In a previous article, we discussed the flexibility many lenders have with their underwriting guidelines for Physician Mortgage Loans. However, despite this flexibility, there are still some common issues Physicians run into during the underwriting process. It is important to be aware of these issues so you can address them early on and avoid extra stress and the possibility of financial loss (i.e., losing your deposit) during the transaction.
1. Student Debt
If any of your student loan debt is in forbearance or deferment, you will want to make sure you get information from you student loan servicer as to what the actual payment will be once it goes into the repayment period. Otherwise, many lenders will take a percentage (sometimes up to 2% of the balance) and use that as the monthly payment, negatively impacting your debt to income ratio.
For example, if you have $200,000 in deferred student loans, the underwriter would use $4000/month as the monthly payment!
2. Not Getting conditions back quickly
Getting any kind of mortgage these days requires a lot of paperwork and the Physician Mortgage is no exception. Like most Physicians, you are likely very busy and trying to get through the mortgage process can be overwhelming. However, when you go into contract on a property, the clock is ticking and all parties (Lender, Agents, Seller, and Buyer) are responsible for hitting certain milestones.
If you delay in providing Lender Requested conditions, you may risk missing your contingency dates and jeopardizing having your sales contract cancelled by the seller. Time is of the essence and providing complete loan conditions is a must!
3. Not getting FULLY pre-approved before you go into contract
Most Loan Officers have the ability to issue you a “pre-qualification” letter based upon reviewing your income and credit. While this may be enough to get your offer accepted, it is wise to have your application FULLY underwritten and receive an official pre-approval.
By doing this, any potential issues/questions will be uncovered by the underwriter while they are reviewing all the other components of the loan approval (income, credit, assets, etc.). This will save time once you get into contract on a property since most of the borrower specific conditions will have already been approved.
Additionally once you have a full pre-approval for your Physician Mortgage, your offer will be even more competitive. This is especially crucial in hot real estate markets where there are multiple offers on properties. With a full pre-approval, you should likely be able to make an offer with a shorter escrow period.