As a medical professional, if you are in the market to buy a house or secure a loan to start a business, the best time to complete the application process is while you are still an employee.
Once you transition to a per diem or rely on sporadic moonlighting work for income as a medical professional, it’s much more difficult for you to obtain a loan.
It might even be a good idea to lock in that loan even if you aren’t sure whether you need it or not. A HELOC loan would be a good example. Most of the loans I’ll mention won’t cost you anything to get approved for and even a HELOC can be had for nearly $0 these days.
Employee Loan Approval Process
As a medical professional employee, you can submit your employment contract or have the bank contact your HR who will confirm that you are employed and will have foreseeable future income.
The formula that loan underwriters use places a higher numeric value on the income as a contracted employee and a lower value if the income is sporadic or variable.
As a medical professional employee, all you would have to show are a few paystubs going back several paychecks and that’s generally accepted as proof of gross income.
Part-time vs Full-time
It doesn’t much matter whether you are working full-time or part-time. From my experience, the banks don’t care about this as long as you have an employment contract.
One of my friends works part-time as a family medicine doctor earning $120k a year and she got approved for a $900k home mortgage. I suspect that the same income as a per diem wouldn’t have allowed her such a high mortgage approval.
Per Diem Loan Approval Process
The loan approval process is more complicated when you are a per diem medical professional. Not only will you need letter from the various companies you work for but you’ll have to show paystubs going back several months for each company.
Then there are letters of explanations you will need to submit to explain why the income is variable and what you ‘expect’ to earn from each company. Rarely will the HR department of these companies step in to offer you a useful letter since they have no contract or obligation to you.
One loan underwriter explained to me that the calculations are made differently if you have sporadic income as opposed to regular employment income.
A while back when I applied for a HELOC, even though my hourly wage was higher and my income potential stronger, the bank considered me a weaker candidate.
For that reason I was approved for a far lower loan amount than I would have otherwise.
Types of Loans To Consider
The types of loans which are worth considering to apply for before switching your employment status are:
- personal line of credit from Lending Club
- business line of credit from Suntrust
- credit card balance transfers
- mortgage refinance loans from SoFi
It’s helpful to have no debt which is something I write about a lot on this site. But it’s just as helpful to have loans available at your disposal should the proper need arise.
I don’t recommend securing loans that you cannot cover with your own cash savings before leaving your employer. For example, it’s fine to get a credit card which allows you a $25k cash advance option as long as you have that sum available in your savings to cover it.
But it wouldn’t be wise to be debt free, have only $100k to your name and focus on increasing your lines of credit unless you are about to make a business move requiring that kind of money.