Physician Loans: Up to 100% Financing for Doctor Mortgages


Doctor mortgage loans are being offered by an increasing number of banks and non-bank lenders, making it a great time to get a physician loan.

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Physicians are medical professionals who have worked hard to achieve their goals. Unfortunately, this hard work has oftentimes come with a sizable financial investment and debts. This can limit a doctor’s options when it comes to getting a conventional mortgage. Physician loans, or so-called “doctor mortgages,” have stepped in to address this need, providing future doctors with the financing they need to fund their medical education.

Find a lender offering physician loans in your state

What is a physician loan?

A physician loan is a loan program designed specifically for the unique financial profile of a doctor. It is a subset of the mortgages for professionals that many banks offer. A physician loan offers fewer restrictions than a conventional loan, based on the premise that the borrower has high income or solid future earning potential. This helps doctors and medical students overcome certain hurdles they might face with traditional loans, including:

  • Little or no established credit
  • No large cash reserves (e.g. down payment)
  • Not yet started employment
  • Bad debt-to-income ratio due to student loans

In traditional lending scenarios, a doctor is often seen as a credit risk, primarily due to their high debt-to-income ratio. Banks have designed these financial products as an alternative that acknowledges the value doctors can bring to a financial institution in the long term.

The components of a doctor loan

While products may vary from one bank to the next, the following are the main components one will typically see in a doctor mortgage:

Low to no down payment requirements. When the average mortgage often comes with down payment requirements as high as 20% of purchase price, doctor mortgages can require far less. In some scenarios, banks may even offer doctors 100% financing with no money down.

Relaxed documentation requirements. Traditional mortgages, especially since the financial crisis, involve extensive income documentation and most of the time banks require W-2 income. Meanwhile, doctors applying for a physician mortgage may only need to submit signed off letters or an employment contract showing that their employment will start in the next three months. Self-employed doctors, too, will find more relaxed income verification procedures and may not need to submit as many years of tax returns as they might with a conventional loan.

No PMI. Conventional loans come with required PMI, or private mortgage insurance. This protection for lenders was consolidated in the aftermath of the 2008 crisis at the federal level. With a physician’s loan, there is no required PMI, even though there may be no required down payment. Not having to pay PMI could save you thousands of dollars.

Easier consideration for student loans. A doctor’s debt-to-income ratio is usually one of the most problematic aspects in an application during the underwriting process. This is typically due in large part to the sizable student loan debt doctors take on to pay for school.

In conventional lending scenarios, a financial institution might see this as a barrier to approval. With doctor loans, a bank takes into consideration that a doctor will have a lot of student debt and, therefore, leverages easier terms when it comes to factoring debt into the applicant’s overall viability.

How physician loans work

Physician home loans are similar in many respects to conventional mortgages. They differ in the larger sense in that they are designed for the specific needs of physicians and other high-income professionals.

These physician loan programs require no private mortgage insurance with the reasoning that the financial institution has “protections” in place based on a physician’s  high income and reliable employment. These mortgages also eliminate amortized student loan repayments as a factor in DTI ratio calculations, accepting lower, income-based payments instead. Down payments are not required, either. These loans “work” in this way because the bank expects to benefit from a strong customer relationship with a doctor in the long term. As such, the financial institution is willing to make accommodations via these offerings to professional customers.

15 Best physician mortgage loan lenders

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Online

usually responds within 30 minutes

Eligible degrees & accreditations:

Medical doctor (MD/DO), Dentist (DMD/DDS), Podiatrist (DPM)

Laurel Road

(All 50 States)

$10M+ Closed Loans

Laurel Road used to be an independent bank but is now owned by Keycorp and part of the Keybank family. They focus on financial products for healthcare professionals.

Laurel Road has a middle of the road doctor mortgage program. It's available in all 50 states but limited to healthcare professionals and only goes up to $1 million. Retired doctors are not eligible. [ Read Review ]

Eligible degrees & accreditations:

Medical doctor (MD/DO), Dentist (DMD/DDS), Podiatrist (DPM)

Down payment Financing
0% up to $1 million
  • Minimum credit score: Not disclosed
  • Maximum loan: Contact to discuss
  • Residents / fellows accepted: Yes
  • Construction loans available: No
  • Income history: Not required
  • Rate options: Fixed and ARMs
Match Banks Contact Send Email

Online

usually responds within 30 minutes

Eligible degrees & accreditations:

Medical doctor (MD/DO), Dentist (DMD/DDS), Podiatrist (DPM)

Keybank

(All 50 States)

$10M+ Closed Loans

Keybank is a major national bank based in Ohio with a competitive doctor mortgage program. They also lend across a large part of the United States.

