A physician mortgage loan or a “doctor loan” is a specific type of mortgage loan aimed at assisting medical industry professionals achieve their dreams of home ownership. Unlike other mortgage loan options, a physician loan requires zero down payment and is flexible in ways a conventional mortgage may not be. Additionally, other loan types may require that borrowers pay a Private Mortgage Insurance (PMI) if a down payment of less than 20% is made. In short, a physician loan offers a zero down payment and the ability to skip PMI. Read on for more information about a physician mortgage loan and how we can help you qualify.
Physician Loan v Traditional Mortgage
Physician loans are a specialty mortgage loan created to assist individuals in the medical field the opportunity to quality for a home loan. Conventional mortgages have clearly defined rules regarding debt to income ratios, proof of long term employment, a sizeable down payment, and without that down payment a private mortgage insurance.
Significant income and long-term employment are often requirements to qualify for a mortgage loan. Medical professionals have the potential to earn more money in the future and are less likely to default on their loans. Lenders keep this in mind and are willing to compromise on a few key points.
How a Physician Loan Works
Compared to a conventional mortgage loan, a physician loan offers a way for physicians and medical professionals the ability to qualify for a home mortgage loan earlier than they would with other loan options. A down payment of 0-10%, no PMI, and flexibility with DTI and employment history, physicians can qualify with ease and afford to buy a home. A physician loan doesn’t usually offer fixed interest rates, among other differences. Here’s how some of the other elements of a mortgage loan are different in this specialty loan type compared to conventional mortgage.
Private Mortgage Insurance (PMI)
When individuals purchase a home and make a down payment of less than 20% lenders require that borrowers purchase private mortgage insurance in the instance that the loan is defaulted. PMI typically costs between 0.5-1% of your loan amount per year, but is based on insurance rates. This can amount to hundreds of dollars extra on a monthly payment, based on the size of the loan. As new doctors have hefty school debt, lenders waive the need for PMI, even if no down payment is made at the time of purchase.
Debt To Income (DTI)
An important measurement of qualifications for a conventional mortgage. However, in a physician’s mortgage loan the amount of money you owe compared to your income isn’t as big of a factor. In a conventional loan the DTI is required to be 50% or lower. Lenders check this to ensure that borrowers are able to easily manage their monthly payments without defaulting on the loan. The higher the DTI the more risky the loan. In the case of a physician this may be impossible as medical school debt accrual is typically quite high. Physician home loans take this into account and are far more relaxed when it comes to DTI restrictions. Other debts are still scrutinized, like credit card debt, car loans, and other expenses are examined, but the higher DTI associated with medical professionals is not necessarily a disqualifier.
Eligible Professional Designations Where Physician Loans Are Available
Medical Doctor (MD)Doctor of Dental Medicine (DMD)
Doctor of Ophthalmology (MD)
Doctor of Osteopathy (DO)
Doctor of Surgery (DCH)
Doctor of Dental Surgery (DDS)
Doctor of Optometry (OD)
Doctor of Podiatric Medicine (DPM)
Doctor of Veterinarian Medicine (DVM)
Doctor of Psychiatric Medicine (DPM)
Up to $1,000,000 without a down payment
5% down between $1,000,001 – $2,000,000
10% down between $2,000,001 – $3,000,000
Eligible Property Types
Single Family (1–2-unit properties only)
Condominiums (some restrictions may apply)
Mortgage Loan – Types
Fixed Rate (15-to-30-year amortization)
ARM mortgages; 3/6; 5/6; 7/6
Employment Start Date Post-Close Requirements
Employment for borrowers with the eligible profession may begin up to 90 days after note date when:
- There is a non- contingent, fully executed (accepted) employment contract or offer letter documented in the loan file.
- There is a verbal Verification of Employment (VOE) conducted to confirm authenticity of the employment documentation prior to closing.
Student Loan Debt
Student loan debt belonging to the borrower with the eligible profession may be excluded from the debt-to-income calculation with documentation to evidence
deferment or forbearance for at least 12 months after the loan closing date. Some additional guidelines may apply.
Why Physician Loans Are A Good Idea
While the earning power behind a physician is high many doctors and medical professionals can’t qualify for a conventional loan. Some things to consider when qualifying for a conventional loan. A physicians loan will most likely be an adjustable rate mortgage, allowing you to pay a lower, fixed interest rate for the first few years of your loan. In some instances a fixed rate mortgage may be available. In either instance your mortgage loan will most likely have a slightly higher interest rate than the prime. Starting a home loan with no money down may also place you in risk of ending up owing more than the property is worth for a period of time. Nonetheless, many physicians and medical professionals find the loan to be advantageous.
You can get answers to more of your questions, and speak to a physicians mortgage loan officer today.