By Charlie Brown 

Almost 16000 new doctors graduate from medical school each year. The same numbers of professionals graduate from residency. Although they have immense untapped earning potential in their future, they do not have any money in hand immediately after they graduate. The Bank of America recognized a rewarding market in these finically naïve youths for home loans. Fresh graduates have no savings, massive debt to pay off, but they have vast earning potentials. History shows that most medical graduates do not last long outside their medical schools and residencies without a mortgage.

Why do banks offer special home loans to physicians?

Sadly, most new physicians do not have any savings, they have huge amounts of student loans to pay off, and they do not have any evidence for earnings. However, what they do have is a lower than the average borrower's chance of defaulting on the loan. That is precisely what makes physicians the best candidates for specialized mortgage loans. Moreover, even a couple of years ago there weren’t too many financial institutions and credit unions interested to lend money to medical professionals. So, the BOA seized this opportunity to sell them physician loans. These loans bore a higher rate of interest (+1%) than regular home loans, but it was a  mall price to pay for the instant approval of mortgage loans in the hour of need.

What are the defining tenets of a physician’s home loan?

Almost all home loans for physicians have at least a couple or all of these traits –

i. Many of these loans are only available for a new attending, new resident and dentists. Some of the loan companies do extend their services to podiatrists, optometrists, and veterinarians.

ii. Some of these loans cater to the residents or new attending only, but some of them are also available to medical professionals of any experience and age.

iii. All of them require little to nil down payment. The rates can vary from 0% to 10%.

iv. They eliminate the added expense of getting purchase mortgage insurance irrespective of the down payments and interest rates.

v. Almost all of the lending institutions that offer physician home loans accept two months’ pay stubs as evidence for employment and earning.

vi. Many of the lending companies require the borrower to open a bank account at the bank where they are paying the mortgage.

vii. The interest rate is almost always flat irrespective of the size of the loan amount.

viii. Some of the lenders have restrictions on the type of real estate one can purchase with the loan amount, but the average lender does not have any such preferences.

ix. A few lending institutions also allow the physician applicant to use gift money to pay closing costs or the down payment.

x. Almost no potential lender will consider a doctor’s outstanding student loans whilecalculating their debt-to-earnings ratio. That makes it much easier for physicians to qualify for physician home loans than regular home loans.

In each state, there are scores of private lenders that offer physician home loans. However, it is always better to check out nationalized banks first. The rates, qualification criteria and costs of down payment do not change much for doctor's mortgage loans. So always start with the reputed institutions and then move onto the private lenders.

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