Guide to Mortgage Loans for Doctors
What is a Doctor Mortgage Loan?
Mortgage loans for doctors help doctors buy a home, often with no down payment or mortgage insurance and looser skill requirements. Medical loans can also be refinanced. They are ideal for doctors and other health professionals who have a harder time qualifying for a typical mortgage due to their sizeable college debt and limited savings.
“Because medical school costs are typically astronomical, doctors can bear a lot of debts that would prevent them from taking out a traditional mortgage,” said Jeffrey Zhou, CEO of Fig Loans, a Sugar Land-based personal lender. Texas.
“Because of the medical education requirements, many doctors are much older before entering the world of work and lack the down payment required to buy a home; Still, they have the income to qualify for a home, ”added Mikell Richards, regional sales director for United Community Bank in Mount Pleasant, South Carolina.
How does a doctor loan work?
Mortgage loans for doctors can provide up to 100 percent financing without the need for private mortgage insurance (PMI), which is standard with traditional loans when you put less than 20 percent off. These costs correspond to part of your loan amount annually, so you can save a lot of money by eliminating these costs.
Medical loans also have high caps, typically $ 1 million or more, depending on the mortgage lender. There may be different limits depending on how much you’re funding – for example, 100 percent funding could be capped at $ 1 million, while 90 percent funding could go up to $ 2 million. There are also other types of doctor loans that can help you start your practice – these can go as high as $ 5 million.
Most medical loan lenders also allow you a higher debt-to-income ratio, knowing that new doctors have significant student debts.
“New graduates and residents often work for very little money and have a lot of student debt, so they may be at a disadvantage on a typical mortgage,” said Luis Strohmeier, CFP, partner and investment advisor at Octavia Wealth Advisors, based in Los Angeles. . “Fortunately, student loans are not counted towards a doctor’s loan.”
Who Can Get a Doctor’s Loan?
Physician mortgage loans are generally available to physicians with specific degrees, including MDs and DOs. Some lenders make similar loans to other health professionals, including veterinarians, dentists, and orthodontists who hold DMV, DPM, DDS, and DMD degrees.
“Doctors, doctors currently on fellowship, and doctors who are still in hospital residency are eligible,” said Kennis Tong, home loan advisor at Valley National Bank, a regional bank serving New York, New Jersey, Covers Florida and Alabama. “We check your status with your employer and, if necessary, request certificates or diplomas from the medical faculty.”
A doctor loan is a viable option if you are confident that you can manage all of your debt payments – including student and credit card debt – in addition to your mortgage. If you know you’ll be moving in a relatively short time, it might not be worth it, says Zhou.
Cost of a medical loan
As a rule, the closing costs for a doctor’s loan are the same as for a conventional mortgage.
“For example, our bank charges a flat fee of $ 1,175 regardless of the loan program,” says Tong.
Does a doctor loan make sense?
- 100 percent funding of $ 1 million or more
- No mortgage insurance
- Higher DTI ratio
- Looser credit, employment and income standards
Most medical loan lenders offer 100 percent financing, which means you don’t have to make a down payment or pay a PMI even if you don’t lay down. You may also not need as high a credit score to qualify, and unlike traditional loans, you can often have a DTI rate greater than 50 percent and not require a proven income or work history – in fact, you can close as much as up to 90 days before work starts, says Strohmeier.
“Typically, a doctor who is just starting out will see their income grow significantly over the course of their career, so these lenders are more flexible with this loan product,” says Richards.
- Adjustable rates
- For primary residences only
- Risk of over-indebtedness
- Condos or townhouses may not be eligible
Medical loans usually don’t come with a fixed rate (although some lenders do). This means that you have an adjustable interest rate that changes at certain intervals and can either increase or decrease your monthly mortgage payment.
There is also a risk that your loan will go under if the value of your home goes down, says Strohmeier, “if you buy a $ 500,000 house, for example, but the value goes down when the market corrects and you keep that $ 500,000 still owe. “
Medical loans also typically cannot be used to purchase an investment property or a vacation or second home, and condos, townhouses, and apartment buildings may also not qualify.
Finally, since there is no down payment required, a doctor loan doesn’t mean you have a lot of equity to start with, which can be a problem if you end up selling, says Richards.
“In these cases, borrowers need to be confident that they will be able to make their loan payments and ensure they have cash reserves to fall back on if there is ever a negative impact on their earnings,” says Richards.
Where can you get a doctor’s loan?
Mortgage loans for doctors are offered by many types of lenders, including major national lenders, independent mortgage companies, and community banks. Lenders offering this type of financing (some including commercial or practice loans) include:
- Bank of America
- BMO Harris Bank
- Caliber home loan
- Citizens Bank
- Fairway Independent Mortgage Corporation
- Fifth Third Bank
- First National Bank
- Flagstar Bank
- Guaranteed price
- Huntington Bank
- TD Bank
- United Community Bank
- US bank
- Valley National Bank
“Spend some time browsing and talking to loan officers,” recommends Tong. “Find out for each of these different loans how the process works, what total costs and terms are incurred and what to expect.”
Alternatives to Doctor Mortgage Loans
A doctor loan isn’t the only option for doctors. If you qualify, you can get another loan with little or no down payment, such as:
- Conventional loan – As low as 3 percent or 5 percent lower with PMI
- FHA loans – Only 3.5 percent less with a credit score of at least 580 and FHA mortgage insurance
- VA loan – Available to eligible soldiers and veterans with no money and no mortgage insurance
- 80/10/10 piggyback loan – Two loans for 90 percent financing (80 percent for the first loan and 10 percent for the second) plus 10 percent down payment