Doctors spend a lot of time, and money learning the skills they need to treat patients and save lives. Unfortunately, this often leaves them with student debt that makes securing a traditional mortgage nearly impossible. There is no doubt that physician mortgage loans are an effective way for those struggling with student debt to purchase a home.
As with anything that offers a benefit, there will also be downsides worth considering. Let’s take a closer look at some of the pros and cons of physician mortgage loans.
The Downsides of PML’s
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One of the most significant drawbacks of doctor mortgage loans is that borrowers will need to have a higher credit score than with a traditional loan. FHA loans and even VA loans have lower credit score requirements. The monthly mortgage payments are another drawback to these types of loans. Though there is no PMI with these loan types, the interest rates offered tend to be higher to offset the risks. Due to the higher interest rate, the monthly repayment obligation will be higher.
There are, moreover, property restrictions to consider when working with doctor mortgage loans. In most cases, a PML can only be used for a primary residence, not a second home or an investment property. Not every lender will extend funding to all physician types. Each lender will offer programs for specific medical designations, which may be expansive in some cases or limited in others. Furthermore, many physician mortgage loans are restricted to medical professionals who are still within the first 10 years of their medical careers. Later-stage doctors are frequently unable to qualify.
The Upside of PML’s
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Most physicians with student debt will have a hard time making a large down payment on a home. Thankfully, one of the benefits of a PML is a low or even no down payment as part of the program. Though these loans are not available for second homes, they can be utilized to refinance an existing property. That means physicians can use a PML program to facilitate renovations on a home they already own. PMI is also not needed when purchasing a new home, even when there is no deposit or a low deposit made on the home.
Another benefit of a physician mortgage loan is that medical professionals are able to purchase a home before they actually start working. Loan approvals can be made with employment contracts set to start within 90 days of the closing. Also, loan limits are typically much higher than conventional mortgage loans, which means a physician’s buying power will be considerably stronger. The underwriting process is also much easier since student loan debt will not be factored into the DTI loan application process.
The Importance of Making an Informed Decision
Understanding both the benefits and the drawbacks that come with a physician mortgage loan is the only way to make an informed decision. Purchasing a home is a long-term decision that should be taken with thorough consideration. This type of specialized home loan can be an effective path to home ownership, but it may not be the best option in every situation. Always speak with a professional mortgage broker or financial specialist about your specific needs before moving forward with a physician mortgage loan program.
Author Bio: Heather Blacksmith has a Bachelor’s Degree in Finance and works at a finance firm based in Seattle, Washington. She specializes in small business finance, credit, law, and insurance. When she is not working, she spends her time in her favorite coffee shop writing on various finance-related topics. Other than that, she enjoys adult coloring books, recycling, and running.
