Mortgages for Professionals (New & Established): Ultimate Guide

Key features of mortgages for professionals

Professionals’ home loans have very attractive features. These programs offer a range of benefits, from flexible underwriting to special terms, all aimed at making the dream of homeownership or refinancing more achievable and financially manageable for professionals.  

All loan purposes allowed

A key feature of mortgages for professionals is the versatility of loan purposes.  The following loan purposes are supported:

• Purchase
• Delayed financing
• Rate-and-term refinance
• Cash-out refinance (there may be limits on the amount of cashback allowed at the table, e.g., up to $250,000)
• Construction-to-permanent financing

100% loan-to-value available (0% down payment)

Perhaps the most attractive feature of professional mortgages is the potential for 100% loan-to-value (LTV).  For a purchase, this means 0% down payment.  For a rate-and-term refinance, this means you maximize your chances of paying your current loan off in full, as long as the appraised value of your property is high enough.  

To take advantage of 100% LTV, lenders typically require healthy credit scores and DTIs as well as properties in sound conditions.  For example, the LTV will typically be reduced by 5 to 10% for the following situations:

• Non-warrantable condominiums, the LTV will be reduced
• Cash-out refinances (rate-and-term refinances, by contrast, can go up to 100% LTV)
• The loan amount reaches a certain threshold (e.g., jumbo loan amount) 

High loan amounts

Understanding that professionals often seek homes that match their hard-earned status and lifestyle, mortgages for professionals offer jumbo loans, which exceed the conforming loan limits set by federal guidelines.

The maximum loan amount under these programs can be as high as $1M.

For example, some lenders offer these attractive options that come with both low down payments and high loan amounts:

• 0% down payment for loan amounts up to $766,550*
• 5% down payment for loan amounts of $766,551 to $1 million

*$766,550 is based on the current conforming loan limit set by the Federal Housing Finance Agency.  

Flexible options to show income

One of the standout features of professional mortgage loans is the flexible options for demonstrating qualifying income. We understand that income sources can vary widely for professionals, and our approach is designed to accommodate these differences.

The following sources of income are acceptable for loan qualification:

• W2 Income:  You fit this category if you’re employed, salaried and receive a W2.  There is no seasoning requirement, meaning that recent changes in employment or salary level will not be a hindrance.
• Contract Income:  Income earned through contracts may also be eligible as long as income and expenses can be reasonably determined.
• Future Income:  If you have a fully executed employment contract, and your employment is set to begin within 90 days of the loan closing, this income can be considered. For applicants in this category, having sufficient reserves to cover expenses in the period before the start date is necessary.
• Self-Employed Income: For self-employed professionals, lenders will consider just one year of established income (whereas traditional lenders typically require two years), as verified by tax returns and year-to-date profit-and-loss statements. This acknowledges the unique financial situations of those who run their own practices.

This flexible approach to income verification ensures that a wider range of professionals can access the home loans they need, reflecting the diverse ways in which professionals earn their income.

Special guidelines regarding debt

Professional mortgages have special guidelines regarding debt that reflect the unique financial situations often faced in this field.  A key aspect of this is the approach to debt-to-income (DTI) ratios.

• Higher Maximum DTI Allowed:  Professionals tend to have higher debt levels due to their educational and career paths. Therefore, the maximum DTI allowed is typically around 45% (depending on credit score), which is a slight increase from the standard 43% imposed by more traditional lenders. This higher threshold provides additional flexibility for those with higher debt levels, making it easier for them to qualify for a loan.
• Consideration for Student Loans in Deferment: Understanding the significant investment in education that professionals often make, these programs offer specific considerations for student loans. If a student loan is in deferment for at least 12 months at the note date, it may be excluded from the DTI calculation. This exclusion is contingent on the lender’s reasonable determination that the borrower’s income is likely to increase by the end of the deferment period and will be sufficient for timely repayment of the student loan debt once it resumes.

These guidelines are designed to accommodate the financial realities of many professionals, especially new professionals who are early in their careers with substantial educational debt.

Favorable professional mortgage rates

Professional mortgage rates are often favorable and competitive in the market.  These competitive rates are a recognition of the stability and reliability inherent in professional careers.

Additionally, there’s an opportunity for borrowers to receive a slight reduction in their mortgage rate if they opt for auto-deposit from a bank account opened with the lender, provided the lender is a depository institution. This incentive not only offers further financial benefits but also encourages a comprehensive banking relationship between the professional and the lender.

No reserves requirements

Another notable advantage of mortgage loans for professionals is that the lender may waive the reserves requirement, in recognition of the dependable and secure nature of jobs within the professional industry.  

Post-closing cash reserves are funds that a borrower is required to have available after closing the purchase or refinance loan. These reserves are meant to ensure that the borrower can continue making mortgage payments in case of unexpected financial challenges. The amount is usually specified as a certain number of months’ worth of mortgage payments, typically ranging from 12 to 24 months.

Variety of payment terms available

Under professional loan programs, borrowers can choose a structure that fits their unique circumstances:

• Fixed-rate mortgage:  For those seeking stability and predictability in their mortgage payments, there are fixed-rate loans (10-year, 15-year, or 30-year may be available). These options provide a fully amortizing payment structure, meaning borrowers will pay off the loan completely over the specified term with consistent monthly payments. This is ideal for professionals who prefer a clear, fixed payment schedule.
• ARM: Adjustable-rate mortgages (ARMs) tied to the Secured Overnight Financing Rate (SOFR) are also available. These include 5/6, 7/6, and 10/6 SOFR ARM options.  These ARMs offer lower initial interest rates, which adjust after the initial fixed period (5, 7, or 10 years) based on the SOFR index. This can be a suitable choice for those who anticipate changes in their financial situation or plan to refinance in the future.

Private mortgage insurance not required

Another advantageous feature of home loan programs for professionals is the exemption from private mortgage insurance (PMI).

PMI is a type of mortgage insurance typically required for conventional loans when the down payment is less than 20% of the home’s purchase price. This insurance is designed to protect the lender, not the borrower, if the borrower stops making payments on the loan.

For professionals taking advantage of these specialized loan programs, the PMI requirement is waived.  Not having to pay the mortgage insurance premiums can lead to significant cost savings over the life of the loan.