Physician Mortgage Loans for Doctors Buying a Home
Physician Mortgage Loans
Physician loans, also called doctor mortgage loans, were introduced by banks and lending institutions because of several distinctive challenges faced by physicians when borrowing. Most doctors and other medical professionals face challenges when finding favorable conventional mortgage loans due to student loans that increase their debt-to-income ratio.
When looking for a home, most physicians struggle while starting their careers due to low salaries during fellowship/residency, minimal savings, and large student loans. Depending on their debt acquired during medical school and whether they make payments consistently, physicians may also struggle with a less-than-average credit score at the beginning of their careers. This increases mortgage interest rates and high monthly payments. These factors make physician loans an excellent alternative to conventional mortgages.
What are Physician Mortgage Loans?
Physician mortgage loans help medical professionals purchase homes, often without a down payment, mortgage insurance, and with loose qualifying requirements. They are best for doctors and medical professionals who have difficulty qualifying for typical mortgages due to substantial college debt and minimal savings. These loans can also be refinanced, making it an attractive concept for new physicians.
Who Qualifies for Physician Mortgage Loans?
While eligibility for physician loans depends on the lender, at GoNoCost Mortgage these loans are reserved for;
- Dentists
- Pediatrists
- Optometrists
- Certified registered nurse anesthetists
- Advanced practice clinicians
- Veterinarians
- Primary care physicians
Other professionals, such as accountants and attorneys, can also qualify for physician loans.
How Do Physician Loans Work?
Physician mortgages resemble conventional mortgages but are more accommodating to doctors’ unique circumstances. These loans offer up to 100% mortgage financing without necessitating private mortgage insurance often associated with conventional loans when borrowers put down less than 20%.
Physician mortgage loans also have higher limits of $1 million or more depending on the lender. The limit primarily depends on the much you want to finance. For instance, if you want 100% financing, the limit is probably capped at $1 million and up to $2 million for 90% financing.
What are the Benefits of Physician Mortgage Loans?
Doctor’s mortgages are beneficial in the following ways;
Down Payment
Most lenders dictate that borrowers should pay a minimum of 20% of the purchase price to avoid Private Mortgage Insurance. PMI is tacked into your mortgage payment to protect the lender if you fail to make the payments. Borrowers with low down payments are often viewed as “risky borrowers.” Therefore, PMI is a form of assurance to the lender.
However, physicians’ loans side-step PMI fully, even with low down payments. Actually, most doctor loans don’t require down payments.
High Loan Limits
Most borrowers can get a maximum dollar amount from conforming loans ranging from $647,200 in low-cost areas to $970,800 in high-cost areas. However, physician mortgages don’t have a borrowing cap, providing unmatched flexibility to medical professionals. However, you shouldn’t borrow more than you need, just because you have been given a larger borrowing amount than you would have received with a conventional loan.
Debt-to-Income Ratio (DTI)
Most conventional loans require a minimum DTI of 43%. However, achieving this debt to income ratio may seem like a distant dream for some physicians with hefty student loans. Fortunately, physician loans don’t factor in student loans as part of the debt amount used to calculate a borrower’s debt to income ratio.
Drawbacks of Physician Loans
While physician loans may seem attractive, especially for new medics who want to purchase family homes, these loans have a few disadvantages.
Interest Rates
Conventional mortgage loans have fixed mortgage rates, making it easier for borrowers to anticipate their mortgage expenses. However, physician loans have variable interest rates, allowing their rates to change with the market. Variable interest rates can increase over time, and most borrowers can end up paying more or less, dependant on the current market conditions. While you can refinance these loans, variable rates are something to be aware of but not afraid of.
That aside, physician loans typically have higher interest rates than conventional mortgages. Some conventional loans have rates of 4.5% or less, while physician loans charge 4.75% or more. When researching which type of mortgage is best for you, make sure to talk with an experienced loan officer to know all of your home buying options.
Limited Residence Types
Unfortunately, you can’t use a physician loan to purchase a condo as your main residence. Additionally, there are limits for vacation home purchases and rental properties purchases as they are sometimes thought of as being high risk mortgages.
Why GoNoCost?
GoNoCost Mortgage offers extremely flexible physician mortgage loan options to medical practitioners. Additionally, if we find the high interest and property restriction a problem, we have alternatives to physician mortgage loans, such as VA loans, FHA loans, piggyback loans, and conventional loans.
Your dream home is waiting. Start your approval today.
“Owning a home is a source of joy and pride, but financing it is often hectic. We are here to change the status quo.”
Let's Connect
Financing your home is easy. Refinancing it is even easier. You just need to find a transparent lender or a reliable online mortgage advisor to guide you throughout the mortgage financing process. GoNoCost Mortgage has those people.