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Buying a home is a major milestone, but for physicians, the journey can be uniquely complex. Between long hours, high student loan debt, complex compensation contracts and delayed earning potential, navigating the mortgage process can feel overwhelming. That’s why understanding key terms like prequalification and pre-approval is essential, especially when exploring physician mortgage programs designed with doctors in mind.
What is Prequalification?
Definition:
Prequalification is an initial step in the mortgage process where a lender gives you an estimate of how much you might be able to borrow based on self-reported financial information.
What Information is Needed:
- Estimated income
- Debt obligations
- Credit score
- Employment status
- How Long It Takes: 24 hours
Pros:
- Quick and easy
- No impact on credit scores
- Helps set a home-buying budget
Cons:
- Not verified by documentation
- Less credibility with sellers and real estate agents
For busy doctors, prequalification can be a helpful first step to gauge affordability. However, it’s not sufficient when competing in hot real estate markets.
What is Pre-Approval?
Definition:
Pre-approval is a more formal process where a lender verifies your financial background and conditionally commits to lending you a specific amount.
Required Documentation:
- Proof of income (e.g., employment contract for residents/fellows)
- Credit report (hard pull)
- Bank statements
- Student loan documentation
- Credit Check and Underwriting: Yes, a hard credit inquiry is performed, and underwriting begins based on your verified financials.
Pros:
- Stronger negotiating power
- Shows sellers and real estate agents you’re a serious buyer
- Helps identify potential issues early
- Streamlines process when you find a home. You are already credit approved; you just need to receive a clear title and appraised value.
Cons:
- It takes more time (48 hours)
- Requires documentation
- Temporary impact on credit score
Why It’s More Powerful in Competitive Markets: In fast-moving markets, sellers often prioritize offers from pre-approved buyers. For physicians, this can be the edge needed to secure a home near a hospital or clinic.
Key Differences Between Prequalification and Pre-Approval
Which Comes First? Prequalification usually comes first, but many physicians skip straight to pre-approval for a stronger position.
Which Carries More Weight with Sellers and Real Estate Agents? Pre-approval, hands down.
Why This Matters for Physicians
Unique Financial Profile of Doctors:
- High student loan debt
- Limited savings during training
- High future earning potential
- Complex compensation contracts
How Physician Mortgage Programs Treat Pre-Approval Differently:
- Accept future income (e.g., signed employment contracts)
- Often exclude student loans from DTI calculations
- Require little to no down payment
- No private mortgage insurance (PMI)
Tips for Leveraging Pre-Approval in Physician Loan Programs:
- Get pre-approved before house hunting
- Use lenders familiar with a physician’s unique needs and loan programs
- Highlight your pre-approval of offers to sellers
Next Steps for Doctors
How to Get Started with a Physician Loan:
- Gather necessary documents (contract, ID, financials)
- Apply for pre-approval with a physician-friendly lender
Checklist for Pre-Approval:
- Signed employment contract
- Government-issued ID
- Recent bank statements
- Student loan documentation
- Proof of medical license or degree
Conclusion
Understanding the difference between prequalification and pre-approval is crucial for physicians navigating the home buying process. While prequalification offers a quick snapshot, pre-approval provides the credibility and leverage needed in today’s competitive market, especially when paired with a physician mortgage loan.
Ready to take the next step? Contact one of our Physician Loan experts about pre-approval today!
Julie Velline
With over two decades of experience in the mortgage industry, Julie Velline has built a career as a loan officer. Julie managed her own brokerage offices for many years before joining Heritage Bank NA in 2017. Her passion for helping first-time homebuyers was sparked after purchasing her first home in 1996. Since then, she has dedicated her career to assisting clients in making their dreams of homeownership a reality.
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