What Are Physician Loans?

Many people make the mistake of thinking the physician loan is the same as a regular mortgage. I’d like to clear up a couple of misconceptions and myths about these special loan programs.

Myths:

• The doctor loan is the same as a conventional loan, but with a fancy name

Not true. Over the years, banks have done extensive research on physicians and their credit patterns – particularly their ability to repay mortgages. It turns out that most doctors pay their mortgages on time compared to other segments of the population.

• There are other loans out there that have better terms

Not true. As of right now, today – June 26 2008 – the doctor loan is pretty much the ONLY mortgage loan available that requires no down payment AND no PMI. That, in itself is probably the biggest draw. There are a few lenders that offer this mortgage – go to www.google.com and start looking!

• No bank is going to give me a break just because I’m a doctor

Not true. The reason the banks are giving you a break is because – *drumroll please* – they know you are going to be high earners in the future and they will do anything to win your business over for life. Banks are in the branding business – if you like their service with a mortgage, you’re more likely to refer them to your other doctor buddies, open a checking/savings account with them, credit cards, etc.

• I can just go down to my local bank and get a doctor loan

Sometimes, this is true. Some banks have the loans, some don’t. There are instances where I’ve heard of people calling major lenders and the loan officers haven’t even heard of the physician loan. Can you say, go somewhere else!?

• I need a 700+ credit score

Probably true. There may be a few lenders willing to work with you if your credit isn’t that great, but you will, I repeat, WILL have to pay higher interest rates, points, etc etc

• There are only a few options

False. You can get a 30 year fixed, 15 year fixed, ARM, etc. Pretty much all of the conventional options exist here. Check out this list for the different options available with the physician mortgage.

That’s it for today – any questions or comments?

Sponsored by www.doctorloanusa.com

Physicians: How to Shop Around and Save on Your Mortgage

As a physician or practicing resident, many of you simply haven’t had the time to do much research on all the different mortgages and physician loans available. This is a grave mistake that will cost you thousands of dollars in the future. You should always talk to different lenders, but when you do – make sure you are working with an experienced, professional loan officer. The largest financial transaction of your life is far too important to place into the hands of someone who is not capable of advising you properly and troubleshooting the issues that may arise along the way. But how can you tell?

Make sure your lender can correctly answer these four simple questions:

1) What are mortgage interest rates based on? (The only correct answer is Mortgage Backed Securities or Mortgage Bonds, NOT the 10-year Treasury Note. While the 10-year Treasury Note sometimes trends in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions. DO NOT work with a lender who has their eyes on the wrong indicators.)

2) What is the next Economic Report or event that could cause interest rate movement? (A professional lender will have this at their fingertips).

3) When Bernanke and the Fed “change rates”, what does this mean… and what impact does this have on mortgage interest rates? (The answer may surprise you. When the Fed makes a move, they can change a rate called the “Fed Funds Rate” or “Discount Rate”. These are both very short- term rates that impact credit cards, Home Equity credit lines, auto loans and the like. On the day of the Fed move, mortgage rates most often will actually move in the opposite direction as the Fed change. This is due to the dynamics within the financial markets in response to inflation. For more information and explanation, get in touch with us at www.doctorloanusa.com).

4) Do you have access to live, real time, mortgage bond quotes? (If a lender cannot explain how Mortgage Bonds and interest rates are moving in real time and warn you in advance of a costly intra-day price change, you are talking with someone who is still reading yesterday’s newspaper, and probably not a professional with whom to entrust your home mortgage financing. Would you work with a stockbroker who is only able to grab yesterday’s paper to tell you how a stock traded yesterday, but had no idea what the movement looks like at the present time and what market conditions could cause changes in the near future? No way!)

Be smart… Ask questions… Get answers!

The criteria for doctor loans changes frequently, not to mention mortgage rates, down payment amounts, PMI, etc. You really need to do a little research beforehand, so when you find that perfect home, you can rest assured you got a great deal. You have better things to do than to worry about mortgages – like worrying about your patients!

If you take anything away from this post – it should be that you need to shop around for not only the best mortgage, but also the best mortgage lender. Believe me, they are not created equal!

More than likely, this is one of the largest and most important financial transactions you will ever make. You might do this only four or five times in your entire life… but a qualified, professional lender does this every single day. It’s your home and your future, so make absolutely sure you are putting them in the right hands.

Understanding Credit Scoring & Credit Repair

With the exception of recognizing that the best score wins, the average home shopper knows very little about the whole credit scoring process. As a medical student, resident or practicing physician, you’ve probably have had even less time to do research regarding credit because of overwhelming schedules.

This guide is meant to help you understand your credit, and if necessary, inform you about small steps you can take to upgrade your credit history and get a loan for the home you really want.

The first step in the process is making sure that you have a current copy of your credit report. Congress recently amended the Fair Credit Reporting Act so that consumers may now receive one free credit report annually. There are three major credit bureaus: Equifax, Experian, and Transunion. Since entries can vary across bureaus, you’ll want to request a free report from each of the three companies. (Go to www.annualcreditreport.com)

It’s also important to know just what a good credit score is. Most A-Paper scores generally begin around 680, although this number may differ slightly among lenders. Don’t despair if you come up shy, there is always room for improvement. Increasing your score just 5 points can save a significant amount of money. For example, if your score is 698 and you increase it to 703, then you could save yourself thousands of dollars over time as a result of a slight improvement to your loan’s interest rate. If you are a physician, most lenders require you to have at least a 700 FICO scrore to qualify for the doctor loan. However, you may be able to find a broker or bank that will work with you if you are shy of 700. You’ll have to shop around though, and the rates will not be as attractive as they would be if you had a higher score.

While credit repair is necessary for some doctors and residents, it’s not the only way to increase your credit score. Even if you have stellar credit, you can enhance your score through these steps:

• Evenly distribute your credit card debt to change the ratio of debt to available credit. Let’s say you have a credit score of 665. If you have debt on only one card, and four additional credit cards with zero balances, evenly distributing the debt of the first card could move you closer, and possibly into, that ideal bracket.

• Keep your existing accounts open and active. The average consumer is usually anxious to close credit card accounts that have zero balances, but doing this can cause them to lose the benefits of a long-term credit history and increase their ratio of debt-to-available credit. The bottom line is don’t close those old accounts!

• Keep credit inquiries to a minimum. Each inquiry into your credit history can impact your score anywhere from 2-50 points. When it comes to mortgage and auto loans, even though you’re only looking for one loan, multiple lenders may request your credit report. To compensate for this, the score counts multiple auto or mortgage inquiries in any 14-day period as just one inquiry, so try and stay within that time frame.

Remember, credit scores don’t change overnight. Improving them requires time and diligent effort on your part, so it’s a good idea to get the ball rolling at least three to six months prior to submitting your application for home financing.

If credit repair is what you need, you can either begin the process yourself or seek out a repair service. If you decide to make your own improvements, visit as many websites as possible to get information regarding credit laws and consumer rights. Diligently search through them and educate yourself to ensure that you don’t sustain any self-inflicted wounds. A good place to start is the Federal Trade Commission’s website, which contains a wealth of helpful literature.

Addressing credit issues can be uncomfortable to say the least. But by taking these steps now, you’ll be that much closer to obtaining the home of your dreams.

Additional Resources:

To order your free credit report, go to:
www.annualcreditreport.com

To read the Fair Credit Reporting Act, go to:
www.ftc.gov/os/statutes/frca.htm

For the Federal Trade Commission’s information on consumer credit, go to:
www.ftc.gov/bcp/conline/edcams/credit/index.html