After years of delayed gratification, most young physicians transitioning from residency or fellowship into practice want to buy a house they will be happy living in.
When making the transition from residency or fellowship into practice, the biggest goal I hear most young physicians express after all of the delay of gratification is to get into a home they are happy with and can grow into a bit. (I touched on the unique opportunities available for finding lower down financing options in a past column.)
Once you find a lender that you are comfortable with, you need to get a preapproval letter to be able to show sellers that you are a qualified candidate with which to engage in purchase negotiations.
Here are a few factors that need to be in good order to increase the likelihood of a favorable approval:
1. Basic documentation
They will require your Social Security number, date of birth, a copy of your driver’s license, etc.
2. Credit score
This is a huge factor. I also touch on how a credit score is constructed in a prior article. The higher the score, the better; but if you can get your score above 740, then you shouldn’t have any problems qualifying for the better rates and programs.
If you are below 740, you can still qualify for a mortgage, but this is the golden threshold to shoot for.
3. Tax records
You need a proof of income and complete and accurate records of your completed taxes and income verification (i.e. W-2s, 1099s, etc.).
4. Statements confirming your net worth
Having the most recent statements for brokerage, bank and retirement accounts will be crucial if part of your approval is contingent on having some collateral or proof of the ability.
All of this said, a preapproval letter is not a guarantee that you will actually be approved. It is a quick run through done by loan officers to get you in the game with realtors and sellers. An actual approval for a mortgage comes from an underwriter at a mortgage company and is a much more stringent process. If you do not have your supporting documents (i.e. tax returns, W-2s/1099s to support those tax returns), then you could actually end up being declined.
Furthermore, if there have been any material changes to your credit history, this may drastically influence what your true approval would come out to. Once you are preapproved, you need to make a conscious effort not to change your credit score — do not cancel any credit cards, take on any new loans, etc.
If you have done your homework on the front end to work on your credit score and connect with a bank that offers physician mortgage programs, then owning a home that you desire upon graduating from training is a likely reality.
Jon C. Ylinen is a Financial Advisor with North Star Resource Group and offers securities and investment advisory services through CRI Securities, LLC. and Securian Financial Services, Inc., Members FINRA/SIPC. CRI Securities, LLC. is affiliated with Securian Financial Services, Inc. and North Star Resource Group. North Star Resource Group is not affiliated with Securian Financial Services, Inc. but is independently owned and operated.
Please consult a financial professional for specific advice in relation to your individual circumstances. This should not be considered as tax, specific loan repayment for an individual or legal advice. This is not a recommendation of any strategy or product in particular. 995582/DOFU 8-2014