How to Get A Physician Mortgage Loan
If you’re a medical professional looking to make homeownership a reality, a physician mortgage loan could be the ideal solution.
These loans are focused on supporting healthcare professionals that have higher-than-average student loan debt, new employment contracts, and limited savings.
Here’s a complete guide on how physician loans work, along with their specific benefits and requirements—and how Rate’s Same Day Mortgage can help you start your homeownership journey.
What is a Physician Mortgage Loan?
Physician mortgage loans, also known as doctor mortgage loans, are unique lending options tailored to meet the financial needs of medical professionals. For example, these loans usually don’t require any down payment or PMI (private mortgage insurance).
These loans are open to medical doctors, dentists (DDS and DMD), veterinarians (DPM), and other healthcare providers, often including those still in residency or early in their careers.
What makes these physician mortgage loans stand out is their approach to income, debt, and savings requirements, which takes into account the heavy financial load of medical professionals.
Do Physician Loans Still Exist?
Yes, physician mortgage loans are still offered today. Even through the changes in the mortgage industry, these specialized loans are still popular with healthcare professionals because of their consistent rise in popularity.
Overview of Physician Mortgage Loans
A physician mortgage loan is designed to meet the financial needs of doctors and healthcare providers. Large student loan balances and limited savings can make conventional loans challenging for recent graduates or residents.
However, physician loans offer flexibility with down payments, debt-to-income (DTI) ratios, and other underwriting standards.
This approach helps medical professionals qualify for a home loan without needing to meet all the strict requirements of traditional mortgage options.
Do Physician Loans Need Mortgage Insurance?
One major advantage of physician mortgage loans is that they usually don’t require Private mortgage insurance (PMI), even with a low down payment.
For traditional mortgages, PMI is generally required if you put down less than 20%, which can add a substantial monthly cost to your mortgage payment.
Physician loans allow you to avoid this cost, freeing up funds for other financial goals like student loan repayment or building a savings account.
How Do Physician Mortgages Work?
Physician mortgages are structured with medical professionals in mind, offering terms that make homeownership accessible even with student loan debt, new employment, or high DTI ratios.
Loan Structure and Interest Rates
Physician loans can come in both fixed-rate and adjustable-rate mortgage (ARM) loan terms. Fixed-rate loans will keep a consistent interest rate and monthly payment over the life of the loan, which provides a certain level of predictability.
Adjustable-rate mortgages usually start with a lower interest rate that adjusts over time based on the market. Newer professionals can choose ARMs for their initial payments, while others prefer the predictability of a fixed rate.
Do Physician Loans Have Lower Interest Rates?
Interest rates on physician loans change by lender, and while some lenders can give you competitive rates, other lenders may set higher rates to offset the loan’s added risk.
It’s essential to compare interest rates across lenders to find the best fit for your financial situation.
Online mortgage calculators can help estimate your monthly payments based on different interest rates, giving you a clear picture of what you can expect.
Loan Term Length and Repayment Flexibility
Most physician loans offer flexible repayment terms, with loan options ranging from 15 to 30 years. Some lenders also offer special repayment structures that can ease the burden of high student loan payments, making the home buying process more manageable.
What Are the Qualifications & Requirements for a Physician Mortgage?
Physician mortgage loans provide flexibility but come with specific requirements for medical professionals.
Basic Qualifications for Physician Mortgage Loans
Typically, to qualify, you must work in a healthcare profession as an MD, DDS, or DPM. Lenders expect specific credentials and employment documentation, especially for recent medical school graduates or medical residents.
Employment contracts can often establish eligibility, as lenders understand the financial stability of healthcare careers.
Do Doctors Get Better Mortgage Rates?
Doctors can oftentimes qualify for favorable mortgage rates, thanks to their income potential. However, your exact rate will depend on factors like your credit score, the lender, and the loan terms.
Speaking with loan officers and comparing lenders options can help you secure the most affordable rates.
Shopping around can also help if you’re looking for a specific loan amount or considering future refinancing options.
Credit Score Requirements
Credit scores remain important for physician mortgage loans. Most lenders look for scores of 700 or higher but some may be willing to accept lower scores.
Higher credit scores can improve your interest rate, potentially saving thousands over the loan term. If you know you’re interested in acquiring real estate choices you should confirm credit score requirements early in the loan process to avoid surprises.
Income Verification and Employment Status
Even if you’re early in your career or a medical resident, lenders often accept employment contracts as proof of income, because they recognize the earning potential in medicine. Maintaining a checking account with regular deposits can further support financial stability.
Pros and Cons of Physician Mortgage Loans
Physician mortgage loans offer a range of benefits tailored to the needs of medical professionals, but they also have some drawbacks. Here’s a balanced look at both.
