For physicians, a physician mortgage loan can turn their homeownership dreams into a reality sooner than they might’ve hoped. The path to homeownership often comes with unique financial challenges for physicians. Years spent in medical school, a high student loan balance, and delayed entry into the workforce can make saving for a down payment or qualifying for a traditional mortgage difficult.
These special physician mortgage programs are designed specifically for doctors and other medical professionals, giving them a chance to buy a home without a large down payment saved. If you’re a new or practicing physician wondering whether this loan type could be the right fit, we’ll help you decide.
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What is a physician mortgage loan?
A physician mortgage loan, or doctor mortgage loan, is a special type of mortgage designed specifically for medical professionals. The main purpose is to help physicians buy homes sooner by removing some of the barriers that come with conventional mortgages.
Key features for doctor loans include no private mortgage insurance (PMI), low down payment options, and flexible debt-to-income (DTI) ratios that account for high student loans.
How physician mortgage loans work
Physician loans work similarly to other mortgages in terms of repayment and interest, but the qualifying rules are different. Lenders know that doctors often carry high student loan debt yet have strong long-term earning potential. Because of this, they’re more willing to take on risks.
Most physician mortgage loans don’t have PMI requirements and have higher loan limits. Some lenders allow medical residents to qualify with an employment contract, even before their first paycheck. This flexibility means medical professionals can buy a home right out of residency or fellowship.
Who qualifies for physician mortgage loans?
To qualify for a physician mortgage loan, you must be one of the following medical professionals:
- Medical doctors (MDs)
- Doctors of osteopathic (DOs)
- Dentists (DMDs/DDSs)
- Veterinarians (DVMs)
- Certain other medical professionals like podiatrists, optometrists, or pharmacists, depending on the lender.
In addition, lenders may also require borrowers to meet these requirements:
- Proof of medical education or license
- Proof of employment or a signed contract as proof of future income
- Good credit score, usually 700+, though some accept lower
- Deferred student loans
Because requirements vary by lender, it’s wise to shop around before applying for a mortgage.
Who offers physician mortgage loans?
Wondering which banks offer physician mortgage loans? Many large national banks and regional lenders offer this type of mortgage. Each has slightly different terms, so shopping around is key.
Examples of banks and lenders that commonly offer physician mortgage loans include:
Some of these financial institutions offer up to 100% financing, while others may require little down payment, depending on the loan size. Working with a mortgage broker who understands physician mortgage loans can also help you compare offers.
Pros and cons of physician mortgage loans
Physician loans come with several benefits and drawbacks worth knowing before committing yourself.
Pros
- Little to no down payment or mortgage insurance: When you apply for a conventional mortgage, you’ll need to put down at least 20% to avoid mortgage insurance. Most doctor mortgage loans require low to no down payment and no PMI.
- Higher loan limits: Because doctors typically earn higher incomes, lenders are willing to extend larger loans than they would for most other borrowers. Physician mortgage loans can go as high as $2 million, depending on the lender.
- Flexible DTI ratios: The huge medical student loan can often mean a higher DTI ratio. Because of this, lenders calculate the DTI using income-driven repayment amounts instead of the full loan balance.
- Future income consideration: Most conventional loans require proof of income, but many physician programs accept a signed employment contract as proof of future income. That means a resident who hasn’t received their first paycheck yet can still qualify for a mortgage.
Cons
- Potentially higher interest rates: The rates for this mortgage type may be slightly higher than what you’d get with conventional loans. This is because lenders are taking on more risk by accepting no PMI and zero down payment.
- Limited eligibility: Physician mortgage loans are only available to certain medical professionals.
- Primary residences only: You can only use the loan to finance a home you’ll live in.
- Not available everywhere: Not all lenders offer physician mortgage programs, and some are limited to certain states.
Physician mortgage loans vs. other loan options
If a physician mortgage loan doesn’t sound like the right option for you, here are alternatives to consider:
Conventional loans
A conventional home loan is the most common type of mortgage. You usually need at least 3% down, but 20% is ideal to avoid PMI. Conventional loans often offer lower rates than physician loans, especially if you have excellent credit.
FHA loans
Backed by the Federal Housing Administration, FHA loans make homeownership possible for first-time home buyers with less-than-perfect credit and limited savings. They only require 3.5% down but come with mandatory mortgage insurance premiums.
Adjustable-rate mortgages (ARMs)
If you want lower initial rates, adjustable-rate mortgages like 7/1 ARM or 5/1 ARM are great options. ARMs can save money in the short term, especially if you don’t plan to stay in the home long-term. The risk is that rates usually adjust upward later.
Bottom line: Are physician mortgage loans a good idea?
Buying a home feels out of reach for many medical professionals due to student loans and limited savings. But physician mortgage loans bridge that gap, helping doctors achieve homeownership earlier in their careers.
If you’re a physician considering buying a house, weigh the pros and cons carefully. Compare doctor loans with other mortgage options to make sure you’re getting the right fit.
Most importantly, focus on your long-term financial goals. While owning a home can be a great step toward stability, avoid stretching your budget just because you qualify for a larger loan.