The Keybank doctor mortgage program does not require you to be a minimum or maximum number of years out of medical school to qualify. They also offer large mortgage options if needed and part of your down payment can be supplied in money that you've received as a gift. [ Read Review ]

Eligible degrees & accreditations:

Medical doctor (MD/DO), Dentist (DMD/DDS), Podiatrist (DPM)

Down payment Financing
0% up to $1 million
5% up to $1.5 million
15% above $2 million
  • Minimum credit score: 700
  • Maximum loan: Contact to discuss
  • Residents / fellows accepted: Yes
  • Construction loans available: Yes
  • Income history: Not required
  • Rate options: Fixed and ARMs
Match Banks Contact Send Email

Online

usually responds within 30 minutes

Eligible degrees & accreditations:

Medical doctor (MD/DO), Dentist (DMD/DDS), Veterinarians (DVM), Lawyer (JD), Nurse (CRNA/NP), Optometrist (OD), Veterinarian (DVM), Pharmacist (Pharm D), Physician Assistant (PA), Certified Public Accountant (CPA)

Amplify

(TX)

$10M+ Closed Loans

Amplify is a regional credit union that only lends in the state of Texas. What they lack in geographic scope, they make up with in terms of availability for most professional degrees.

Amplify's professional mortgage program covers a wide range of professionals, including probably yours too. The program is limited to Texas, so if you live outside Texas you'll have to find another lender. They only lend on owner-occupied properties, so you can't use these loans for investments. [ Read Review ]

Eligible degrees & accreditations:

Medical doctor (MD/DO), Dentist (DMD/DDS), Veterinarians (DVM)

Down payment Financing
5% up to $1.25 million
10% up to $1.5 million
20% above $1.75 million
  • Minimum credit score: Not disclosed
  • Maximum loan: $1.75 million
  • Residents / fellows accepted: Yes
  • Construction loans available: Yes
  • Income history: Not disclosed
  • Rate options: Fixed and ARMs
Match Banks Contact Send Email

Online

usually responds within 30 minutes

Eligible degrees & accreditations:

Medical doctor (MD/DO), Dentist (DMD/DDS), Veterinarians (DVM)

Alerus

(AL, AZ, CA, CO, CT, DC, FL, ID, IN, IA, KS, KY, MD, MA, MI, MN, MO, MT, NE, NV, NM, NC, ND, OH, OR, PA, SC, SD, TN, TX, UT, WA, WI, WY)

$10M+ Closed Loans

Alerus is a national bank but one that you might not know. They are headquartered in North Dakota but provide mortgage across the country.

Alerus has some other interesting features, including a $20,000 closing guarantee. It's a benefit paid to the seller if the loan doesn't close per the terms of the pre-approval letter. In other words, it's something you can use to make your offer look more attractive in a competitive market. [ Read Review ]

Eligible degrees & accreditations:

Medical doctor (MD/DO), Dentist (DMD/DDS), Veterinarians (DVM)

Down payment Financing
0% up to $750 thousand
5% up to $1 million
10% above $1.5 million
  • Minimum credit score: Not disclosed
  • Maximum loan: $1.5 million
  • Residents / fellows accepted: Yes
  • Construction loans available: Yes
  • Income history: Not disclosed
  • Rate options: Fixed and ARMs
Match Banks Contact Send Email

Online

usually responds within 30 minutes

Eligible degrees & accreditations:

Medical doctor (MD/DO); Lawyers(JD), Residents, Fellows

US Bank

(All 50 states)

$500M+ Closed Loans

US Bank has a great doctor mortgage program but it isn't advertised on the bank's website. You'll have to contact them directly.

US Bank is able to lend in all 50 states, meaning this program is available to most of the country's doctors and physicians. The downside is that the program is fairly limited. For example, dentists, pharmacists and nurses aren't eligible. [ Read Review ]

Eligible degrees & accreditations:

Medical doctor (MD/DO); Lawyers (JD), Residents, Fellows

Down payment Financing
5% up to $1 million
10% up to $1.5 million
15% up to $2 million
  • Minimum credit score: 700
  • Maximum loan: Contact to discuss
  • Residents / fellows accepted: Yes
  • Construction loans available: Yes
  • Income history: Not required
  • Rate options: Fixed and ARMs
Match Banks Contact Send Email

Online

usually responds within 30 minutes

Eligible degrees & accreditations:

Medical doctor (MD/DO)

First Financial Bank

(TX)

$10M+ Closed Loans

First Financial Bank has a physician loan program for Texas doctors that offers 0% financing up to a limited amount.

First Financial Bank has a local Texas doctor mortgage program that may be worth checking out if you want to check every possible rate available. The 0% down financing is limited to a small amount but they can do 5% down up to $1 million which opens up the program to doctors looking for houses in that range. [ Read Review ]

Eligible degrees & accreditations:

Medical doctor (MD/DO)

Down payment Financing
0% up to $510 thousand
5% up to $1 million
10% above $1 million
  • Minimum credit score: Not disclosed
  • Maximum loan: Contact to discuss
  • Residents / fellows accepted: Not disclosed
  • Construction loans available: Not disclosed
  • Income history: Not disclosed
  • Rate options: Fixed and ARMs
Match Banks Contact Send Email

Online

usually responds within 30 minutes

Eligible degrees & accreditations:

Medical doctor (MD/DO); Dentist (DMD/DDS) Lawyer (JD), Veterinarian (DVM), Fellow, Resident, Physician Assistant (PA), Nurse (CRNA/NP), Certified Public Accountant (CPA)

Extraco Banks

(TX)

$10M+ Closed Loans

Extraco Bank has both a physician loan and professional loan option. Both the physician loan and professional loan provide 100% financing options.

