If you’re a doctor (or other health care professional), you belong to one of the most valued and prestigious fields in our society.
So why do so many medical professionals have nightmare experiences buying a home? What are the biggest mistakes people make? Here are the most common ones we have seen:
- Assuming you will have no trouble qualifying for financing; waiting too long to start. The fact that you’re a doctor, nurse, or dentist does not guarantee that an underwriter will approve your loan. You may have student loan debt that could limit the amount you can borrow to buy a home. If you are considered self-employed, you will have to provide tax returns that may raise even more questions that will require you to provide even more documentation. All of this takes time. And lenders who don’t understand how to structure a physician’s loan, or who don’t have access to a physician’s loan program won’t know for sure whether you’ll qualify until an underwriter has reviewed your file. We’ve known quite a few medical professionals who were told they were approved after they signed the contract to buy the house, only to find out later that the underwriter declined the loan. Then you’re really stuck. Either you lose the home entirely, or they qualify you at a higher rate, or higher closing costs, or both.
SOLUTION: Always start your financing process early – before you even look at homes. Meet with a lender like Mike or Gayle Lynch 530-244-0913) who is experienced with physician loan programs and has helped many medical professionals get financing they could afford – even after getting turned down by another bank).
2. Thinking that Shopping for the “Lowest Rate” will guarantee you’ll get the lowest priced loan. Based on the stories we hear, there’s a fair amount of “bait & switch” happening to medical professionals looking for mortgage financing. It’s not necessarily by design, because you may be dealing with a loan officer at a bank who hasn’t done any/many physicians’ loans and assumes that because you’re a doctor, you’ll be approved. Maybe that bank will eventually approve you – but only after you agree to a larger down payment or they require that you pay down your student loan debt (with money you may not have) — or that you pay a higher interest rate and/or closing costs than you were originally quoted.
SOLUTION: Ask questions of any lender you’re thinking about using for your mortgage financing – questions like:
- Do you have physician’s loan programs?
- Can you give me detailed information about the requirements and benefits of that/those loan program(s)?
- How many doctors loans have you done over the last year?
- Can you provide references of doctors for whom you’ve done mortgage financing?
A reputable lender will ask you to provide some documentation before they will give you specific answers about what you can qualify for. They need to know that information to be able to structure the file so that an underwriter will be able to see that you have the ability to repay the loan. Mike & Gayle Lynch of the Home1 Team (530-244-0913) have a long track record with their underwriters. Their Underwriters know them well and work collaboratively with them to find ways to approve loans for medical professionals who are great credit risks but who may not fit perfectly into a cookie-cutter loan program.
- Not removing yourself from Group Practice Liabilities when you leave a practice. If you leave a practice, make sure you are not going to be liable if the practice defaults on a loan. Loans offered by banks hold the physician to a high level of responsibility for repayment. Most lenders require a personal guarantee for a small practice loan, you should be prepared for that. You also need to protect yourself if the practice is restructured or if you leave the practice.
It’s normal for loan terms to include a “joint and several” clause, which makes each practice partner individually liable for a loan in the case of a default. The mistake some doctors make is in assuming that leaving the practice means you are also free of that liability. But if your name is on the loan paperwork, it will show up as a liability on your credit report and that will reduce your borrowing power if you want to buy a home. Also, if your old practice defaults on the loan, and your name is on the loan paperwork, you could be held liable for the balance due.
SOLUTION: Pay very close attention to whose name is on the paperwork. As with everything else involving contracts and financing, the fine print is important. The Home1 Team has earned a reputation for thoroughness in the service of their clients. Having helped many medical professionals over the last 20 years, they know what to look for and how to resolve issues that would otherwise prevent you from getting the most favorable financing for your situation.
4. Assuming that a “Doctor’s Loan” is always going to be the best financial option for you. Doctors’ Loans were created by mortgage lenders primarily to help young medical professionals qualify for financing to buy a home. Banks know that. Over the course of your career, you will likely earn far more than the average person and they understandably want to compete for your business when you’re in the early stages of your career. They can build a relationship with you that will result in a numbers of loans and other financial instruments over your lifetime.
The main feature of doctors’ loans is that they tend to relax some of the requirements most other people have to meet in order to buy a home: things like treating your student loan debt differently than they would treat the student loan debt of a teacher or small business owner. Doctors’ loans are also designed to allow young doctors starting their careers to purchase a home with a smaller down payment, or even no down payment. These concessions are not free, however.
So, if you are well-established in your career and assuming you’ve been financially responsible, have saved money and maintained good credit, etc., a “Doctors’ Loan” is probably not be the best instrument for financing your next home purchase.
SOLUTION: Work with an experienced loan officer who understands that just because you’re a doctor doesn’t mean a Doctor’s Loan is the best way for you to finance your home purchase. The Home 1 Team’s reputation for integrity has been earned because they never take the easy or lazy way when working on loans that can be complex – like the loan of an established physician who has multiple bank and investment accounts and relatively complicated tax returns. Mike & Gayle Lynch are passionate about helping their clients make smart financial decisions.
Call the Home 1 Team: 530-244-0913
And don’t wait! The sooner you know you’re approved and what you’re qualified for, the stronger the negotiating position you’ll be in.