgage Insurance, also known as PMI.
It’s also worth mentioning that lenders utilize different underwriting criteria, concentrating on how much money you are able to give for your loans every single month, instead of focusing on their overall balance.
This makes things so much easier for these people to qualify for loans, straight out of residency or medical school. Of course, keep in mind, that each bank has different rules, hence, it would be recommendable to conduct proper research before you select a lender.
Adding More Useful Info Below
Maximum Loan Amount
Conventional mortgages that are forced to comply with Freddie Mac or Fannie Mae guidelines are not permitted to exceed a certain amount of money that has been borrowed. In most regions of the USA, the limit is around $417,000.
But still, in places where properties are pricier, it can go up to $625,000, for example, New York City, Hawaii, San Francisco, etc. Now, if you decide you want to apply for a mortgage that exceeds these limits, then you must qualify for a jumbo mortgage loan.
These types of mortgages cannot be sold to Freddie Mac or Fannie Mae, hence, lenders who decide to finance these loans are at greater risk due to the fact that they must sell them to outside investors, or keep them on their books.
In comparison to conventional home loans, jumbo loans have higher interest rates and more stern loan requirements, such as:
- You must have a high credit score
- Cash in reserve at closing, at times you must have enough money to make a year’s worth of payments for the mortgage
- Down payment as much as twenty percent of purchase price
Furthermore, when it comes to FHA loans, the value of the loan cannot go beyond a certain amount of money, which highly depends on the location. The maximum amount in regions where houses are relatively cheap is around $275,000.
On the other hand, in places with high-value markets, the maximum amount can go as high as $636,000. In terms of home loans for doctors, it depends on the lender. There are some lenders that will loan even $2 million. Some companies are going to offer different loan limits, depending on the amount of down payment.
Physician Loan VS Conventional Conclusion
In comparison to the conventional one, a physician loan has:
- Lower down payment
- Higher loan limit
- No PMI
- More flexible credit requirements for the best rates
- Prioritizing monthly payments instead of overall student loan debt
Now that you’ve gathered some useful information regarding home loans for physicians, it’s up to you to decide whether it is the best choice for you or not. What’s safe to say is that these loans do have their place.