Extraco only operates in the state of Texas, making them a limited option. However, if you're in the state of Texas that's good news. The program also includes a broad range of professionals such as nurses, physician assistants and even CPAs. [ Read Review ]

Eligible degrees & accreditations:

Medical doctor (MD/DO); Dentist (DMD/DDS) Lawyer (JD), Veterinarian (DVM), Fellow, Resident, Physician Assistant (PA), Nurse (CRNA/NP), Certified Public Accountant (CPA)

Down payment Financing
0% up to $750 thousand
3% up to $1 million
10% up to $1.5 million
  • Minimum credit score: 660
  • Maximum loan: Contact to discuss
  • Residents / fellows accepted: Yes
  • Construction loans available: Not disclosed
  • Income history: Not disclosed
  • Rate options: Fixed and ARMs
Loan Officer
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Online

usually responds within 30 minutes

Eligible degrees & accreditations:

Medical doctor (MD/DO); Dentist (DMD, DDS), Fellow, Resident, Optometry (OD), Pharmacist (PharmD), Lawyer (JD), Nurse (CRNA/NP), Veterinarian (DVM), Chiropractor, Podiatrist

Regions Bank

(AL, AR, FL, GA, IL, IA, IN, KY, LA, MS, MO, NC, SC, TN, TX)

$500M+ Closed Loans

Regions Bank has a broad program that offers 0% down to doctors and dentists, while requiring 3% down for other professionals.

Regions Bank is one of the "big banks" that offers a doctor mortgage to a broad group of professionals. They can also help with construction projects with a one-time close construction to permanent loan. [ Read Review ]

Eligible degrees & accreditations:

Medical doctor (MD/DO); Dentist (DMD, DDS), Fellow, Resident, Optometry (OD), Pharmacist (PharmD), Lawyer (JD), Nurse (CRNA/NP), Veterinarian (DVM), Chiropractor, Podiatrist

Down payment Financing
0% up to $750 thousand
5% up to $1 million
  • Minimum credit score: 700
  • Maximum loan: Contact to discuss
  • Residents / fellows accepted: Yes
  • Construction loans available: Yes
  • Income history: Not required
  • Rate options: Fixed and ARMs
Match Banks Contact Send Email

Online

usually responds within 30 minutes

Eligible degrees & accreditations:

Medical doctor (MD/DO); Dentist (DMD, DDS), Fellow, Resident, Optometry (OD), Pharmacist (PharmD), Lawyer (JD)

UMB Bank

(AZ, CO, KS, MO, NE, OK, TX)

$500M+ Closed Loans

UMB Bank has one of the few 0% down mortgages available to lawyers, so is popular among the attorney crowd. They have a small footprint but can be a good bet for doctors too.

The UMB Bank program is limited to just seven states, so that's a major downside if you are outside of their lending footprint. The good news is that a wide range of doctors qualify for the program, including Pharmacists and Optometrists, both of which are sometimes excluded from lending programs. [ Read Review ]

Eligible degrees & accreditations:

Medical doctor (MD/DO); Dentist (DMD, DDS), Optometrists (OD), Pharmacists (Pharm D)

Down payment Financing
0% up to $1 million
5% up to $1.5 million
10% up to $2 million
  • Minimum credit score: 700
  • Maximum loan: Contact to discuss
  • Residents / fellows accepted: No
  • Construction loans available: No
  • Income history: Not required
  • Rate options: Fixed and ARMs
Match Banks Contact Send Email

Online

usually responds within 30 minutes

Eligible degrees & accreditations:

Medical doctor (MD/DO); Dentist (DMD, DDS), Fellow, Resident, Physician Assistant (PA), Nurse Practitioners (NP), Veterinarians (DVM), Attorneys (JD), Certified Financial Analyst (CFA), Certified Public Accountant (CPA)

First National Bank of Omaha (FNBO)

(CO, IA, IL, KS, MO, NE, SD, TX, WY)

$500M+ Closed Loans

First National Bank of Omaha (FNBO) has one of the most expansive professional mortgage programs on the market with the ability to finance multiple degree types.

