"Physician Loan" and Re-financing???

[Scarlet_Fire]

I am an M4 about to graduate.
I currently own a home that I acquired through a 'no document' loan early in med school.
Most likely I will be staying in my current home during residency, but I want to lower my interest rate.
I understand that, once I am an employee of the hospital, I can re-finance (assuming I qualify).

My question is this:

Can I RE-FINANCE my home for the outstanding amount owed using this 100% financing Physician Loan?
(I currently owe much less outstanding on my home than that for which I would qualify using the Physician Loan.)

---

Members don't see this ad.

 

[Mutterkuchen]

I cannot answer your question about the physican loan program directly, however as a homeowner in medical school I know a little bit about refinancing.

Assuming that you already own your home and assuming you or your spouse has an income, you should have no problem refinancing at a much lower interest rate through most any lender. This assumes that your education loans qualify for forebearance. You will have equity in your home and you have already made the downpayment for the no-doc loan, so the 100% financing is really not applicable.

I bought a house using the modest income of my wife for documentation. The lender did not look at my undergraduate debt or my projected med school debt when qualifying me for the loan.

Assuming you made ontime payments, the physician loan program should lend to you, no problem. However, since you already have equity in your house, I would advise you to not limit your mortgage search for those who cater just to residents. You might be able to get a better deal (lower interest rate and closing costs) from some other lender.

 

[Scarlet_Fire]

Thank you for your input.

I did speak at length with 2 different mortgage brokers, and have learned that the Physician Loan will not allow refinancing per se, but that there are a myriad of options for refinancing which, as you stated, may be better than the physician loan.

The typical Physician Loan (100% financing, no consideration of any student loans) are 3, 5, or 7 year arms. This means that your 'rate' is only locked in for that specified amount of time, then after that your mortgage lender may reserve the option to increase the rate by up to 6% in the first year after the arm expires! This is, however, unlikely, as the company will presumably want to continue doing business with you, as long as you've been diligent and on time. These short arm loans are also available to anyone, and you can usually get a very low interest rate. But as an applicant for traditional refinancing, there are many more options available, including long term mortgages (15, 30 year).

FYI: It has been recommended to AVOID so called 'interest only loans'. While attractive for monthly payments, you are not building any equity in the home during this time. Some have suggested putting the money one would otherwise pay to mortgage into some investment which will (hopefully) outpace the interest rate. This is very risky.