By Phil West, WCI Contributor
If you’re a nurse and you’re looking to find a home loan, know that there are a number of options available to you. Some of the programs out there are available to the general public, and some are earmarked specifically for healthcare workers. And still others place nurses into a larger “hero” category offering incentives. Here's what to know if you're looking for the best home loans for nurses.
Conventional Home Loans for Nurses
It’s quite possible that, despite all the options out there, a conventional home loan could offer you the most advantageous rates and terms. These kinds of loans can be found either through a private lender (a bank or mortgage company, for instance) or by government-sponsored entities like Fannie Mae and Freddie Mac. Unlike a Federal Housing Administration (FHA) loan, a conventional home loan is not actually offered or secured by a government entity. Instead, it's backed by a bank, credit union, or mortgage company.
Because it’s the most common type of home loan, conventional loans are generally more available than other types, and you can do more shopping around for the best rates and terms.
Federal Housing Administration (FHA) Loans
An FHA loan is one that is insured by the government, and it can be issued by lenders who have been approved by the government. Why is an FHA loan potentially a better option? It's because it offers smaller down payments, lower closing costs, and easier credit qualifying. People who have lower credit scores and who might have a hard time being approved for a conventional loan could potentially find more success with an FHA loan.
As Investopedia notes, “The FHA loan is designed to help low- to moderate-income families attain homeownership. They are particularly popular with first-time homebuyers.” FHA borrowers often tend to be higher risk so they generally must pay higher interest rates and private mortgage insurance (PMI).
As we’ll explore with a few types of loans here, it’s possible to refinance at a later date to get more preferable terms once you establish equity and a good track record of payment.
Can Nurses Use Physician Mortgage Loans?
The White Coat Investor has an entire article about how physician loans work. Basically, they’re based on the idea that while some doctors starting out might not have the conventional elements you’d look for in a home loan applicant, their ability to earn—and earn significantly—puts them in a special class. That means they can secure a mortgage with fewer restrictions than a conventional mortgage. Nurse practitioners are, for the purposes of these loans, often treated like doctors. While nurses don’t necessarily qualify for these, as their employment is usually tied to hospitals or to established practices, some banks will put loans for nurses and nurse practitioners in the same bucket.
As we put it, “Quite a few institutions recognize that the financial lives of doctors are a little bit unique, that they aren't as bad a credit risk as their high debt-to-income ratio would suggest, and that they can bring other valuable business to the bank.”
Physician loans can come with higher interest rates or higher fees than conventional loans, but it’s also possible to refinance them when your situation changes or when rates are more favorable.
More information here:
Home Loans for Doctors: Physician vs. Conventional
Nurses Can Consider Homes for Heroes
Though not available in all states, this Homes for Heroes program incentivizes healthcare professionals and EMTs—as well as military, law enforcement, and teachers—to work with their network of lenders and real estate professionals.
The program claims, “Most heroes save at least $3,000 when they buy or sell a home with us. When you add up savings from real estate agents, loan officers, title companies, home inspectors, and other everyday deals, the savings is way beyond what you’ll get from other national programs.” As with any services like this, do a little research once you get more specifics about who might specifically be working with you.
Good Neighbor Next Door
The Good Neighbor Next Door (GNND) program is forwarded by the US Department of Housing and Urban Development to “make American communities stronger and to build a safer nation” by “encouraging law enforcement officers, pre-K through 12th-grade teachers, and firefighters/emergency medical technicians to become homeowners in revitalization areas.”
It’s a little challenging to know where revitalization areas might exist in your market, but this tool might help you.
More information here:
How to Buy a House the Right Way
How Expensive of a House Can I Afford?
USDA Mortgages for Nurses
If the country is calling—in essence, more than 90% of the area of the US qualifies here—you might want to look into a USDA mortgage. According to the US Department of Agriculture, the program “assists approved lenders in providing low- and moderate-income households the opportunity to own adequate, modest, decent, safe and sanitary dwellings as their primary residence in eligible rural areas.”
It adds, “Eligible applicants may purchase, build, rehabilitate, improve or relocate a dwelling in an eligible rural area with 100% financing. The program provides a 90% loan note guarantee to approved lenders in order to reduce the risk of extending 100% loans to eligible rural homebuyers—so no money down for those who qualify!”
As with the Good Neighbor Next Door program, it can’t be applied to every house you might have your eye on, but if you’re looking to live away from a city center or if you've found a job outside of a metropolitan setting, this could be what you’re looking for.
VA Home Loans
Finally, if you came about your medical training via the military—or were otherwise in the military as part of your development—you could be eligible for a VA Home Loan. According to the US Department of Veterans Affairs website, no down payment is required for these types of loans—though some lenders might require them for customers using the Home Loan guaranty. But it can be used again and again by veterans; it’s a lifetime benefit with no limits.
Have more questions about conventional mortgages or refinancing and whether they’re the best option for you? Let us introduce you to the best mortgage lenders in the business, vetted by WCI and thousands of readers.
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