Unfortunately, they have a small lending footprint, including only being able to lend in Texas in the Dallas/Fort Worth area. We're always trying to convince them to expand the program and recently they added the ability to finance condos. [ Read Review ]

Eligible degrees & accreditations:

Medical doctor (MD/DO); Dentist (DMD, DDS), Fellow, Resident, Physician Assistant (PA), Nurse Practitioners (NP), Veterinarians (DVM), Attorneys (JD), Certified Financial Analyst (CFA), Certified Public Accountant (CPA)

Down payment Financing
0% up to $850 thousand
5% up to $1.25 million
10% up to $1.5 million
  • Minimum credit score: 680
  • Maximum loan: $1.5 million
  • Residents / fellows accepted: Yes
  • Construction loans available: Yes
  • Income history: Not required
  • Rate options: Fixed and ARMs
Match Banks Contact Send Email

Online

usually responds within 30 minutes

Eligible degrees & accreditations:

Medical doctor (MD/DO); Dentist (DMD, DDS), Podiatrist (DPM), Fellow, Resident

Truist

(AL, AR, CA, CT, DC, DE, FL, GA, IN, KY, MA, MD, MS, NC, NJ, OH, PA, SC, TN, TX, VA, WV)

$500M+ Closed Loans

Truist was formerly known as SunTrust and has historically been a strong player in the doctor mortgage world, thanks to a strong physician home loan program.

Medical professionals with a job offer can close up to 90 days prior to the start date. For doctors and dentists with 10 to 15 years post-training experience, 89.99% financing is available for up to $1.5 million. Truist won’t let you borrow outside of your debt-to-income ratio of 43%, but your student loan payment can be excluded from the debt component if the student loans are deferred for at least 12 months at the time of closing. [ Read Review ]

Eligible degrees & accreditations:

Medical doctor (MD/DO); Dentist (DMD, DDS), Podiatrist (DPM), Fellow, Resident

Down payment Financing
0% up to $1 million
5% up to $1.5 million
20% up to $2 million
  • Minimum credit score: 680
  • Maximum loan: Contact to discuss
  • Residents / fellows accepted: Yes
  • Construction loans available: Yes
  • Income history: Not required
  • Rate options: Fixed and ARMs
Match Banks Contact Send Email

Online

usually responds within 30 minutes

Eligible degrees & accreditations:

Medical doctor (MD/DO); Dentist (DMD, DDS), Pharmacist (Pharm D), Attorney (JD), Veterinarian (DVM), Physician Assistant, Registered Nurse (RN/NP/CRNA), ATP Pilots, CPA

Flagstar Bank

(All 50 States)

$500M+ Closed Loans

Flagstar Bank was chartered in 1987 and holds around $23 billion in assets, making it a medium sized bank. However, they punch above their weight when it comes to mortgages.

The bank is the sixth largest bank mortgage originator nationally. They only offer ARM products when it comes to doctor mortgages but their ability to lend in all 50 states means they're a player at every closing. There is no application fee or prepayment penalties. They also offer a float down, buy down, and recast option. [ Read Review ]

Eligible degrees & accreditations:

Medical doctor (MD/DO); Dentist (DMD, DDS), Pharmacist (Pharm D), Attorney (JD), Veterinarian (DVM), Physician Assistant, Registered Nurse (RN/NP/CRNA), ATP Pilots, CPA

Down payment Financing
0% up to $1 million
5% up to $1.5 million
20% up to $2 million
  • Minimum credit score: 700
  • Maximum loan: $2,500,000
  • Residents / fellows accepted: Yes
  • Construction loans available: Yes
  • Income history: Not required
  • Rate options: ARM Only
Match Banks Contact Send Email

Online

usually responds within 30 minutes

Eligible degrees & accreditations:

Medical doctor (MD/DO); Oral Surgeons (OMS), Podiatrist (DPM)

First Horizon Bank

(AL, AR, CT, GA, FL, LA, MS, NC, NJ, NY, SC, TN, TX, VA)

$500M+ Closed Loans

First Horizon Bank has one of the hottest doctor mortgages available as they can lend up to $1.5 million at 0% down.

Being able to lend such a large amount at 0% down is particularly helpful in states like New Jersey, New York and Texas where home prices have risen sharply in the past decade. The only downside is that the program has strict eligibility requirements and folks like dentists and lawyers aren't eligible. [ Read Review ]

Eligible degrees & accreditations:

Medical doctor (MD/DO); Oral Surgeons (OMS), Podiatrist (DPM)

Down payment Financing
0% up to $1.5 million
5% up to $2 million
10% up to $2.5 million
  • Minimum credit score: 680
  • Maximum loan: $2.5 million
  • Residents / fellows accepted: No
  • Construction loans available: Yes
  • Income history: Not required
  • Rate options: Fixed and ARMs

Doctor loan mortgage eligibility requirements

While the name may make it sound as if these types of mortgages are limited to MDs in the healthcare field, they are actually open to a wide range of medical doctors and highly paid professionals. Who exactly is eligible for a doctor mortgage? The list includes other medical professionals, as well as professionals in other fields. High-income individuals who may qualify for a doctor mortgage include:

  • Optometrists
  • Dentists (DDS or DMD)
  • Veterinarians
  • Podiatrists (DPM)
  • Accountants (CFP or CFA)
  • Attorneys
  • CRNAs
  • Physician assistants (PA)
  • Nurse practitioners (NP)
  • Medical residents

Anyone with a high-paying professional job may qualify. Beyond that, applicants need to consider other issues related to qualification, including their student loan debt.

