MORE LIKE THISVA MortgagesFHA mortgagesHome AffordabilityMortgages
What is a physician loan?
A physician loan is a mortgage for medical doctors that doesn’t require private mortgage insurance, or PMI, even with a small or no down payment. This could potentially save a borrower hundreds of dollars off a monthly mortgage payment.
A typical physician loan makes allowances for medical school debt and the chronology of a medical career. Dentists are eligible for some physician loan programs.
Who can qualify for one
All physician loan programs are available to medical doctors with M.D. or D.O. degrees. Some include doctors with D.P.M. degrees, and some are available to dentists and orthodontists with D.D.S. or D.M.D. degrees.
Lenders recognize that becoming a doctor or dentist is a multistage process, so the lending criteria vary depending on how far along the borrower is in training and career development. The programs tend to have higher maximum loan amounts for attending physicians than for interns, residents and fellows.
Physician mortgage loans are for buying or refinancing a primary residence. They're not available for buying second or vacation homes. Some lenders may approve a physician loan to buy a two- to four-unit investment property, as long as one of the units is the borrower's primary residence.
Explore mortgages today and get started on your homeownership goals
Get personalized rates. Your lender matches are just a few questions away.
Won’t affect your credit score
How a physician loan works
Doctor loans differ from conventional mortgages in three ways: They don't require PMI, they're flexible with debt-to-income ratios and they accept residency contracts as verification of employment.
PMI: Most mortgages require private or government mortgage insurance for loans with down payments less than 20%. A physician loan is distinctive for not requiring PMI, even with a down payment of less than 20%.
On large loan amounts, PMI can add hundreds of dollars to the monthly payment. By not charging for mortgage insurance, a physician loan frees up that money so it can go toward other obligations, such as medical school loans.
Debt-to-income ratio: When assessing a mortgage application, lenders scrutinize the borrower's debt-to-income ratio, which is the percentage of monthly income that goes toward paying off debts. A borrower with a high debt-to-income ratio, or DTI, is deemed riskier than a borrower with a low DTI.
Doctors, especially early in their careers, would be disadvantaged by lenders' preference for low-DTI borrowers because most doctors graduate from medical school with six-figure debt. During internship and residency, student loan payments can gobble up much of a doctor's income, making it difficult to qualify for a mortgage because of high debt-to-income ratios.
So when calculating DTI, some physician loan programs don't count medical school debt if the payments are deferred or in forbearance for a certain period. This reduces the DTI, making it easier to qualify for the loan.
Employment verification and proof of income: Mortgage lenders typically require borrowers to prove that they're working and earning income. If the loan applicant is about to take a job and about to get paid, that's seldom good enough.
Doctor mortgage loans are an exception. Some allow the borrower to satisfy the employment requirement by showing the employment contract — even before a residency begins. Some programs will lend to borrowers with less than two years of self-employment or work as an independent contractor.
The main reason to get a physician loan is to make a small down payment without paying for private mortgage insurance.
But if a physician home buyer can comfortably afford a down payment of at least 20%, PMI wouldn’t be required to begin with. In such a case, it makes sense to skip the physician loan and instead get a conventional mortgage or, if the loan amount is larger, a jumbo loan.
Doctors who start their training straight from college spend much of their 20s and into their 30s in medical school, internships, residencies and fellowships. Physician loans can help bring down some of the barriers once they're ready for homeownership.
» MORE:How to know if you're ready to own a home
How to find a physician loan
When getting any type of mortgage, it always pays to shop around, starting with the bank or credit union with which you already have a relationship.
Explore mortgages today and get started on your homeownership goals
Get personalized rates. Your lender matches are just a few questions away.
Do doctors get better mortgage rates? No, doctors do not get better mortgage rates. Physician mortgage loan programs, or doctor mortgage loans, are generally attractive because they don't require a down payment or primary mortgage insurance (PMI), which can cut the initial costs of homeownership.
