We tend to think of doctors as being rich, or at least in total control of their financial lives. Given that most physicians and specialists make more than $200,000 per year, there’s some objective reasoning behind this impression. But doctors often face significant and unique financial challenges, such as qualifying for a mortgage when buying a home.
Why do doctors find it so hard to buy a house? And what can they do about it?
The Homebuying Challenges Facing Doctors
Most people buying a home for the first time take out a mortgage, which is a special type of loan providing money to help you purchase a house. In order to qualify for a mortgage, you’ll need to verify your financial trustworthiness, and by extension, your ability to pay back the loan. For doctors, it can be difficult to do this, even with abundant income.
These are just some of the reasons why:
· Debt. Getting started in the medical field often leaves you saddled with debt from medical school. Depending on your field of specialty, you might have been in school for 8 years, 10 years, or even longer, and you might have attended multiple schools in the process. When you see $500,000 of debt, suddenly, a $200,000 income doesn’t look as impressive. If your debt-to-income ratio (DTI) is too high, you’ll fail to qualify for most traditional mortgages.
· Proof of employment. Even if you have all the proper training and certifications, it can be difficult to start a medical career from scratch. You may start your career bouncing from place to place and trying to find a position for yourself. If you’re starting an independent practice, you may have inconsistent income and minimal employment history. Accordingly, proving your state of employment and your consistent ability to pay back the loan can be difficult.
· Proof of income. In line with this, you may find it hard to prove your income. If your income is inconsistent or if you only have a couple of years of income to show, banks may be hesitant to issue you a mortgage.
· Timing. On top of that, physicians also need to be concerned with the timing of their home purchase. If you’re still in residency or in training, you may end up moving to a different city before too long. If you’re already in the middle of developing your career and finding a permanent position, you may be so busy and flooded with work that you don’t have time to shop for a house or a mortgage.
Options for Doctors
So what options do doctors have to make this process easier?
· Physician mortgage loans. Many financial institutions now offer physician mortgage loans, which are financial products specifically created to help doctors buy primary residence homes. Physician mortgages are similar to traditional mortgages, with a handful of key differences. For example, you won’t need to add any private or government mortgage insurance, your medical school debt will typically be ignored, and you’ll have much more flexibility on proving your employment and income. However, you’ll still need to have a good credit score, proper certifications, and income in place.
· Buying in cash. Alternatively, if you find yourself unable to qualify for a conventional loan, you can bypass the loan angle entirely and commit to buying a house all in cash. This may be difficult to pull off, especially if you’ve just started your career and you don’t have much in the way of personal savings. However, with a few years of active savings, you could accumulate enough cash to fund the purchase of your first home without the help of a bank.
· Improving your credit score. Even with a physician mortgage loan, you’re still going to need a good credit score if you want to qualify as a borrower. If your credit score is too low, you’re going to find it impossible to buy a house without a loan. Though it does take some time, there are plenty of actions that can reliably boost your credit score, such as committing to paying your bills on time, lowering your debts, and addressing any credit reporting errors that might be artificially lowering your score.
· Reconsider your priorities. Buying a house can be a fulfilling purchase and a great investment, but it’s not right for all people in all situations. Would it be better to rent for a few years while you achieve more financial stability?
On some level, it’s natural for doctors in the early stages of their career to struggle with buying a home. But the struggle doesn’t have to get in the way of your home buying dream. With a few financial changes, or a physician mortgage loan on your side, you could be weeks to months away from getting the home you’ve always wanted.