Qualifying with student loans

As referenced earlier, student debt is always a concern for individuals applying for mortgages. High student debt throws an applicant’s DTI ratio off, disqualifying them from many financial products.

How can one qualify for a doctor mortgage with large amounts of student debt? There’s generally two ways. 

Find a program that doesn’t care about your student loan debt. Many doctor mortgages are portfolio products, meaning that the bank is using the cash on its balance sheet to fund the loans. The bank holds the loans in its own portfolio. That means the bank’s underwriters control the approval parameters, which means you can find banks that understand that as an endodontist you have $500,000 in student loans. You may have to search a little harder but those kind of programs are out there.

Use your IDR payments. If you’re on an income-driven repayment plan like IBR, PAYE or REPAYE, generally a physician mortgage lender is only going to look at your total required student loan payment and not the total amount owed. Conventional mortgages will default to a fully amortizing payment which could be significantly higher than your IBR payment. Also, many physician loan lenders will exclude any debt that is deferred for at elast 12 months front he data of closing.

Minimum credit scores for physician loans

One caveat to the myriad benefits that come with doctor mortgages is the fact that applicants must have a good FICO score. A “good” FICO score for the purposes of a doctor mortgage is in the range of 720 to 740 points. In scenarios in which a doctor has 6 to 12 months of cash reserves, a lender may approve a borrower with a score as low as 680.

If you have a credit score below 720, you probably aren’t ready to buy a house anyway as it implies you have other financial priorities that should be taken care of first. Pay off your credit cards (but don’t close them as they can lower your credit score), catch up on any missed payments, clean up any inaccurate information on your credit report and don’t miss any payments going forward. That should get you to a score above 720 relatively soon. It may take a year to clear up your score but that’s probably a good thing before you commit to purchasing a house.

Property qualification requirements

Banks also take into consideration the type of property for which an individual needs a physician loan. In general, doctor mortgages are only extended to primary residences and only vary rarely for investment properties. In some scenarios, a bank may approve a mortgage for a second home, but this is far less common than for primary homes. If you want a physician loan for a vacation property, we can help you find one but you may not have as many options.

Are physician home loans a good idea?

All that said, are doctor mortgages a good idea for you as an applicant? It all depends on your financial picture. A good approach to take can be to weigh the advantages and disadvantages of taking out a physician loan.

Reasons to take out a physician loans

Physician loans come with several advantages, including:

  • No PMI, saving the borrower money
  • High loan-to-value is OK (i.e. low or no down payment required)
  • High loan limits
  • Special consideration of student debt
  • Fixed-rate and adjustable-rate mortgage options

Applicants can also close on a home before they even begin working. Professionals with a signed contract can qualify for a doctor mortgage and close on a house as early as 90 days before they start working.

Reasons to avoid physician loans

In some situations, taking out a physician loan could put you in a compromised position. Applicants for these types of products typically don’t have much cash on hand for a down payment, meaning it may not be the right time to purchase a home. These borrowers are, of course, sometimes already burdened with extensive debt. Taking on the additional debt of a home loan will only compound the situation. Just because a bank will lend you money doesn’t mean you should borrow it.

Physician loan vs. conventional loan when home buying

All of this does come with a catch, however. Physician loans typically come with a higher interest rate than a conventional loan in which the applicant has put 20% down. This is one of the most significant differences between physician loans and conventional loans.

What are some other distinctions between these two financial products? The loan limits can be much higher on doctor mortgages, offering limits as high as $2,000,000 or more. Conventional loan limits can average out at just below $647,200 before you cross into jumbo territory.

Conventional loans sometimes have lower credit score requirements. A physician loan can require credit scores as high as 700+, while a conventional loan may go as low as 620 in the commercial sector and even lower with a Fannie-backed loan.

Examples of doctors who take out physician mortgage loans

Who are the doctors qualifying for physician loans? Let’s walk through some examples that illustrate typical borrowers so that you can understand the process more clearly and determine whether or not a doctor mortgage is right for you.

A doctor who doesn’t have a down payment

Imagine this scenario: Valerie has just graduated from med school. She has a job lined up, but she is also at the beginning of a very long process of digging out from under all the student debt she accrued during medical school. She has no cash on hand, as a result, and nothing for a down payment. Her parents have already helped her along the way, and she is loath to ask them for help again with a gift for the down payment.

Valerie has an employment contract in hand, and her salary will be more than satisfactory. She is also happy with the location of her job and wants to stay in the area in the long term, so homeownership makes sense. A doctor mortgage is the best option for her, giving her away to establish roots now so that she can focus on her career.

