2016 Home Financing for Doctors. What Obstacles Do You Face? (Can you buy a home?)

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1 2016 Home Financing for Doctors This is what you NEED to know by Tal Frank What Obstacles Do You Face? (Can you buy a home?) Obstacles Little/no savings Student loan debt Low/moderate income No verifiable income & no pay stubs Job starts in July, but wish to move in June or earlier Solutions 100% loan Up to $20K graduation loan Not fully included in debt ratio Low interest rates No PMI High debt ratios allowed Approval with signed letter of hire Close up to 60 days before job starts Ask questions & take notes What Mortgage Products Are Out There? Which is best? Which do you need? Which do you qualify for? Physician Loan Portfolio Conforming Fannie Mae and Freddie Mac FHA Government Insured VA Government Guaranteed 1

2 What Loan Meets Your Needs? Needs 100% loan Special Student loan consideration Low interest rates No PMI High debt ratios allowed Approval with employment letter Close 60 days before job starts The Home Buying Timeline 1. Select a Loan Officer you trust 2. Get Pre-Qualified by the Loan Officer 3. Select a Realtor you trust 4. Find a home & get under contract 5. Complete Application / Get LE 6. Have the home inspected and appraised 7. Update your loan approval papers 8. Obtain a CTC (Clear to Close) 9. Get CD / TRID Waiting Period DON T USE A REALTOR JUST BECAUSE She is your aunts friend. He s a buddy of yours from college. She is the mother of the chief resident where you will be working. You saw his picture on a sign in front of a home you liked. She just started in the business and you want to help her out. This is the realtor you see on the side of every bus in town Bottom Line Get the Right Realtor Get the Right Loan Officer 2

3 The 3 C s C Redit Scores <640 Excellent Very Good Good Fair Poor Preparing Your Closing Budget Down Payment (0% PhysicianLoan, 3.5% FHA, 5% Down Conforming $ Closing Costs (Avg. 3% of purchase price varies by state). $ Escrows (3 6 mos. taxes & insurance)... $ (1 yr. homeowners insurance). $ (Prorated interest from closing date to month-end).. $ Sub-Total $ Less Earnest Funds $ TOTAL Funds at Closing $ DEBT RATIO Determines How Much You Can Afford How Are Student Loans Counted? Total Debt Ratio = Total Monthly Debt Payments Monthly Gross Income 3

4 How Debt Ratios Are Used Conforming FHA Physician Loan 36%-41% 41% 50% 28% = $1,167 36% = $1,500 $50K or $4,167/mo. 41% = $1,708 50% = $2,083 What If My DTI is Too High? Arrange for a Gift from Family Your loan must allow for gift funds (to pay off consumer debt) Discuss with your LO as this requires proper paper trail Apply for a Graduation Loan (to pay off consumer debt) No Payments for 3 years Must apply and get approved prior to graduation The House You Buy Depends on your DTI & PITI $220,000 Purchase Price (assumes 5/1 3.75%) P&I = $1,018 Taxes = $175 Insurance ( Home Owners) = $100 Total PITI = $1,293 4

5 The House You Buy Depends on your DTI & PITI 5 Year ARM at 3.75% 30 Year Fixed at 4.125% 30 Yr Fixed at 4.125% 0% Down PhysicianLoan 20% Down Conforming 5% Down FHA P&I = $1,018 P&I = $852 P&I = $1,013 Taxes = $175 Taxes = $175 Taxes = $175 Insurance = $100 Insurance = $100 Insurance = $100 PMI = $145 PITI = $1,293 PITI = $1,127 PITI = $1,433 ($0 Down) ($44K down) ($11K Down) The 3 C s C ollateral Reasons to Buy 1. Rent = House Payment 2. Prices Stable or Appreciating 3. > 3 Year Stay Reasons to Hold Off 1. You Don t Qualify 2. < 3 Year Stay 3. Values Depreciating The Buy vs. Rent Decision The Five Seven Decision Factors: Match City Risk Lifestyle Tolerance Appreciation Reserves Tax Deduction Timeline/ Length of Residency 5

6 Another Example Benefits of a $220,000 House Held for 4 Years: Rent Payments = $48,000 $1,000/mo. PITI = $62,064 $1,293/mo Equity = - $17,000 Tax Advantage = - $7,800 Appreciation (at 2%) - $18,000 Difference of $28,736 TOTAL = $19,264 Tips to Avoid Hassle and Extra Fees Avoid companies that market to physicians but do not have a Physician Loan. Read website carefully for clues. Many will market FHA loans to you. Do not open or close any credit accounts before checking with your loan officer Avoid major purchases prior to buying a home or Call with Any Questions! Tal Frank talfrank@physicianloans.com