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Physician Mortgages—How Much is the Right Down Payment?
When you begin your search for a mortgage, there are many features to consider, one of which is deciding the amount to put down on your home. First time home buyers—including physicians—may be lured by lenders who advertise “no money down” loans and see this is as a perfect opportunity to purchase a home. Although this may be true, you need to take a step back and consider how the amount of a down payment can affect your mortgage, both short- and long-term.
Down Payments—Both Sides of the Coin.
The down payment is one of the most well-known parts of the home mortgage, and one which buyers focus much of their energy on. Historically, the “magic number” for a down payment is 20% of the purchase price. However, down payment requirements vary between loan programs, rate types, and even lenders, so it is important to shop around and ask questions about each lender’s options. Let’s consider the pros and cons of a low down payment.
The Good News—Pros to a Low Down Payment
More Money in Your Pocket. Its simple math: the less money you put down on your home, the more money you have for other expenses. You can use the money saved to pay for other costs, furnish the home, build an emergency fund, or even pay extra on your medical school debts.
Ditch the Rent & Become a Homeowner Quickly. If you live in a market where housing demand is rising, or if interest rates are creeping up, it may behoove you to go ahead and purchase a property while the buying environment is good. Paying rent doesn’t get you anywhere, while as a homeowner, you can build equity.
Special Terms for a Variety of First-Time Buyers. To encourage first-time buyers, many lenders offer special terms like low down payment loans. Physicians reap even bigger rewards, with low (and even zero) down payment mortgages, relying on their stellar reputation and strong history of financial stability.
The Bad News—Cons to a Low Down Payment
The Road to Equity Will be Long. When you put less money down, you have less equity. The ideal scenario for making a low down payment would be one in which you plan on staying in your home for at least 5 years. There is some risk as well—if the housing market drops, and the value of your home along with it, you could owe more than your home is worth. Being “upside down” on your mortgage can present a challenge if you choose to refinance or take a renovation loan in the future.
Interest Rates are Less Than Ideal. Since a low down payment means you are not investing as much in your purchase, the bank is giving you more. This is a bigger risk for them (especially if your home’s value should drop), which means they will likely offer you a higher interest rate.
Be Prepared to Buy Private Mortgage Insurance (PMI). Like we mentioned above, banks are taking a bigger risk with low down payment mortgages. To safeguard the investment, many lenders will require private mortgage insurance to safeguard against borrower default. This is an added expense to consider in calculating a monthly payment. BONUS: One of the biggest benefits of a physician mortgage is the exemption from PMI. Even with low down payment mortgages, many lenders forego this requirement for physicians.
Although not all lenders offer a dedicated Physician Mortgage program, some offer a large menu of mortgage options, including preferential financing for borrowers in financially secure industries like medicine. Wells Fargo is one of those lenders. A giant in the financial services industry, Wells Fargo is an icon with a memorable past. First appearing as a banking services provider in California in 1852, it underwent many name changes, many mergers, and a lot of diversification before becoming the bank as we know it now, in 1929 (although named Northwest Bancorporation).
One of the largest financial services company in the United States, Wells Fargo offers consumer banking and lending, student loans, wealth, and investment management services, and more, in operations worldwide. With over 70 million customers, over 7,000 locations in 39 states and 40 countries, you can find a Wells Fargo branch practically anywhere. Although it does not have physician-specific terms, Wells Fargo is no stranger to the mortgage industry and has thousands of loan officers with the experience to assist doctors in the mortgage process.
Wells Fargo and Company Mortgages
Although not equipped with a designated physician mortgage program, Wells Fargo offers a full slate of lending services, including
Minimum Credit Score
Loan Amounts For Residents & Fellows
Loan Amounts For Practicing Physicians
Wells Fargo has earned too many awards to list, but some of note include being #1 in Banking & Financial Services (UPA’s Green Power Partnership), #2 Top Company for Philanthropy (DiversityInc.) and #1 Company for People with Disabilities (National Organization on Disability). You can find any financial service available at Wells Fargo, an attractive feature for busy physicians. Visit the Wells Fargo mortgage page to learn more about the services offered. And to read through our exhaustive list of mortgage lenders, visit our page here.