Pros
No PMI Requirement
Physician loans typically waive PMI, saving you a monthly expense and lowering your mortgage payment. This is a huge plus for medical professionals looking to keep costs manageable.
Low Down Payment Options
Many mortgage lenders offer physician loans with down payments as low as 0-5%. This flexibility allows you to purchase a primary residence without needing a large savings account, which is helpful when you’re balancing other financial priorities, like student loans or credit cards.
Flexible Debt-to-Income (DTI) Ratios
While high student loan debt is a common challenge with doctors, physician loans often allow higher DTI ratios. The DTI ratio is a financial metric that compares a person’s monthly debt payments to their gross monthly income.
Lenders generally recognize the long-term earning potential of medical professionals and are willing to adjust DTI requirements to reflect this.
Higher Loan Limits
Physician mortgage loans often have higher loan limits which helps healthcare providers afford homes in line with their lifestyle and career status without requiring a jumbo loan for higher loan limits.
Career-Specific Perks
Many lenders offer supportive loan programs for physicians, with benefits like flexible underwriting standards, like accepting an employment contract as proof of income, which can simplify the approval process.
Cons
Higher Interest Rates
To offset the risks of low down payments and no PMI, physician loans may have slightly higher interest rates than conventional mortgages. Over time, this could result in a higher monthly mortgage payment for homeowners in this loan program.
Limited Loan Options
Not all lenders offer physician loans which can limit your refinancing options down the line if you want to switch to a different mortgage lender.
Strict Eligibility Requirements
These loans are typically restricted to certain medical professionals, such as MDs, DDS, and DPMs.
Meeting all eligibility criteria, including different lender disclosures and providing proof of primary residence, can also add to the application and qualification process.
Are There Alternatives to a Physician Loan (Non-QM)?
Non-QM loans are mortgage products that don’t meet the “qualified mortgage” (QM) criteria set by the Consumer Financial Protection Bureau (CFPB). If a physician mortgage loan doesn’t seem like the right fit, several other Non-QM options may suit your financial situation better.
Interest-Only Loans
Interest-only loans allow borrowers to pay only the interest for a specific period, typically five to ten years, keeping initial monthly payments lower.
This option can be especially useful for medical professionals balancing medical school debt or other personal finance goals and may offer flexibility if you plan to refinance later.
Asset-Based Loans
Asset-based loans consider assets like savings accounts, real estate, and checking account balances rather than relying solely on income.
This may benefit those with larger assets but a high debt-to-income ratio, allowing you to leverage your assets over income.
Bank Statement Loans
Bank statement loans use bank statements as income proof, making them a valuable option for those with variable income, such as self-employed healthcare professionals or those with diverse income streams.
These loans can provide a more flexible approach to income verification based on your cash flow rather than traditional methods.
Jumbo Non-QM Loans
Jumbo Non-QM loans cater to borrowers who need loan amounts exceeding conventional limits, which was previously harder to get.
This option appeals to those looking to purchase high-value properties or finance larger home loan amounts, particularly in higher-cost areas.
For medical professionals with high income potential, these loans offer the flexibility needed to secure a larger property.
Debt-Service Coverage Ratio (DSCR) Loans
DSCR loans are designed to ensure borrowers can cover their debt through existing income sources.
These loans are ideal for physicians or healthcare professionals investing in real estate, as they focus on overall debt coverage rather than traditional income verification.
DSCR loans may also allow you to refinance existing real estate investments.
Other Alternatives
What is a Home Equity Line of Credit?
If you already own a home, a HELOC can offer flexible financing letting you borrow against your home’s equity. This option can finance a second home, real estate investments, or other significant expenses.
Conventional Mortgage Loans
Conventional loans may be a solid choice if you meet specific credit and DTI requirements. These loans often have competitive interest rates but may require you to have PMI if your down payment is less than 20%.
FHA Loans
FHA loans offer a low down payment and flexible credit score requirements, making them attractive to first-time homebuyers. PMI is required, but for those who don’t qualify for a physician loan, FHA loans provide another alternative.
Portfolio Loans
Portfolio loans are held by the lender rather than sold to investors, allowing greater flexibility for borrowers with unique financial circumstances, such as high student loan debt or self-employed income.
Rate, Inc. is a private corporation organized under the laws of the State of Delaware. It has no affiliation with the US Department of Housing and Urban Development, the US Department of Veterans Affairs, the Nevada Department of Veterans Services, the US Department of Agriculture, or any other government agency. No compensation can be received for advising or assisting another person with a matter relating to veterans’ benefits except as authorized under Title 38 of the United States Code.
Eligible borrowers must have a minimum DSCR of one. Property type restrictions apply. Eligible for fixed and adjustable rate mortgages. Interest only payment options are available. Gift funds may be used for down payment and closing costs after the borrower has documented the minimum required borrower contribution. Applicant subject to credit and underwriting approval. Additional restrictions apply.