A doctor who has too much student loan debt

Sam is beginning to establish himself as a prominent name in plastics in his area. It is clear he has great earning potential in the near and long term and he’s ready to buy his first home. Making payments on any loan will not be a problem.

Given his significant student debt, however, he would never qualify for a conventional mortgage. Everything else looks good on paper for him and the time is right to buy. A doctor mortgage is the best way forward for him.

A doctor who wants to maximize leverage

Sanjay has been running a dermatology practice for several years now. He has an established reputation, impressive income and money invested. The time is right to buy a home, and there is an option right down the street from his practice.

The catch is that Sanjay does not want to liquidate his investments and use the cash for a down payment. He prefers to keep the money where it is doing quite well. Applying for a physician loan makes sense for Sanjay, as he can access a loan with little to no money down.

A doctor who gets the best rate through a doctor loan

Oftentimes, doctor mortgages can come with rates that are anywhere from 0.125 to 0.25 points higher than conventional loans. Joan, however, has heard about a bank in her area that is offering competitive rates to professionals such as herself. The terms are impressive because the bank understands the value of a doctor or other professional as a long-term client. The bank may get a smaller rate of return on this financial product, but they know that Joan will be a good customer for years to come, especially given her income. Joan decides to take advantage of this offer and take out a doctor mortgage.

Drawbacks of the doctor loan

There are some drawbacks to consider with doctor loans. One drawback is that you may not get the tax deduction on the mortgage interest that you would expect. Tax laws have changed recently to raise the bar on standard deductions, meaning that most people these days are taking the standard deduction and therefore not benefiting from the ability to deduce home mortgage interest. This means that you get no more tax benefit from owning than you would from renting.

A second drawback to consider is that a physician loan can often come with a higher interest rate than a conventional mortgage. While the advantages may outweigh this disadvantage in the long term, it is something to keep in mind when applying for a physician mortgage.

Physician loan alternatives

Before taking out a physician loan, it is always important to weigh all of your options. The following are some of the alternatives to a physician loan that you will want to consider before making a decision.

FHA loans

An FHA loan is a government-backed mortgage designed for buyers who may not qualify for a conventional loan due to lower credit scores or poor debt-to-income ratios. Some FHA loans even go to individuals with bankruptcies on their records. Lenders may also accept a lower down payment on an FHA and roll your closing costs into your mortgage.

There are some requirements that come with FHA loans:

  • Any home purchased with an FHA loan must be appraised by an FHA-approved appraiser.
  • Any home purchased with an FHA loan must serve as the buyer’s primary residence, and the buyer must occupy the home within 60 days of closing.
  • ·Any home purchased with an FHA loan must undergo an inspection, and that inspection must show that the home meets certain minimum standards.

Buyer requirements are far less stringent with FHA loans. Someone applying for one of these government-backed loans can put as little as 3.5 percent down. Qualifying credit scores, too, can be as low as 580 or higher. If a buyer can put 10 percent down on the home, their score can be as low as 500, in some cases.

VA loans

Professionals who have served in the military can also consider going with a VA loan. With a VA loan, applicants go through a conventional mortgage process. The difference is that the Veterans’ Administration guarantees a portion of the loan, making it easier for banks to approve less qualified applicants and allowing buyers to get more favorable terms on a loan. 

A VA loan comes with some pretty sizable advantages beyond the guarantee, including:

  • No down payment required by the VA (a lender may require a down payment)
  • Competitive, low interest rates
  • Limited closing costs
  • No PMI

This is also a lifetime benefit extended to those in the armed services. That means that an individual can use the program multiple times throughout their lives for multiple purchases. 

Saving for a 20% down payment

Another alternative to consider is taking the time to save for a 20% down payment and then applying for a conventional loan. One merit of this approach is that you could end up with a potentially lower interest rate, saving you money over the life of your mortgage. 

With housing prices as high as they are, however, saving 20% can take a significant amount of time, even with a physician’s or professional’s salary. Keep in mind, too, that you will need to rent in the interim, essentially throwing money away that could go towards monthly payments on a doctor mortgage.

A conventional loan with private mortgage insurance (PMI)

If you do not want to take the time to save for a 20% down payment, you also have the option of trying for a conventional loan with PMI. PMI is required for all loans with less than 20% down. In this scenario, of course, you are paying a significant sum each month to protect the lender, not yourself. PMI on a $500,000 home can range from $2500 to $5000 per year— amounts that can really add up over the lifetime of your loan.

How much house can I afford with a physician loan?

If you decide to move forward with a physician loan, just how much house can you afford? A good rule of thumb is to limit your monthly housing costs (monthly mortgage payment plus related expenses) to 36% of your gross monthly income. Other financial advisors recommend limiting yourself to a quarter of your take home pay each month. Remember that housing costs include additional costs on top of your mortgage payment, such as utilities, HOA fees, and taxes.

