Physician Mortgage Loans: A Comprehensive Guide to Home Loans for Doctors

Are you a doctor looking to buy a house? There are tailored loan programs just for you offering benefits like no down payment and no PMI. Keep reading to discover how these loans work, their pros and cons, and eligibility criteria.

Subscribe to our blog to receive notifications of posts that interest you!

What is a physician loan?

Physician loans are a type of mortgage program specifically designed for medical professionals. They are a popular choice for doctors who are starting their careers as they do not require a down payment or private mortgage insurance (PMI). Since many doctors carry a significant amount of student debt after medical school or during their residency, it can make purchasing a home more challenging. As a result, physician loans offer unique allowances for these situations and are more willing to approve mortgages for doctors with high earning potential.

Why do physician loans exist?

Becoming a doctor can be a rewarding profession, but it could also pose financial challenges. Medical school is a costly affair, and many aspiring doctors end up with a considerable amount of student loan debt. This, in turn, could make it challenging for them to qualify for a conventional mortgage. Physician Loans aim to make homeownership more affordable for doctors.

How do physician loans work?

Physician loans, or doctor loans, are a type of mortgage designed to help medical professionals overcome the obstacles they face with traditional mortgages. They eliminate the need for private mortgage insurance (PMI) and consider the borrower’s potential future earnings. Let’s take a closer look at how physician loans work.

Private Mortgage Insurance (PMI) For A Doctor Loan

When buying a home and making a down payment of less than 20%, lenders typically require borrowers to pay private mortgage insurance (PMI). However, physician loans do not require eligible borrowers to pay for PMI, regardless of the down payment. Not having to pay PMI each month could save you a significant amount over the life of the loan, freeing up more cash for you to have on hand each month.

Debt to Income Ratio (DTI) For A Doctor Loan

Traditional mortgages consider your debt-to-income ratio (DTI), which compares your total debts (including student loans) to your income. If you have a high DTI, then it could be challenging to qualify for a mortgage.

Physician loans consider your potential future earnings as a doctor more heavily than your current debt load. This is because doctors typically have high earning potential even if they have significant student loans early in their careers. This flexible approach allows more doctors to qualify for homeownership.

Who qualifies for physician mortgage loans?

To qualify for a physician mortgage, you must have a medical degree and meet specific criteria, which may vary by lender. Individuals with the following degrees may be eligible for a physician loan:

• Medical Doctor (MD)
• Doctor of Dental Surgery (DDS)
• Doctor of Dental Medicine (DMD)
• Doctor of Optometry (OD), Doctor of Ophthalmology (MD)
• Doctor of Pharmacy (PharmD)
• Doctor of Podiatric Medicine (DPM)
• Doctor of Osteopathy (DO)
• Doctor of Veterinary Medicine (DVM)
• Physician Assistant, Registered Nurse, Nurse Anesthetist, Nurse Practitioner, or Clinical Nurse Specialist.

Medical doctors could also be eligible if they are either an active medical resident or within their first ten years of practice, starting from the completion date of their residency.

Speak with a Loan Officer to see if you qualify!

What credit score do you need for a physician mortgage loan?

The credit score requirements for physician mortgage loans may vary depending on the lender and type of property. If you’re interested in obtaining a physician loan mortgage through DML, then review the following credit score requirements and the maximum loan amounts:

How much house can I afford with a physician home loan?

If you are considering a physician home loan, then you might be wondering how much house you can afford. While there is no down payment required and no need for private mortgage insurance, there are still some additional costs to consider.

It is important to look for homes that are within your qualified price range to avoid falling in love with a house that you cannot afford. Qualifying for a loan depends on various factors, and your mortgage lender will work with you to determine your eligibility. You can also use our Home Affordability Calculator to estimate your mortgage amount and monthly payments by entering in your information

Are mortgage loans for physicians a good idea?

Physician mortgage loans have many benefits over traditional mortgages, which could be helpful for new doctors looking to buy a home. Let’s explore the advantages and disadvantages to decide if a doctor loan is right for you.

Advantages of a Doctor Mortgage Loan

• No down payment: Eliminates the financial hurdle of a significant upfront cost.
• No mortgage insurance: Saves money on monthly payments compared to conventional loans with low down payments.
• Higher DTI ratio: Allows for qualifying for a larger loan despite potentially high student loan debt.
• Access to higher loan amounts: Caters to the financial potential of doctors who might require a larger loan for their desired home.

Disadvantages of a Doctor Mortgage Loan

• Adjustable Rate Mortgage (ARM) only: Requires dealing with potential fluctuations in monthly payments.
• Limited to primary residences: Doesn’t support investment property purchases.
• Credit requirements: Still requires meeting credit score and income verification standards.
• Potentially higher interest rates: Might come with a slightly higher interest rate compared to conventional loans.

Alternatives to Physician Mortgage Loans

If you do not qualify for a Physician Loan or are looking to explore some alternative options, then there are several options to consider.

Conventional Loan

This is a type of conforming loan that meets Fannie Mae or Freddie Mac requirements but is not backed by the government. Available in a range of down payments, these loans come in all shapes and sizes.

FHA Loan

These loans are governed by the Housing of Urban Development (HUD) and offer flexible guidelines for borrowers with limited down payment funds and an imperfect credit score.

