Given their often high student loan balances, doctors can have a hard time qualifying for home mortgages. To combat the issue experienced by this group, some companies offer home mortgages targeted directly at new doctors and their unique financial situation.
These mortgages typically come at higher interest rates, and they don’t require a down payment. Many giants in the industry, such as Bank of America, have seen a large increase in how much of their business comes from these physician mortgages.
However, even smaller banks are getting into this particular market. Bank SNB saw $50 million those particular mortgages last year and is expecting to reach closer to $100 million this year, CNBC reported.
Why Doctors Sometimes Can’t Find Mortgages
Many people might think doctors would have no problem securing a home mortgage. Yet, there are challenges that plague doctors relating to the traditional underwriting process for a mortgage.
Having adequate savings can help, but new doctors often lack the savings since they are fresh out of medical school. Schooling is expensive, especially with the costs of secondary education on the rise. Furthermore, it’s not unusual for new doctors to be carrying hundreds of thousands in student loan debt. Since lenders look at a borrower’s debt-to-income ratio, on paper, those doctors might not look like a safe bet.
What These Special Mortgage Loans Offer
The special mortgages aimed at doctors have a higher interest rate than a conventional mortgage, but they sometimes don’t require any money down, which is an attractive option for a doctor who is just getting on his or her feet financially after school. One thing these mortgage lenders require is a future work contract, which shows the doctor will have a steady income.
Although these mortgages come with higher interest rates, they offer another important break that’s missing on other deals. Doctors don’t have to pay private mortgage insurance. This can lead to significant cost savings when doctors are eyeing mortgages for hundreds of thousands of dollars.
Why Do Lenders Want to Cash in On This Market?
It’s no secret that doctors make a lot of money. The average doctor salary is now at $300,000, according to a survey conducted by Medscape. With that amount of income, doctors can be considered a lower-risk borrower for banks. In addition, if a doctor already has ties with a particular lender, they might be more likely to use them again in the future when they have other financial needs, such as loans for home renovations or car purchases.
Author: Andrew Rombach
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