Also, there’s one important point to consider: You can often qualify for a lot of house with a physician loan. Again, the limits on a doctor mortgage are typically much higher than those offered with other loans. When considering how much house to buy, keep in mind that you don’t have to push the limits. A smaller loan on a more affordable house may well be the best answer in the long term.

I like to say that you should try to keep your loan amount within 2x of your annual income. If you make $200,000, that means you can afford a $400,000 house. This “rule” gets a little loose when you’re on the coasts or living in a high-cost-of-living city. It does not mean that you get to ignore the advice completely and buy a house that is 10x your income. Just know that if you choose to spend more money on a house, you’ll have to cut back in other areas if your goal is to build wealth.

Should I get a big loan and invest the down payment?

Given the high limits of physician loans, some doctors sometimes consider the option of using a 0% down mortgage and investing the down payment they were going to put into the house. 

Is that a good plan? It depends on a variety of factors, including the interest rate you eventually get on your mortgage, as well as the ROI on your investment. The math often says that you’ll make more money investing in the stock market than you would in paying down your mortgage. The math often ignores human behavior and many people trick themselves into thinking they are making the right decision without understanding how they’re actually going to act.

Here’s a few reasons to consider if you’re thinking about leveraging yourself:

Behavior risk. To make this plan work, you actually need to invest the difference and keep investing it for 30 years. You’ll also need to re-invest dividends and never raid the investment fund for another expense. It’s much easier to spend money than it is to keep to that plan.

Market risk. Paying off your mortgage is a guaranteed return. The market’s performance is not guaranteed and the risk of loss is very possible. There’s a reason stock markets and other investments pay a better return and that’s because the risk of losing the capital or seeing sub-par performance is a real thing.

Housing risk. If you take out a 0% mortgage, housing prices tank and you lose your job (things that often happen together), it’s not going to be fun if you need to sell that house because you’re moving to a new location for a new job. You’ll either have to go through a short sale, bring thousands of dollars in cash to the closing table or let the bank foreclose on the property and destroy your credit in the process.

Refinance risk. Thanks to over a decade of historically low interest rates, many homeowners using a physician loan mistakenly think they can accept a higher interest rate today and simply refinance into a lower rate in a couple of years once their house has appreciated in value. This is a mistake for a couple of reasons but is more obvious today with rising interest rates and a dried up refinancing business. Don’t assume that you can refinance.

The process: How to buy a house with a physician loan

If you have decided to proceed with applying for a physician loan, what are your next steps? The following section will walk you through everything you need to do to get a doctor mortgage and purchase the house of your dreams.

Step 1: Assemble your team

You will need a team of professionals to help you with the home purchasing process. While some people try to go it alone, these professionals make the entire process much easier and faster, and they can even help you save money:

Real Estate Agent: Your real estate agent can help you decide many key factors related to your purchase, including how much house you can afford, where to look for the right house and how to build an offer when you do find a house you like. A real estate agent has access to the NMLS and will also know of pocket listings (houses that have not yet hit the NMLS but which are being circulated among real estate agents with the hope that someone can find a buyer before hitting the market).

They also act as your point person with everyone else on your team, making sure everyone is working together in your best interests. You’ll want a real estate agent that is familiar with physician loans so they sell the financing component correctly when making an offer to a seller. I’ve seen many sellers that are unfamiliar with physician mortgages and so think the chance of the buyer’s financing falling through is high even though it’s quite the opposite.

Mortgage Lender: You will also need the right mortgage lender; specifically, one that specializes in physician loans. These professionals can help size the loan to your needs, insure you get the best deal possible, and help you get an idea of the long term implications of your loan.

Generally, I recommend that you find 3 to 4 mortgage loan officers that you like, seem responsive and have competitive programs and rates. Keep it mind that these loan officers don’t have to come from a national bank. You likely haven’t heard of many of the physician loan lenders.

These loan officers all want your business but are happy to just have a seat at the table when it comes time for you to make a decision. You want people that are friendly, competitive and not going to try and hammer you into an unfavorable loan.

Real Estate Appraiser: Running an appraisal on a home is an essential part of the home buying process. It ensures that the price you’re paying is comparable to similar homes in the area. An appraisal also protects the lender, giving them a realistic idea of their ROI in mortgaging a home to a buyer. Your lender will generally organize the appraisal.

Home Inspector: A home inspector will run the inspection on the home you eventually are interested in buying. This part of the process ensures that you are getting the most value for your money and also protects you from unpleasant defects in a home that you might not discover until after the sale is closed. Your real estate agent should be able to help finding a home inspector.

Step 2: Get pre-qualified (no credit check)

Before you begin looking at houses and get too excited, you need to get pre-qualified for a loan. This process is relatively quick and does not require a credit check, so you won’t see a negative impact on your credit score. 

The mortgage lender looks at your general financial picture, then confirms that you are likely to get approved for a doctor mortgage. They may provide you with a pre-qualification letter as well that includes an estimated amount for which you would be approved. You can then use this letter when viewing homes and making offers.

