Are Profession-Exclusive Loans For Real?
Can your profession help you get a better mortgage?
The answer could be a surprising “yes.”
Doctors, teachers, and police officers are just a few professionals for which lenders and non-profits run special home buying programs.
These loans are not available to just anyone. They offer benefits that can surpass those of open-market mortgages. The idea behind them is to overcome special challenges that these workers face.
Some widely available loans will be enough for these professionals. For example, the USDA home loan requires zero downpayment, and the 3% down HomeReadyTM mortgage considers income from all members of the household for approval.
But some home buyers still might fall outside the approval box, even for these lenient programs. For them, profession-exclusive loans can speed homeownership.
Doctor Mortgages Are Lenient On Work History
Loans to newly-qualified doctors are designed to deal with common challenges that they face when applying for a mortgage.
These graduates have extremely high earning potential, but often no savings and big student loans.
Lenders are willing to approve these loans because doctors have very low foreclosure rates, even though they may not meet typical mortgage guidelines.
A typical doctor’s loan requires a downpayment of just one-to-five percent and no monthly mortgage insurance. Instead, the lender issues its own mortgage insurance and charges a higher rate.
A debt-to-income ratio of up to 50 percent and a loan amount ranging from $500,000 to $1 million. This can be helpful to doctors with new jobs and high student debt.
On the other hand, the interest rate may be no bargain, and there are standard programs with low downpayments that might be less expensive or more suitable – and they frequently allow new physicians to qualify with shorter employment histories.
Alternatives for doctors include the 3.5% FHA loan. FHA is more lenient on income history and debt ratios. In addition, FHA recently rolled out a change that estimates deferred student loans at only 1% of the balance instead of the previous 2% guideline.
Special Mortgages For Teachers
There are two sources of mortgage benefits for teachers. The most advantageous programs are government-based or funded by community organizations. For example, HUD’s Good Neighbor Next Door program allows teachers to purchase HUD foreclosure properties for half price with as little as $100 down.
Programs for teachers include grants and tax credits. For example, Baltimore offers $5,000 grants for teacher downpayments, California provides special mortgage tax credits for teachers in under-performing school districts.
Texas supplies downpayment assistance grants and fixed rate teachers mortgages.
The other source of teacher mortgage programs is private mortgage lenders and marketing firms, which may promote special loans with discounted closing costs, and other benefits. However, clever marketing doesn’t replace real value.
Compare terms of the offered loan against those of standard mortgage programs.
Broad Range Of Professions Potentially Eligible
There are many programs for members of professions focused on serving the public. The following are a few job types for which special home-buying incentives could be available.
- Police Officers
Like the teacher programs, the most are backed by national agencies like HUD, state and local governments, and community organizations.
Benefits include the half-priced homes and downpayments as little as $100 through the Good Neighbor Next Door program.
Closing cost help is available from the Everyday Hero Housing Assistance Fund, an organization whose mission is to increase homeownership among community service professionals.
Both of these options help public servants who may have very little in savings, and lower incomes. These loan options help these workers live in the communities they serve. Special loan options become more necessary as home prices and towns and cities across the country increase.
How to Shop for Profession-Based Mortgages
Loans exclusive to your profession may not always be the best fit.
Determine why you think you need a special program. If it’s because you’re a first-time buyer, have little downpayment savings or are on a tight budget, understand that there are broad-based loan programs available to everyone that may solve your problem.
There’s no need to go with a “special” program unless it’s actually cheaper. The following are ways to find and examine programs.
- Check your state, county, and city government websites for programs
- Consult your union or national industry group for sources of specialized loans
- Obtain a few quotes from standard lenders with competitive rates
- Compare special and traditional programs.
In the end, make sure the specialized loan is actually a better value than widely-available loans like FHA, HomeReadyTM, or the USDA mortgage.
What Are Today’s Rates?
Mortgage rates have recently plummeted near 3-year lows. Low rates apply to almost any loan for which you apply, but some loans come with lower rates than others.
Get rate quotes for a few different programs. It takes just minutes to start, and you could receive a pre-approval faster than you think.