The average medical student graduates with $200,000 in student loan debt. That means potential student loan payments of $2,000 per month or more. And high student loan rates are just one reason medical professionals, especially those just starting their careers, face challenges in obtaining traditional mortgages. There is hope, though. Arthur State Bank, a community bank in SC, has developed a mortgage program to address medical professionals’ unique needs. In this article, we’ll explain why medical professionals have difficulty obtaining traditional mortgages and why a medical professional mortgage might be the right fit for you.
Mortgage Challenges for Medical Professionals
Physicians, dentists, veterinarians, pharmacists, chiropractors and physician assistants all may face obstacles when applying for a mortgage early in their careers. Here are a few of the challenges they face:
Lenders look at your income and credit score when it comes to mortgages, of course, but they also look at your debt-to-income ratio. This is the total of your monthly debt payments compared to your monthly income. Lenders add up your student loan payment, your new mortgage payment, your car payment and your credit card payments, and then look at your monthly income. Here’s an example:
- Monthly gross income: $10,000
- Debts: Student loan payment: $2,200 Credit card minimum payments: $500 Car payment: $400 Estimated new mortgage payment: $1,500 Total Debts: $4,600
- In this scenario, your debt-to-income ratio is 46%.
Fannie Mae and Freddie Mac, two government entities that buy most conventional mortgages, allow debt-to-income ratios of up to 50%, and if your debt-to-income ratio is more than 45%, you must have 12 months of cash reserves. If you’ve recently finished your schooling, fellowships, residencies, and other training, you’re unlikely to have that much in cash reserves, and you may have a tough time qualifying for a conventional mortgage. If you’re curious about how much your potential mortgage payment will be and how that impacts your debt-to-income ratio, try out Arthur State Bank’s mortgage calculator.
Proof of Income
Lenders typically require proof of income. You may want to settle into your new home before starting work, but you may have a tough time qualifying for a mortgage if you haven’t already started working. You could move your family into temporary housing, but that adds more stress into an already stressful situation.
Twenty percent down is typically cited as the ideal down payment. If you’ve just finished your training, it’s unlikely you’ve had a chance to save up that much. One of the reasons the 20% number is often cited is that if your down payment is less than 20%, most lenders require you to carry private mortgage insurance or PMI. PMI can add significantly to your monthly mortgage payment, and it doesn’t protect you as the borrower. Rather, it protects the lender if you default.
Medical Professional Mortgages with ASB
At Arthur State Bank, we recognize the tough position you’re in. We also see your potential for growth. That’s why we’ve developed a medical professional mortgage, which is tailored specifically to your needs. It offers:
- A 5% down payment, which can be earned funds or a gift.
- A maximum loan amount of $1.5 million.
- No PMI.
- A fixed rate for the first 5 or 10 years, which may adjust annually after that.
- A mortgage term of up to 30 years.
We’re proud to serve as your community bank in South Carolina, and we’d love to invest in you as a valued member of our community. We believe in personal service, and we’ll be with you every step of the way. To learn more about your mortgage options, take a moment to complete this no-obligation mortgage information request form. We’ll get in touch to discuss your homeownership options. You’ve worked hard, and you deserve the home of your dreams. We’re ready to help. Contact us today!