For those who are in the medical or dental profession, getting a college degree takes time and money. And as college costs continue to rise, it costs more money than ever, often incurring student loans and debt. But there is a loan program designed for the medical and dental professional that takes into consideration student loan debt as well as the future earnings of a medical or dental professional. It’s called the Physician Home Loan Program.
Who is Eligible?
To qualify for the Physician home loan program, the borrower must be a licensed physician who has completed a residency of at least one year, or be in a current residency program. This program is available for both physicians and dentists. For newly established physicians, they can finance a single-family property, including a duplex if one of the units is occupied by the borrower. Borrowers can also currently be in a fellowship or in residence.
The thought behind this loan program acknowledges the physician who is fresh out of school and starting a new practice or working as a staff physician at a hospital probably doesn’t have a whole lot of money in the bank for a 20% down payment, as just getting through medical and dental school alone is expensive. However, it is also understood that future earnings potential is huge which means student loans will be paid off sooner and the physician can handle the monthly student loan payments more easily than others.
The loan program does ask for a maximum debt-to-income ratio of 43, or 43% of the borrower’s gross monthly income. Student loan payments must be calculated into this debt ratio but do not have to be counted if they are deferred at least 12 months out after the closing date. The minimum down payment for this loan program is 10% and the minimum credit score is 720 and can be used by a first time home buyer. There is also a minimum cash reserve requirement of six months. Documentation of the degree or documentation of the anticipated graduation date must be included in the loan application.
How it Works
Let’s take a look at a typical scenario for a physician. The physician has completed residency and has a down payment of 10% of the sales price. The gross monthly income for the physician is $20,000 per month. The physician has an automobile payment of $700 per month, no credit card debt and student loans totaling $550 per month. With a 43 debt ratio, the maximum mortgage payment, including taxes and insurance is around $8,600 per month. When subtracting the automobile payment of $700 and student loans of $550, the amount available for the mortgage is now $7,350. With a loan amortized over 30 years and a rate of around 4.5%, the loan amount works out to $1,450,000. The maximum loan amount for this physician’s loan program is right at $1,500,000. When considering the cash to close requirement, that includes the 10% down, closing costs and six months of reserves which in this scenario is six months of $7,350 in payments, or $44,100.
Find Out if You Qualify
If you or someone you know is interested in learning more about this program, reach out to me. I’ve helped many physicians get into the home of their dreams, and I can help you too.