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Traditional loans come with much stricter guidelines and qualification criteria. When a physician needs immediate access to money, he or she may try the conventional loans, but their processing time is much longer than that of specialized home loans for doctors. Loans for doctors have lenient eligibility requirements, and most practicing physicians find these loans to be simple and straightforward, even with their busy schedules.
Why are conventional home loans not enough?
Freddie, Fannie or Ginnie Mae buys most conventional loans in the market. All reputable banks reserve their role as the servicer of the traditional loans. They take charge of the billing, payment, tax calculations, insurance and administration of the client's escrow account. They are the loan management authority, who receives a premium for their services. The banks sell these loans as bonds secured by mortgages on the Wall Street. As a result, they have to stick to strict rules and payment regulations that can uphold their end of the bargain. That explains the stringent requirements for the qualification criteria for the applicants.
Why are physician home loans helpful for doctors?
On the contrary, a specialized home loan for physicians is a portfolio product. The bank that designs it gets to keep it. Hence, the bank is more likely to outline or customize the underwriting guidelines for the loans. The risk threshold is more flexible than conventional loans or FHA loans. These home loans for physicians are beneficial for doctors with established practices as well as those in training. These specialized loans have some distinct advantages over the FHA loans. As a physician, you should explore the following benefits of going for one of these –
- Amicable down payments – Almost all physician home loan payments pay between 95% and 100% of the home's cost price. However, the exact percentage will depend upon your qualification, location and the institution making the loan. The amount of the credit will also determine the down payment.
- Eliminates the Private Mortgage Insurance – PMI is a typical requirement for almost all conventional home loans that cover at least 80% of the house's value. At this time, no physician's home loan or mortgage loan demand PMI. They might have a higher interest rate since they are more convenient than FHA loans. You may have to pay between 0.2% and 0.3% extra in terms of interest, but you will save between 0.5% and 1.0% as the annual PMI.
- The debt-to-income ratio doesn't include student loans – Becoming a doctor takes years of education and expenditure. It is a costly process, and it is not fair if the loan company counts the student loan(s) as a part of the debt to income ratio. Most physicians' home loans do not include the student loan(s) in the debt-to-income ratio during the assessment process. The underwritings might allow you to use an IDR payment for meeting the eligibility requirements.
- Higher limitations – The home loans remain with the bank, and they have more liberty to offer high loan limits to doctors. Since the medical professional is usually rewarding, baking institutions do not shy away from providing higher than usual limits on home loans for doctors.
These are only a few of the benefits of working with specialized home loans for physicians. There are several other advantages as well that you can start enjoying as soon as you step into your new abode.