One of the biggest challenges with down payment assistance programs has long been the issue of student loans and the way underwriters calculate payments on deferred and Income Driven Repayments. The general rule has been to default to one to two percent of the outstanding student loan balance as a MONTHLY payment. 2% of $200,000 equals a monthly payment of $4,000, which means the applying resident will be lucky to qualify for a Cracker Jack box to live in.
Another challenge has been the issue of qualifying for the loan and down payment assistance, without being able to present any paystubs, in the case of a transitioning medical school student graduate with only a Match letter in hand. Most incoming residents don’t want to move twice. Having to start residency, obtain two paystubs and then apply for a loan is about as appealing as switching places with the cadaver in the lab.
The problem has been finding a loan that accommodates the unique challenges that resident physicians face in qualifying for a loan, and that will work in conjunction with down payment assistance. You might have guessed by the subject line in this post, that yes, we have done just that – we have found a solution for both of these issues.
We are currently able to help incoming residents and residents already at work in the residency programs within the counties listed at the bottom of this article. We will continue to expand this program into new counties throughout the year ahead.
Programs from county to county vary to some degree so I’m going to give you a general overview of the pros and cons and invite you to reach out to us with any additional questions. We are happy to answer any specific questions and provide you with a total cost analysis for your particular situation.
- Depending on the county in which you are buying, the down payment assistance equals between 3.5% and 7% of the loan amount. For example, if you buy a $300k home and your loan amount is $291k (less required down payment), your down payment assistance would be between $10,185 and $20,370 depending on the county you buy in.
Once you qualify and receive the down payment assistance funds, there are no strings attached. You do not need to pay that money back, you can sell at anytime with no recapture fee, the down payment assistance is not taxable, it is your money to be used towards down payment, closing costs, or any other fees directly associated with buying the home. This sounds too good to be true. I know, it’s pretty cool – we are excited to be able to provide this service to qualifying residents.
- The loan program only requires 3% down, plus the entire down payment and a portion of the closing costs can come from the down payment assistance. You can also ask the seller to cover any remaining closing costs up to 3% of the purchase price, meaning you can actually buy a home with no minimum investment from yourself.
- You do NOT need to be a first time homebuyer.
- All loans are 30 year fixed, with no prepayment penalties or down payment assistance recapture.
- You can close up to 60 days before you start your residency with your Match letter.
- We qualify your student loan payments based on Income Driven Repayment amounts, which means most residents will qualify for a decent home in these areas.
- These loans do not have the best interest rates. Rates are actually set by each agency, which varies by county and have nothing to do with our margins as a lender; we have no influence or control over the interest rates available with these programs.
- Closing costs are a little higher. I’m seeing them between 2% and 3% of the purchase price of the home.
- These loans may have monthly private mortgage insurance – however the mortgage insurance is at a significantly lower factor than traditional conventional or FHA loans. The private mortgage insurance costs on these loans are roughly half the cost of an FHA loan.
- There are income limits – in one county I was researching today it was $88,350. Most residents will not have a problem with this, but it could be an issue if you wanted to use a spouse’s income to qualify and combined your income exceeded the limits for your county.
If you are interested in purchasing a home, and are in or will be in residency at one of the institutions below, I’d invite you to contact us and we can create a total cost analysis for you, which will line up to 4 different loan options so you can compare and see the total cost of all the loan options over a specified time horizon you intend to be in the home.
Phoenix & County of Maricopa
Abrazo Central Campus-AZ Phoenix
Maricopa Med Ctr-AZ Phoenix
Mayo Clinic School of Grad Med Educ-AZ Scottsdale
Phoenix Childrens Hospital-AZ Phoenix
St Josephs Hospital-AZ Phoenix
U Arizona COM-Phoenix
Tucson Pima County
Tucson Hospitals Med Ed-AZ
U Arizona COM at South Campus Tucson
Colorado Health Foundation Denver
Denver Health Med Ctr-CO
St Joseph Hospital SCL Health-CO Denver
El Paso County
Penrose Hospital-CO Colorado Springs
Escambia County Pensacola and Century
Hillsborough County Tampa
U South Florida Morsani COM-Tampa
Pinellas County Clearwater, Gulfport, St Petersburg, Largo
Bayfront Med Ctr-FL St Petersburg
Johns Hopkins All Childrens Hosp-FL St Petersburg
Largo Medical Center-FL Largo
Lee County Fort Meyers
Manatee County Bradenton
Blake Medical Center-FL Bradenton
MountainView Hospital Las Vegas
U Nevada Affil Hosps-Las Vegas
U Nevada SOM-Reno – Las Vegas
South East Texas Housing
City of Baytown 2534, City of Pasadena 3220, 3230, 3231, 3235, 3239 and Walker County 7906 and 7907
* Eligibility subject to program stipulations, qualifying factors, applicable income and debt-to-income (DTI) restrictions, and property limits. Fairway is not affiliated with any government agencies. These materials are not from HUD or FHA and were not approved by HUD or a government agency. Copyright©2017 Fairway Independent Mortgage Corporation. NMLS#2289. 4801 S. Biltmore Lane, Madison, WI 53718, 1-877-699-0353. All rights reserved. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Lender. Licensed Nevada Mortgage Lender. TX Location: 1800 Golden Trail, Carrollton, TX 75010. AZ License #BK-0904162
Josh Mettle NMLS #219996 is an industry leading author and mortgage lender, specializing in financing physicians, dentists, CRNA, and physician assistants. You can get more great physician real estate and mortgage advice here or his by visiting his book site. 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; listen to “Physician Financial Success” podcast episodes or download Josh’s latest tips and advice here.
Copyright © 2017 eJLM LTD. All Rights Reserved. Fairway Independent Mortgage Corporation. NMLS#2289. 4801 S. Biltmore Lane, Madison, WI 53718, 1-877-699-0353. Other restrictions and limitations may apply. Equal Housing Lender. Disclosures