As a doctor, personal financial factors such as a large amount of student loan debt and a changing income trajectory could make the process of applying for a mortgage uniquely challenging. However, physician mortgages can offer specialized loan products specifically tailored to doctors. These programs often include reduced down payments, low interest rates, and do not require private mortgage insurance (PMI).
By understanding a few key points, you can be confident navigating the mortgage process and making educated decisions toward a mortgage that suits your needs.
1) Understand the Underwriter Evaluation Process
When you apply for a mortgage, your loan is typically evaluated by underwriters who review your application to determine whether you qualify. They consider factors like:
- Credit score and history
- Total Assets
- Current Income
- Current debt
Although a physician loan may have more flexibility around personal financial criteria compared to a traditional mortgage, lenders still consider factors such as credit card debt or a history of late or missed payments, as well as your debt-to-income ratio.
Debt-to-Income (DTI) Ratio
Lenders use DTI to assess whether you can afford monthly loan payments. To calculate this ratio, divide your monthly debt payments by your gross monthly income.
Lenders usually prefer a DTI lower than 43%, which may be a difficult standard for new doctors with hefty student loan debt. With a physician mortgage, a higher DTI may not hinder your chances of approval. Plus, the lender might consider your future earning potential when determining whether to approve your loan.
2) Seek Pre-Approval
Before house hunting, you may consider seeking pre-approval, so you have an idea of what kind of budget you’re working with when looking at potential homes. This is especially true for doctors with variable incomes or uncertain bonus structures.
Pre-approval can also speed up the buying process as sellers won’t have to accept an offer contingent upon the buyer receiving financing.
3) Work With Professionals
A lot goes into buying a home, and having the right professionals on your side may make the process easier to navigate.
Consider working with an experienced real estate agent who understands the local market and the specific requirements for buyers in the medical field. Working with a professional may also enable you to better understand each step in getting a mortgage, what documents you need, and how your career may impact the process.
4) Avoid Taking on New Debt
Once you decide on a home and go through the mortgage application process, avoid incurring more debt.
Adding debts too close to closing day may create complications before closing. It may be wise to wait to take out a loan for a new car or add credit card debt while your loan is still in process
As a doctor looking to purchase a home, there are a few factors to consider when seeking a mortgage.
Understanding the evaluation process, obtaining pre-approval before searching for your dream home, and working with professionals for guidance and assistance can help stack the deck in your favor.
With these steps in mind, you can be better prepared to embark on this exciting new journey