Today’s post will take a slight departure from my usual focus on commercial multifamily real estate. Instead, I will be discussing residential real estate and how physicians qualify for residential lending. More specifically, I will be reviewing the book, “Why Physician Home Loans Fail” by Josh Mettle.
Josh sent me his book a few months ago and it has sat on my nightstand ever since. As a long-time investor in real estate, I have gone through the lending process more times than I care to remember. I’ve done residential loans, commercial loans, adjustable rate mortgages (ARMs), fixed loans, construction loans, private lender loans, full-recourse loans, non-recourse loans, refinances, etc.
The one thing all of these loans had in common was my distaste for the process. In fact, the lending process is my second to least favorite thing about real estate. Property management is the only thing I like less.
Having said that, the ability to qualify for lending and correctly leverage a property can create returns for the investor that exceed anything that the traditional wall-street financial advisory model could ever parallel in both size and consistency. For that reason alone, lending is of utmost importance to the multifamily real estate investor.
Consequently, I took the book with me last month to Washington D.C. where I was doing a couple of learning events for physicians interested in learning more about diversifying into commercial multifamily real estate. At 131 pages and nine chapters, it was a quick read. I read the book straight through and didn’t once feel drowsy. It takes considerable talent and writing acumen to take a dry subject like mortgage lending and make it engaging and engrossing.
Josh does this by immediately diving into the heart of the issue and providing a meat and potato presentation of residential lending and the unique challenges physicians can face when trying to buy a home.
I particularly liked his use of real world examples to better illustrate these challenges. The truth of the matter is that most physicians do not expect to be denied lending when they have high credit scores and a well-paying job. I’m sure that it is a rude awakening to discover that those two qualities are not always enough to be approved for a loan.
Gone are the days in which the ability to fog up a mirror or having a pulse was all that was needed to be approved for a loan. Underwriting standards are much more stringent and many doctors have found themselves dazed and confused by the process and more than a little indignant to be turned down for a loan.
As a mortgage broker who caters to physicians, Josh has seen the unique challenges that can disqualify many of our brethren. More importantly, Josh shares how to get around those challenges and acquire approval when others cannot.
Unfortunately, not all mortgage brokers are created equally. Many do not know the unique challenges of our profession. Whether it is buying your first home out of medical school or residency or switching from a W2 position to an independent contractor, there are numerous landmines in today’s market that can disqualify a six-figure earner from being able to buy a home. If your mortgage broker doesn’t know how to sidestep these problems, then I’d be happy to rent you an apartment in one of my communities.
However, if owning a home is your dream then don’t give up just because an underwriter told you that you couldn’t qualify. Make sure you read Josh’s book. Then go out and find a mortgage broker who is well versed in providing loans to physicians. I would also insist that the mortgage broker read, “Why Physician Home Loans Fail.” Better yet, give Josh a call and see if he can help you.
Josh and I have no financial relationship and I do not benefit from the sales of his book. I bring this information to you because knowledge is power and being able to anticipate potential roadblocks and how to seamlessly navigate them before they arise can make the difference between being approved and being denied for your dream house.
To Your Wealth!
Dennis Bethel, M.D.
P.S. I can hear many of my readers asking about commercial multifamily real estate lending and how that can go wrong. It is definitely a topic for a future blog post. In short, commercial loans can be more intensive with the property and the deal sponsor being scrutinized more stringently. Active investors will have several hurdles to navigate, many of which would disqualify the average physician. The good news, however, is that as passive fractional investors, you can invest in commercial multifamily real estate without having any exposure to the lending process.