A physician mortgage loan can be an excellent way for doctors to get into a home sooner and borrow more than they might otherwise qualify for.
But carefully calculate how much you can borrow using a physician mortgage loan calculator.
Numerous free Physician mortgage loan calculators are readily accessible on the internet.
By entering a sample purchase price, you can experiment with adjusting factors like down payment, taxes, and more to see how it impacts your monthly payments.
How to Know How Much You Can Afford With a Physician Mortgage Loan Calculator
Starting with what your lender is willing to loan you is not the ideal approach when determining how much house you can afford.
While lenders may offer a high borrowing amount, it is essential to consider all possible variables to make a well-informed decision.
A physician mortgage loan calculator can help determine how much house you can afford based on your specialty, experience, location, and more.
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For example, if you’re an experienced cardiologist in a large city, you’ll likely qualify for much more than a family physician just starting in a rural area.
A physician mortgage loan calculator will consider the following:
1. Your Medical Specialty and Years in Practice
More experienced specialists typically qualify for higher loan amounts since they have a proven track record of earning potential.
As a result, the calculator considers your specialty and experience to estimate your potential income, directly affecting the loan amount you may be eligible for.
You can use your average annual income over the past 2-3 years to determine your earning potential.
Include your base salary and any bonuses, commissions, or profit-sharing. If you’re just starting your practice, estimate your projected income based on industry standards.
2. Your Current Student Loan Debt
While lenders will consider your future earning potential, high debt-to-income ratios may still limit how much you can borrow.
Lenders recognize that physicians often carry substantial student loan debt, which can impact your debt-to-income ratio.
The calculator can assess your current debt level to ensure the loan amount is manageable within your financial capacity.
3. Where You Practice
Physician salaries and the cost of living vary in different areas. Lenders will evaluate salaries for your specialty in your local market.
The calculator considers regional variations in income and expenses to provide a more accurate estimate of your borrowing potential.
4. The Down Payment Amount
The more you can put down, the less risk for the lender and the higher loan amount you may qualify for.
By inputting the down payment amount into the calculator, you can check how it affects the overall loan eligibility and monthly payment.
5. Interest Rate
Physician mortgage loans often offer lower interest rates since lenders consider physicians a lower risk.
The lower your rate, the more house you can afford for the same monthly payment.
The calculator takes this into account, allowing you to see how changes in interest rates impact your borrowing capacity and long-term affordability.
6. Insurance
Homeowner’s insurance is a critical aspect to consider in the calculation. It protects property investment and ensures you are financially secure in case of property damage or theft.
The calculator factors in the cost of homeowner’s insurance, which can vary based on factors like the property’s location, the home’s value, and the coverage level.
7. Property Taxes
The calculator factor in the varying property tax rates based on locations. Higher property tax rates in certain regions can impact your overall affordability, and the calculator ensures that these costs are included in the calculation.
8. PMI (Private Mortgage Insurance)
PMI is an additional fee that protects the lender if you default on the loan. Usually, a mortgage loan charges a PMI for down payments of less than 20%.
PMI is often waived for physicians, so you may not impute this figure.
How the Physician Online Calculator Works
The internet is full of free mortgage calculators that can help determine how much house you can afford based on your income and down payment.
Some free physician mortgage online calculators include:
- NerdWallet,
- Bankrate,
- Zillow’s mortgage calculator,
- Physiciansmortgageloan.com,
- Huntington Bank Mortage payment calculator
These tools will ask you to enter information like your annual salary, desired down payment amount, and monthly debt payments and interest rate to determine your maximum affordable monthly payment.
Once you enter all your numbers, the calculator will show you the maximum monthly payment, mortgage amount, and home price you can afford based on the information provided.
Make sure this number fits comfortably within your budget. If needed, adjust the down payment amount and interest rate, or look for ways to pay off debt to improve affordability.
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To explore different scenarios, you can adjust the inputs to see how down payment, interest rate, or location affect your borrowing capacity.
Remember that the calculator’s estimate is based on the mortgage payment alone.
When creating a comprehensive budget, factor in other costs like property taxes, insurance, utilities, and maintenance.
Tips to Help You Calculate How Much to Borrow
Even with a physician mortgage loan calculator, you will still need to decide how much to borrow.
Here are some things to consider when der=terming how much you can take with a physician loan:
1. Determine Your Debt-to-Income Ratio
To determine how much house you can afford with a physician mortgage loan, you’ll need to calculate your physician income and debt-to-income ratio.
Lenders use your debt-to-income ratio to evaluate how much you can borrow while still being able to make payments comfortably.
To calculate your ratio, add up your monthly debt payments like student loans, car payments, and minimum credit card payments, and divide that number by your monthly income.
The 36% Rule is a standard guideline to ensure responsible income-based borrowing.
It suggests that your housing expenses and other debts like car payments, credit card debt, and student debts should be at most 36% of your gross monthly income.
If your income is $300,000 per year and your monthly debt payments total $6,000, your monthly income would be $25,000, and your debt-to-income ratio would be 24% ($6,000/$25,000), leaving you in an excellent position to qualify for a physician mortgage loan.
However, if your monthly debt payments were $12,000, your debt-to-income ratio would be 48% ($12,000/$25,000), which is too high for most lenders.
In this case, you’d need to pay down your debts before applying for a mortgage.
Alternative to the 36% rule, some advisors propose the 25% or 28% Rule, dividing your take-home pay by 0.25 or 0.28 to determine a suitable budget for monthly expenses.
Knowing your earning potential and debt-to-income ratio will help you determine how much you can afford to borrow for a home as a physician.
As a physician, you may be able to exclude student loan debt from this calculation because some physician mortgages provide exemptions in considering your student loan.
2. Understand Your Options
Physicians often have more mortgage options, such as securing loans without a down payment or private mortgage insurance (PMI).
You can choose between a 30-year, fixed-rate mortgage, a 15-year with a lower interest rate mortgage but higher monthly payments, or an adjustable-rate mortgage (ARM) with potential interest rate fluctuations depending on your long-term plans for the property.
3. Get Good Advisors
Getting good advisors, including a buyer’s agent and financial advisor, is crucial to find the right home, negotiating prices, and devising a financial plan for homeownership.
A lender can present various financing options and calculate how different interest rates and loan types will impact your monthly payment.
4. Down Payment
The more you can put down, the lower your interest rate and monthly payment will be.
As a physician, you can put down as little as 0-10% for a down payment on a physician mortgage.
The typical down payment is usually 3-5% of the purchase price. The more you put down, the better.
A larger down payment, like 10-20% or more, will get you a lower interest rate and monthly payment.
It also means less money borrowed and less interest paid over the life of the loan.
5. Consider Other Factors
It’s vital to consider other financial implications that surround you or involve getting a house, such as
- Utility costs,
- Repairs and Maintenance
- Furniture, and Household Items
- Fees associated with homeowner’s association membership.
- Closing Costs
- Household Income
- Cost of Living
- Personal Comfort Level
- Type of house and desired neighborhood
- Savings for Other Financial Goals
Conclusion
Using a physician mortgage loan calculator is helpful to determine how much house you can afford before starting the home-buying process.
Check with multiple lenders to compare offers, as rates and terms vary. With the right preparation, you’ll know how much house you can afford.
However, it’s important to note that these calculators only offer a limited perspective.
It is still advisable to consult with a financial advisor to understand how all the mentioned variables, including student loan debt, should be considered for a complete financial assessment.