Physician mortgage loans are a special mortgage product available to doctors. Doctor home loans have fewer restrictions for borrowers than conventional loans because lenders generally trust doctors to be responsible borrowers. Doctors often apply for these mortgages when they’re in residency or shortly after graduating med school. Lenders will accept an offer letter as proof of income, which is an extremely rare scenario. Most banks want to see a stable history with a current employer. In fact, some will let you take out a mortgage months before your residency officially starts. Grant Tisdel, an expert in physician mortgage loans, states that lenders who offer physician mortgage loans accept 0% down, which is a rarity in the mortgage world.
A physician loan…
Requires physicians, residents and fellows to invest very little money for a down payment on the loan, usually 0-5% of the purchase price. Most banks offer 100% financing.
Does not mandate you pay for private mortgage insurance (PMI). With a conventional loan, unless you have over 20% equity in the house (what you own or paid for with a down payment), you have to purchase PMI.This protects the lender in the event you default on a loan payment. It’s a waste of money—avoid paying PMI on a loan at all costs.
Does not include student loans into your debt to income ratio. This is a huge deal, and one of the main reasons physician mortgage loans can be so beneficial if you’re a recent grad.
Accepts your residency/fellowship/employment contract as proof of how much money you will earn in the future. Usually, conventional mortgage underwriters look backward at your earning history in efforts to determine if you’ll be able to afford your monthly loan payment.
Might require you to open an account with the originating bank to be eligible for a loan. Forcing you to open an account is a way for the bank to ensure you’ll be doing business other than your mortgage loan with them.
May be used by residents, fellows or practicing physicians. This is the case at 90% of the banks that offer physician loans. Can be used for most property types (single family and town homes), but in certain cities and regions, you may not be eligible to purchase a condowith a physician mortgage.
Does not distinguish between a conventional mortgage loan and a jumbo loan. Most banks will charge higher rates and fees on anything over $647,200, which is considered a riskier product, thus the name “jumbo”.A point of note: not all banks that offer the doctor loan program offer jumbo loans.
In some cases, lending guidelines may allow you to use money you receive as a gift for a down payment, cash reserves or miscellaneous closing costs.
Requires you to have decent credit. Typically, you need to have a creditscore of 680-720+. If you have a credit score over 800, congratulations—the best rates and terms will be available to you.
Mandates that you have a loan payment to income ratio of less than 43%, which means your monthly payment can’t be more than 43% of your income.
MD, DO, DMD, and DDS’s
Minimum Credit Score of 680.
100% to $1,000,000 -Nationwide Excluding CA, DC, FL, HI, ID, MD, NV, RI
95% to $1,500,000 - Nationwide
90% to $2,000,000 - Nationwide
30/20/15/10 Year Fixed Mortgages, 10/6, 7/6 and 5/6 ARMs
No Private Mortgage Insurance Required
Single Family, Condominiums, Townhomes
1-2 Units Primary Residences Only
Gift Funds Allowed
Extended Hard Locks -180 Days for existing homes / 365 Days on new construction
4 Months Reserves
10+ years post training requires 10% down up to a $2M loan amountClose 90 days prior to commencement date of a new employment contract
Purchase and Rate/Term Refinances loans (Cash Out Refinances are NOT allowed)
Second Homes and Investment Properties NOT allowed
You don’t have to do much to get a doctor mortgage loan, according to Doug Crouse, who specializes in physician mortgage loans.
Each lender has its own qualifications, but there are some general requirements that you should meet.
Proof of medical degree
Signed contract indicating that your job as a doctor will start within 60 to 90 days
FICO score of 680 (although some lenders will go as low as 680 and ers lenders will require 720)
Deferred student loans
A debt-to-income ratio (DTI) of 45% or less, not including student loans
Most lenders offering doctor mortgages don’t include student loans in the DTI, so even though your official DTI might be higher than that, it won’t matter because your medical school debt isn’t even counted