Physician's Money Digest
July 15, 2004

Find the Right Lender for You
by Michael Moskowitz, president, Equity Now

Financial management is becoming more challenging for physicians- not that it was ever easy. Physicians have always had high education debt payments, office equipment expenses, and malpractice premiums. And now, HMOs are flattening income.

So it is not surprising that as doctors seek financing, they are running into resistance from the same mainstream banks that used to extend them credit as fast as you could say MD.

Bank Loan Rejection

One New York area physician was denied a mortgage because his medical practice did not follow "normal" profit and loss patterns. "Banks shun people who can't disclose everything and present tax returns or W-2s to verify income," he said.

The physician heard about a direct mortgage lender that specializes in self-employed professionals who can't verify income, don't necessarily have perfect credit, need large amounts of cash, or just need to close within a week or two.

A loan officer from the direct mortgage lender talked to the physician. They reviewed his application and agreed to lend him $650,000. He paid off debts and outstanding balances, including a previous mortgage, and had $158,000 left over to put back into his practice or to use for any purpose.

This physician was fortunate. Many of his colleagues were rejected or stonewalled by banks that do not understand medical practices. Banks tend to focus on full income check loans and pay close attention to credit scores, which can be a problem for physicians dependent on insurance to keep an even cash flow. Banks generally take a long time approving consumer loans.

As a result, some physicians will call a mortgage broker who advertises low rates. The borrower learns, disappointingly, that brokers are intermediaries with no ability to make lending decisions or lend money. They are agents trying to place loans with lenders, and the applicant many times ends up paying high fees and rates.

Direct Lender Advantages

The mortgage company lends money to the borrower in their capacity as a direct lender, which differs from banks and brokers. Unlike brokers, direct lenders make lending decisions and actually make loans. And unlike banks, direct lenders are not snarled in bureaucratic procedures. Many direct lenders specialize in borrowers who are good risks but who have unverifiable income and blemishes on their credit records. Physicians and other professionals can find themselves in these circumstances.

Whatever you decide, follow these tips:

• Try to work with someone referred to you by a colleague or friend.
• Beware of ads for unusually low rates-if it sounds too good to be true, it is.
• Insist on knowing closing costs in advance and getting everything in writing.
• Know how long each step takes.
• Check your lender's credentials with the Better Business Bureau and State Banking Department.

Borrowing money can be a successful endeavor for busy physicians when they are prudent in choosing and working with the right lenders. A quick and pain-free loan can help to improve your financial standing as well as your practice. Do your research and discover the lender who is suitable for you.

Michael L. Moskowitz, CPA, is president of Equity Now, a direct mortgage lender. He holds a BBA degree from Bernard M. Baruch College. An experienced accounting and lending executive, he founded Equity Now back in 1984. The company is licensed in New York, New Jersey, Connecticut, Pennsylvania, Massachusetts, and Florida. He welcomes questions or comments at 212-664-8900, or for more information visit www.equitynow.com.