It’s important that you understand the challenges that nearly all physicians face at three specific junctures in their career: I call these junctures “danger zones,” because it is during these transitional periods when most loans are declined, due to multiple changes in the client’s financial situation.
It is when you are in one of these danger zones that it is most important for you to work with a loan oﬃcer who specializes in physician mortgage loans.
- Med school to residency. This transitional period is particularly dangerous because so much change is occurring. We typically see changes with student loans coming out of deferral and often going into IBR (income-based repayment), new employment contracts, sometimes with no history of fi ling taxes, and little if any down payment saved, and due to the demands of a resident’s schedule, we’re often asked to close before the first day on the job with no pay stubs in hand. A loan oﬃcer who specializes in physician home loans should be able to advise you and offer solutions to all of these challenges.
- From residency or fellowship to attending physician. The second danger zone is the transition to attending physician. This is an exciting time, again, with a lot of change. After two decades of education, residency, and very hard work, you are about to likely see your income increase four- or fivefold. Many of our clients have pinched pennies and clipped coupons every step of the way, and are beyond excited to be able to provide a safe home for their family. Problems can arise at this stage again, due to student loans transitioning to full repayment, or a limited down payment, often coming from gifts or sign-on bonuses, and to top it off, most clients want to close on their home when they relocate and before their first day on the new job. Again, an experienced physician loan oﬃcer will anticipate these challenges and help you navigate them safely.
- Attending physician going into private practice. The last danger zone where physician home loans can really come undone is when a physician is going into private practice, joining a group as a partner, or taking a position as an independent contractor receiving 1099 income (we see this a lot with anesthesiologists and emergency medicine physicians). Conventional and FHA loans, which make up 95 percent of the mortgages in the entire country, require a two-year history of self-employment or 1099 independent contractor taxes before that income can be used to qualify for a home loan. Physician mortgages, on the other hand, will generally allow qualification after zero to six months on the job, depending on the specifics of the employment contract and practice arrangement.
Please reach out to us, we are here for you no matter the situation or stage of practice you may be in.
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