Step 3: Get pre-approved (requires credit check)

Getting pre-approved is the next step up. Basically, it is confirmation that you will indeed receive a mortgage. This part of the process is much more complex than pre-qualification. The lender will assess income, debts, employment and credit score in detail. Other questions that may come up include:

What kind of credit do you have? Do you have a lengthy and consistent credit history? Do you have your own credit, or are you just an authorized user on another person’s account?

  • What is your current and future income?
  • Are you applying alone or with a partner?
  • What are the terms of your student loans? 

You only need to get pre-approved with one lender. This will be the pre-approval letter that you will include in your offer. The pre-approval letter says that you are approved with one bank and includes all the magic words like member FDIC, equal-housing lender, etc. to get the seller to take your offer seriously. You can always complete an application with multiple lenders once you have a contract in hand.

The right loan officers will support you throughout this process, offering consultation and guidance, as needed.

Step 4: Start viewing houses

Realistically, you’ve been looking at houses on Zillow and Redfin this whole time. But try not to physically step foot into a house until you have a pre-approval letter in hand and are working with a real estate agent.

Trusting your real estate agent in this stage is important. They know what is available out there, and they will have a much more realistic idea of what type of property you can buy with your budget and where that property will be located. Make sure to view multiple houses as well, even if you fall in love with the very first one you see. You always want to weigh your options and have as much data to factor into your final decision as possible.

Step 5: Make offers and sign a contract

Perhaps the most exciting (and nerve-racking) part of the process is when the time comes to make an offer on a home. Remember that not every offer is accepted and you may not get your first choice. Sometimes, too, deals fall through after the fact, whether due to some pain point on the buyer or seller side. Trust in your real estate agent’s guidance during this time. They will draft the offers and understand the best approach in making your offer as appealing as possible.

When the time comes to sign the contract, make sure you review everything closely. Some homebuyers even turn to attorneys during contract review (and some states require it). Your real estate agent can again serve as a helpful guide during this time, as well.

Step 6: Comparison shop physician loans

Go back to the 3-4 loan officers you met at the beginning of the process who have a seat at the table and see what they can offer you. You want to weigh all the options and review the disclosures and terms with a fine-toothed comb. They will be jockeying for your business, so make sure to comparison shop and go back for multiple rounds when you get a better offer from one loan officer.

One important caveat: When looking at rates related to a doctor mortgage outside of the actual purchasing process, do it within six months at a maximum of when you believe you will buy your home. Rates evolve constantly based on inflation rates and the economy. Collecting a bunch of rate offers 1 year before you want to buy may mean that you are actually in for some very different rates come purchase time and is just a waste of time for you and the loan officer.

Renovating a house with a physician construction loan

Finally, there is another option you can consider with a physician mortgage. Did you know that some lenders offer construction loans combined with their professional mortgage products? These products are called physician construction loans and could allow you to make a low down payment but also qualify for the purchase price plus additional funds that could be used to renovate the property.

With the market as tight as it is, this can open up a lot more options for you. Why not look for a house that needs a little love and attention, then use your cash on hand to renovate it?

You can also consider taking advantage of the high limits that can come with doctor mortgages, buying a more affordable home, and then using the extra money you get from the loan to do the renovation as well. Renovations that are done well and with attention to detail can add a lot of value to a home, meaning that you will increase your ROI from day one.

Physician loans are great financial products that come with a lot of benefits. Whether you are a doctor or resident, or another type of professional, these mortgages can give you an easy way to access the funds you need for a home.

Physician loan bank program overviews

Bank of America

Citizens Bank

Fifth Third Bank

Flagstar Bank

KeyBank

Laurel Road

PNC Bank

Regions Bank

SoFi

TD Bank

Truist

US Bank

State-by-state guide to physician loans

Alabama

Alaska

Arkansas

Arizona

California

Connecticut

Colorado

Delaware

District of Columbia

Florida

Georgia

Hawaii

Idaho

Illinois

Indiana

Iowa

Kansas

Kentucky

Louisiana

Maine

Massachusetts

Maryland

Michigan

Minnesota

Mississippi

Missouri

Montana

Nebraska

Nevada

New Hampshire

New Jersey

New Mexico

New York

North Carolina

North Dakota

Ohio

Oklahoma

Oregon

Pennsylvania

Rhode Island

South Carolina

South Dakota

Tennessee

Texas

Utah

Vermont

Virginia

Washington

West Virginia

Wisconsin

Wyoming

Joshua Holt

Joshua Holt is a licensed mortgage loan originator (NMLS #2306824) and founder of Biglaw Investor. His mortgage expertise lies in the areas of professional mortgage loans, particularly for lawyers, doctors and other high-income professionals. Prior to Biglaw Investor, Josh practiced private equity mergers & acquisition law for one of the largest law firms in the country.

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