The minimum credit score to qualify for this type of loan is 660. However, Physician Bank provides options for those that fall below this threshold to rebuild credit for future qualification. HOW LONG DOES IT TAKE TO GET APPROVED? The approval process can take between 1-15 days.
A good credit score (often 700 or above) Deferred student loans (or loans in good standing, aka on an Income-Driven Repayment plan) DTI ratio of 45% or less (not including your full student loan amount)
Lenders also use slightly different underwriting criteria, focusing more on how much you have to pay on your loans each month instead of their overall balance and by accepting a signed employment offer as proof of income. This makes it easier for doctors to qualify for loans straight out of medical school or residency.
The average medical school debt in is over $200,000, according to the Association of American Medical Colleges (AAMC) latest data. However, graduates often pay over $300,000 over the life of their loans due to interest charges. Though this figure is staggering, it's not surprising.
However, Physician Loans are still considered conventional in the sense that they are not backed by the government and require borrowers to meet certain credit requirements.
670–740: Good credit – Borrowers are typically approved and offered good interest rates. 620–670: Acceptable credit – Borrowers are typically approved at higher interest rates.
Are medical loans hard to get? Medical loans provided by a hospital or health care provider are typically designed to make health care more accessible. These loans may have more lenient credit requirements and lenders may not even consider your credit history for approval.
Due to the exceptional need for primary care physicians, loan forgiveness programs in these fields are more widely available than for other specialties. Loan forgiveness and/or repayment programs are sponsored by national, state, and local governments, as well as some private organizations.
However, some loan programs, like those backed by the Federal Housing Administration (FHA), may allow DTI ratios higher than 43%, sometimes up to 50% or slightly more, especially if you have compensating factors such as a high credit score or substantial savings.
Your particular ratio in addition to your overall monthly income and debt, and credit rating are weighed when you apply for a new credit account. Standards and guidelines vary, most lenders like to see a DTI below 35─36% but some mortgage lenders allow up to 43─45% DTI, with some FHA-insured loans allowing a 50% DTI.
The 28% mortgage rule states that you should spend 28% or less of your monthly gross income on your mortgage payment (e.g., principal, interest, taxes and insurance).
Physician loans often provide unique advantages like lower down payments and exemptions from private mortgage insurance, which can be attractive for doctors investing in property. However, these loans may come with higher interest rates compared to traditional loans, influencing the long-term cost of your investment.
Public Service Loan Forgiveness (PSLF) is the quickest way doctors can pay off medical school debt. Federal student loans are discharged after 10 years if you work for a nonprofit hospital or medical facility that is a registered 501(c)(3), the military or academia.
Depending on various factors, paying off medical school loans might take 10 to 30 years. According to a study from Weatherby Healthcare, 25% of doctors expect to take six to 10 years to pay off their student loan debt, while 34% expect to take at least 10 years to pay off their student loans.
With profit margins that actually expand as rates climb, entities like banks, insurance companies, brokerage firms, and money managers generally benefit from higher interest rates. Central bank monetary policies and the Fed's reserver ratio requirements also impact banking sector performance.
Doctors on the coasts (especially California and New York) spend the most on homes. In over half of the states, doctors paid a median home price between $400,000 and $600,000. This is a decent estimate of what a doctor will end up paying in the vast majority of the country.
In today's market, a good mortgage interest rate can fall in the high-6% range, depending on several factors, such as the type of mortgage, loan term, and individual financial circ*mstances. To understand what a favorable mortgage rate looks like for you, get quotes from a few different lenders and compare them.
Here's where three experts predict mortgage rates are heading: Around 6% or below by Q1 2025: "Rates hit 8% towards the end of last year, and right now we are seeing rates closer to 6.875%," says Haymore. "By the first quarter of 2025, mortgage rates could potentially fall below the 6% threshold, or maybe even lower."
Introduction: My name is Lakeisha Bayer VM, I am a brainy, kind, enchanting, healthy, lovely, clean, witty person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
