Physician mortgage loans are a great product aimed only at physicians and healthcare professionals. The advantages to these products (such as zero to very little down and no PMI) are offered by lenders to physicians precisely because they are sound investments. Physicians tend to earn higher incomes over the life of their careers.
However, lenders have different ways of considering physician income when determining loan eligibility. Most of the time, the guidelines that consider physician employment income are more forgiving and flexible than Conventional Loans.
Physician income usually falls into the following categories of employment and these categories that lenders take into account:
W2 Employee
A W-2 employee is an employee who receives a regular wage or salary from an employer who withholds payroll taxes. A physician is a W2 employee of the company (for instance, a hospital or medical practice) with a guaranteed salary.
Member of a Partnership
If a doctor is part of the practice and a partner, banks see this as the same type of employment as a W2. That is, as long as the physician’s partnership is 25% or less.
Independent contractors/1099 Physician
There are several essential differences between W-2 and 1099 physician income. Both types of work are common in the profession. Independent contractors are self-employed and responsible for paying their taxes. They use the 1099-MISC form.
This is further broken down by banks as follows:
Self Employed Sole Proprietor or Owner of LLC with less than one year of self-employment – 1099
Banks accept this income with a hospital contract outlining guaranteed pay.
Self Employed Sole Proprietor or Owner of LLC with one year of self-employment – 1099
If physicians have filed at least a year’s worth of 1099s, lenders can calculate income using the previous year’s tax returns along with a current Balance sheet.
Self Employed Sole Proprietor or Owner of LLC with at least two years of self-employment – 109
This is the standard 1099 borrowers are held against by lenders and banks. At least two years of personal and business returns are considered.
Typical Supporting “Income” Documents needed for banks and lenders for any type of employment include:
Employment contract showing start date and guaranteed salary.
1040 Personal Tax Returns
W2 form
1099 forms
The Doctor Mortgage Loan Program is designed to help professionals who qualify to receive a mortgage loan from participating lenders with zero to very little money down and no private mortgage insurance (PMI.) Though the average physician loan allows for debt from medical school debt, income is the primary consideration.
Finding a qualified lender to work with is essential as they all have specific qualifications regarding income and how it’s calculated. MD Mortgage Loans can help find a lender that meets the needs of a specific borrower based on the type of sufficient income. They have compiled a list of Physician Mortgage Lenders and Banks by state and qualifications.
