Is a Professional Mortgage Right For You?
For many young professionals entering the workforce, purchasing a home may feel like a goal that will take years to reach. Considerations like significant personal or student loan debt, limited cash flow, and saving for a down payment often discourage them from pursuing homeownership sooner. However, for those employed in a lucrative field expecting a pay increase in the near future, homeownership could be possible much sooner than expected.
A professional mortgage is designed to help young adults bridge that gap between their current and expected future earnings so they can purchase a home now rather than waiting a few years for their financial situation to improve. Like any other financial product, however, the exact terms of a professional mortgage can vary significantly. If you’re shopping for a professional mortgage, there are a few factors you should consider.
The Advantages of a Professional Mortgage
If your profession qualifies you for a professional mortgage, the advantages can be significant:
- Low down-payment options: banks know that a postgraduate degree is expensive to obtain, and many first-year doctors and lawyers have significant debts that preclude them from making a large cash down payment. As a result, down payment requirements are often lower than for conventional loans.
- Higher loan amounts: in anticipation of the higher income you’ll be making in a year or two, many banks are willing to offer you a higher loan amount than you’d otherwise qualify for based on your current income and assets alone.
- No requirement for PMI: private mortgage insurance is usually applied when you pay less than 20 percent of the value of the home as a down payment. Since your liquid cash is likely to be limited, banks will often waive this insurance.
- Excluded student loans: while a typical loan might include your student loans in your debt-to-income ratio, a professional loan will sometimes ignore deferred loans when calculating the amount for which you qualify.
Who Qualifies for a Professional Mortgage?
In most cases, professional mortgages are reserved for high-earning professionals like attorneys and physicians. The exact terms will vary from bank to bank, however — some offer the same underwriting guidelines for dentists, veterinarians, physician’s assistants, pharmacists, CPAs, and other professional designations with predictably high incomes.
Check with each financial institution that you talk to, asking specifically what their professional requirements are and how those requirements change the terms of the loan.
Can You Qualify With Future Income?
Conventional loan applications generally require you to submit past pay stubs to prove your income. In the case of a professional mortgage, however, some lenders will allow you to submit an employment contract that lists your future income. Some lenders will even allow for loan closings up to 90 days in advance of your future employment date so you can get as big a head start as possible on your new home.
Talk to First Western Trust Bank
Real estate is an excellent way to diversify your portfolio and grow your wealth in the long term, and a professional mortgage is a perfect way to get started. If you’re looking to purchase your first home and you’re wondering whether you qualify for a professional mortgage, talk to First Western Trust Bank today.