A lender's own program, not an agency program. Lenders that offer physician loans often keep them rather than selling them to Fannie Mae or Freddie Mac. That is why the rules differ from one lender to the next. The federal ability-to-repay rule still applies: the lender must make a reasonable, good faith determination that you can repay. (12 CFR 1026.43)
Down payment and mortgage insurance. Many physician programs allow a small down payment without private mortgage insurance. On a conventional loan, the CFPB explains that private mortgage insurance is usually required when the down payment is less than 20 percent of the purchase price. Leaving out mortgage insurance is the lender's choice, and it does not automatically mean a lower total cost. The CFPB notes that when a lender offers a conventional loan with a smaller down payment and no mortgage insurance, the trade-off is usually a higher interest rate.
An employment contract in place of pay history. Many physician programs accept a signed contract for a job that has not started, each with its own window for the start date and its own reserve rules. For comparison, Fannie Mae also accepts a signed, non-contingent offer or contract, when it shows the employer, position, pay and start date, under conditions that include limits on the start date and, in some cases, extra reserves. (Fannie Mae B3-3.3-03)
Student loans. This is where physician programs differ the most, and where the agency rule is worth knowing. Fannie Mae's rule (B3-6-05):
- If the credit report shows a monthly student loan payment, the lender may use it.
- If you are on an income-driven plan with a documented payment of $0, the lender may qualify you with a $0 payment.
- If the loan is deferred or in forbearance, the lender may use 1% of the outstanding balance, or a fully amortizing payment from the documented repayment terms.
Freddie Mac and FHA have their own student loan rules. Many physician programs set a different rule again, for example for loans deferred during training. Ask each lender how it counts yours, in writing.
Loan size, credit and reserves. Maximum loan amounts, credit score minimums, reserve requirements and debt-to-income limits are set by each lender. Some programs lend above the conforming limit; others stop at it.
More than one state. Training and first jobs move people. Align is licensed in Michigan, Ohio, North Carolina, Florida, Louisiana and Texas, so a contract in any of those states can start the same conversation.
