[Josh is a good friend of mine who has a great deal of knowledge and expertise in physician home mortgage. I’m happy to share a series of educational posts from him regarding this topic. So here you go, Josh’s debut on DWM. Disclosure: The Mettle Group is a paid sponsor of this website.]
First 3 of 6 Steps to a Flawless Home Purchase
In the post-mortgage meltdown world of mortgage lending, physicians face more challenges and have a higher rate of underwriter decline than any other professional client we work with. It’s shocking but true. Spend a few minutes in physician chat rooms where the topic is mortgage and you will read nightmare after nightmare horror stories. It’s truly scary what a batched home loan and closing can do to a family.
The unfortunate reality is mortgage has become one of the most highly regulated and highly scrutinized industries in the country. The Dodd Frank Act added an immense amount of regulatory disclosure as well as provisions such as the “Ability to Repay Rule”, which legally require a mortgage lender to PROVE you have the ability to repay your loan, or the lender could be fined up to 10 years of mortgage payments. Think about that for a moment — if we make a mistake in how we calculate your income, or we allow you to close on an employment contract without all contingencies being removed, we could be found responsible to pay your mortgage for the next 10 years. That is a lot of dough, and it should give you some insight as to why qualifying for a loan has become more difficult and less enjoyable from a client experience perspective.
So what can you do? You can educate yourself, you can be more prepared, and more aware than your peers. If you follow these Six Steps to a Flawless Home Purchase, you’re virtually guaranteed to come out the other side unscathed.
- Choose a Mortgage Professional Who Can Educate and Truly Guide You
If you just do one thing right, find a professional experienced with doctors and dentists. You’ve got to do your due diligence by researching and interviewing the professional. Make sure the mortgage professional has experience with physicians and has done a good job with physician clients in the past.
If you spend extra time and energy to find the right person and then allow that professional to guide you through the process, you’re much more likely to get to closing without a hitch. Physicians often run into trouble when they think that there is no reason that they shouldn’t get financing. For instance, the resident who was able to get a home loan back in 2006, before the mortgage meltdown, who is now making significantly money, may think that getting a home loan today should be easy and any bank would finance them. However, the physician may not be taking into consideration all of the factors, like his new position being a 1099 independent contractor or wanting to close on the new home prior to starting the new position. Both of which would through a huge wrench in things for a conventional mortgage lender.
The reality is that a lot has changed and under the lens of the post-mortgage meltdown underwriting guidelines, getting a loan is not as easy as it used to be. If there’s a deficiency with your situation, you need an expert to guide you through the loan process and all possible solutions. Nobody is better able to do this than someone who specializes in physician home loans; they’ve seen all the same challenges before and have an arsenal of outside of the box solutions.
- Verify Your Lender’s Reputation
Once you think you’ve identified a good loan officer, verify his or her reputation. Look for past client testimonials and don’t be afraid to ask how many doctors they have worked with in the past few months and how many they are working with currently. If you don’t get a good vibe or you’re not sure, I’d advise you to keep looking or even ask to speak with past physician clients.
Once you’ve identified several loan officers in your area who appear to be experts, who have testimonials and who look like they serve physicians on a regular basis. It’s really important to have a good phone conversation with them. Take a few minutes to cut out all distractions, don’t call from the freeway or emergency room (I’ve literally had a call from an anesthesiologist in the middle of a procedure). Find a place and time you can be focused on the mortgage professional you are interviewing, let them know any challenges that you can see, such as student loans, relocation to a new state and or job, source of down payment and ask them a couple of intelligent questions. You will know in your gut whether the mortgage professional is the real deal.
- Obtain a Credit and Income Approval
A Pre-Approval is simply not enough for you to gamble your family’s new home on. You must get a full Credit and Income Approval. The importance of getting all credit and income documents into the hands of an underwriter as early in the process as possible cannot be overstated.
The thing to keep in mind is that the underwriter is the one who has the final say. Finding a seasoned loan officer who is experienced with doctors is a great first step, but at the end of the day, it doesn’t matter how good your loan officer thinks your file is because he or she is not the final decision maker. It’s not like a mom and dad situation where the underwriter and loan officer meet in the middle. It’s like a kid and parent situation and the parent in this situation is the underwriter. That’s where the buck stops. Get all of your income, new employment contracts, student loan changes and down payment documents all the way to the underwriter and insist on a full Credit and Income Approval. Once you have that, you’re ready to rock.
If you follow these first three steps of the six steps to a flawless home purchase, you should be in great shape. You can’t do any more mortgage due diligence than that. The only way you could be more prepared to buy a home is if you had the money in the bank and were prepared to write a check for the entire purchase price.
But there are a few more things you can do to ensure the rest of your transaction is flawless.
Josh Mettle is an industry leading author and mortgage lender, specializing in financing physicians, dentists, fellows, PhDs, and physician assistants. You can get more great physician real estate and mortgage advice at http://www.utahphysicianhomeloans.com/ or his book site: www.whyphysicianhomeloansfail.com. Josh is also a fourth generation real estate investor, and owns a number of rental homes, apartment units and mortgages. Josh is dedicated to helping physicians become more financially aware and able, download Josh’s latest tips and advice at www.physicianfinancialsuccess.com.
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