VA Loan

This loan option requires a $0 down payment and is designed for military personnel, veterans, and surviving spouses, and is partially backed by the Department of Veterans Affairs.

80/15/5 Piggyback Loan

A piggyback loan is a second mortgage taken out on your home to avoid PMI and cover part of the down payment amount. The structure is 80% initial mortgage, 15% second mortgage, and 5% down payment.

Who offers physician mortgage loans?

There are many types of lenders who offer physician mortgage loans, including Direct Mortgage Loans. Speak with one of our Loan Officers to start the process.

How To Get a Physician Loan

While these steps may vary depending on the lender here are the general steps to get a Physician Loan.

1. Connect with a Lender: Reach out to one of our Loan Officers to discuss your situation.
2. Gather Documents: Collect necessary financial and personal documents including tax returns, W2’s, pay stubs, driver’s license, and property information.
3. Apply for Pre-Approval: Begin your application process to understand your qualification amount.
4. Find a Home: Work with a Realtor to find a home you want to make an offer on.
5. Close the Loan: After finding your home and having your offer accepted, you are set to proceed to close on the loan.

Is a physician loan right for you?

Physician loans are favored by early-career doctors for their no down payment and no PMI benefits. Nevertheless, it’s important to weigh the pros and cons and compare alternative loan options. If you have enough savings for a down payment and qualify for conventional financing, then a conventional mortgage may save you money in the long term. But if you can’t qualify for a conventional loan, a physician loan provides an opportunity to purchase a home when you otherwise couldn’t.

Alternatively, if you have better uses for limited funds, then you might opt for a physician mortgage to maximize retirement contributions or pay off student loans. Ultimately, the decision if a physician loan is right for you will depend on your specific financial situation and goals.

FAQ’s About Physician Home Loans

Do physician loans get lower interest rates?

Physician loans may have a higher interest rate compared to conventional mortgages. However, they offer several benefits like no PMI and a lower down payment. It’s important to note that the interest rate for a physician loan is decided by the lender and your financial profile.

Are physician loans fixed or variable?

Physician loans are only offered with a variable interest rate through an Adjustable Rate Mortgage (ARM). An ARM is a type of home loan in which the interest rate can fluctuate over time. Unlike a fixed-rate mortgage that keeps the same interest rate throughout the loan period, an adjustable rate can increase or decrease based on market conditions. This means that monthly mortgage payments may go up or down, depending on how the interest rate changes.

How many physician loans can you have?

When considering physician loans, it’s important to note that you’re typically limited to having just one such loan at any given time. This means that if you’ve already acquired a physician loan for your current needs, you won’t be eligible to apply for another until you’ve paid off or closed out your existing loan.

Can you refinance a physician loan?

It is possible to refinance a physician loan to replace your current mortgage with a new loan with better terms. Depending on your goals for refinancing, a physician mortgage refinance could help you to lower your interest rate, reduce your monthly loan payments, or give you access to your home’s equity so that you could cover other significant expenses.

Do physician loans have PMI?

Physician loans do not have PMI. This is one of the primary advantages of this type of mortgage. By removing PMI, physician loans could reduce your monthly payments, which could be particularly helpful for those who are starting their careers.

Can you use a physician loan for investment property?

No, physician loans are only intended for primary residences and cannot be used to purchase a second home or investment property. If you are looking to purchase a second home or investment property, then we have a variety of loan options available.

Can you use a physician loan more than once?

There typically is not any restriction on the number of times you can use a physician loan. This flexibility means that if you’ve previously used a physician loan to finance a home purchase, you may still be eligible to apply for another physician loan in the future. As long as you meet the lender’s criteria and qualifications.

Are physician loans only for first time home buyers?

Physician loans are not exclusively reserved for first-time home buyers. However, it’s important to note that eligibility criteria for these types of loan can vary among lenders. While first-time home buyers are not a prerequisite for physician loans, lenders may have other specific requirements or preferences regarding the borrower’s financial and professional status.

Can you get a physician mortgage with student loans?

Physician loan programs are designed to help medical professionals purchase homes, even if they have a lot of student loan debt. These loans are different from traditional loans because they only consider a portion of the student loan payment when calculating the debt-to-income (DTI) ratio. This means only the monthly payment made through an Income-Driven Repayment Plan (IDR) is considered.

As a result, the DTI is significantly reduced, making it easier to qualify for the loan. Physician mortgages were created specifically to aid individuals in this situation, so having student loans should not prevent you from getting one.

Do residents, nurse practitioners, physician assistants or pharmacists qualify for physician loans?

Medical residents, nurse practitioners, physician assistants, and pharmacists may be eligible for a physician loan provided they meet all the requirements. However, eligibility is subject to other factors such as proof of employment, income, and credit score. To find out if you qualify for a physician loan, it’s best to speak with a Loan Officer who can guide you in the right direction.

Can I get a physician loan as an independent contractor?

If you are working as an independent contractor and do not have pay stubs or W2s to show your current position, then you could still be eligible for a physician loan. In such cases, you could provide a contract of employment as evidence of your income as a doctor.

Eligibility and approval is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral and underwriting requirements. Direct Mortgage Loans, LLC NMLS ID# is 832799 (www.nmlsconsumeraccess.com). Direct Mortgage Loans, LLC office is located at 11011 McCormick Rd Ste 400, Hunt Valley, MD 21031.