A few differences between doctor’s vs. conventional loan
- doc loan low or no down payment (Compass requires 0% down, BOA requires 5% down)
- Doc loan no PMI (Private Mortgage Insurance)
- Doc loan takes future income up to 60 days prior to starting the new job/new income (but this may apply to only the “doctor” applicant, and not a non-doc co-applicant, so they may require Your 2014 tax return and your new pay stub)
- Doc loan has higher interest rate than conventional loan
Various terms you may want to inquire about
- FHA: see there’s the 1st time home buyer assistance program. perhaps you can get government funded 2nd/silent loan (may be interest free or super low interest) to source your down payment. this way you can avoid PMI & get a good interest rate.
- ARMs: Adjustable rate mortgage, this usually has lower interest rate for its fixed rate period than the fixed mortgage rate products. this is for people who CAN pay off the mortgage quickly in the event that the mortgage rate adjusts really high after the fixed rate period ends and refinancing is not beneficial (new refi rate is still not low enough). people who can handle the worst case scenario can benefit from the savings on interest & building up equity faster in the fixed rate period. 5/1, 7/1 (just did a 7/1 refi on our 1st home), 10/1. *the first # is the duration in years the rate is fixed, the 2nd number is the frequency in years the rate is adjusted thereafter. so usually the shorter the fixed rate period (1st number), the lower the initial mortgage rate.
- conventional 30 year fixed: lock in a low rate for the life of the loan
- doctor’s loan: since we likely won’t have money for down payment, this may be our only way to get our foot in the door NOW. but if we wait and save up, then we don’t have to take the higher rate of the doctor’s loan. it might also be worth waiting till your FICO get above 740 (where you will get the lowest mortgage interest rate while holding other variables constant) although some mortgage companies will look at potential actions you can take to increase your score & take the higher score as long as you prove that you CAN take those actions (e.g. pay down credit cards, etc.)
Good luck with the meeting; I’m excited for you and here to support you however I can 🙂
Doctor’s vs. Conventional Loan