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September 1, 2022 0 Comments

7 Best Physician Mortgage Loans in Minnesota

Are you a physician looking to purchase a home in Minnesota? If so, it might feel like the odds are stacked against you.

Property prices were unaffordable in 4 out of 10 US counties last year. Since then, real estate prices have continued to soar, especially in high-demand areas.

Unfortunately, Minnesota happens to be one of these. According to census data, housing shortages in the Twin Cities are the worst in the nation. To make things worse, new doctors often have high student debt and fewer savings.

Fortunately, many lenders offer physician mortgage loans.

Physician mortgage loans have a number of perks, including up to 0% down payment requirements, and no PMI costs. Physician mortgage loans are also typically more forgiving of student debt. Thanks to these factors, physician mortgages can be a valuable option.

For many doctors and med students, the ability to get a physician mortgage could be the make-or-break factor in purchasing a home.

Ready to start looking into your physician mortgage options in Minnesota? Keep reading to find out which lenders have the most competitive offers, as well as the pros and cons associated with physician loans.

Pros and Cons of Physician Mortgage Loans

Physician mortgage loans can feel like a godsend to doctors and med students who’re eager to buy a home, while laboring under years of student debt. Most medical students have to spend longer in college than other university graduates. Once they do graduate, med students are usually close to their 30s.

This is roughly the average age when a lot of people think about purchasing their own home. According to statistics, the median age for first-time how ownership is 31.

Unfortunately for physicians, if they want to get going with a home purchase, many find that their debt-to-income ratio and credit utilization rate is too high for a regular mortgage, thanks to student debt. At the same time, a lot of med students have limited savings for a down payment.

While their peers might have already been working for 4+ years, a freshly graduated doctor or surgeon hasn’t been in the job market long enough to build up savings.

Physician mortgage loans are tailored to solve these problems and can be the key for a young doctor or medical graduate to be able to break into the home market.

Pros

Statistics show that the average med student graduates with roughly $241,600 in total student loan debt. This is a sizeable sum, and it’s sure to count against you when applying for a mortgage.

Most regular mortgage products evaluate your debt utilization rate. If it’s too high, you won’t qualify for a low down payment, or might not be eligible for a mortgage at all.

One of the big benefits of physician mortgage loans is they typically take a lenient view of student debt. Lenders know that the student debt you’ve incurred pursuing a medical career can pay itself off over time.

Currently, the US is facing a shortage of between 37,800 and 124,000 physicians within 12 years. Not only is there a demand for doctors, surgeons, and specialists—but medical careers tend to pay well. Physicians and surgeons earn well over the national average.

Because of this, most lenders can accurately wager that the average doctor will be able to pay back their student debt and mortgage on a physician’s salary.

Besides this, physician mortgage loans also offer attractive down-payment requirements, often starting at a 0% down payment.

Also, unlike other 0% down payment mortgages, physician mortgage loans typically don’t require private mortgage insurance (PMI). Lenders usually require PMI for mortgages with down payments of less than 20%.

PMI can cost you a few hundred dollars per month. Over your mortgage period, this could add up to quite a few thousand dollars.

Another perk to physician mortgage loans is that most are relatively lenient around proof of income. Usually, a job contract is all that’s needed. Some even allow you to take out doctor loans as a resident physician.

Cons

Some lenders also offer adjustable rate mortgages (ARMs). Under these, mortgage rates for doctor loans in Minnesota are fixed at a low threshold for the first few years of the mortgage period. After this period is up, your interest rate will fluctuate.

Another potential downside to physician mortgage loans is that low-money-down mortgages can drive up your monthly mortgage payments.

If you’re wondering “how much house can a doctor afford in Minnesota?” the answer will depend on your salary. Most lenders are typically prepared to finance up to four times a doctor’s annual income.

If you take out a mortgage for a home that’s worth close to $1 million, with little-to-no down payment, you’ll have a relatively hefty mortgage payment to make each month.

If something unforeseen happens, this might cause you to default on your mortgage and put your home in jeopardy.

Top 7 Lenders for Physician Home Loan Programs In Minnesota

physician mortgage rates in Minnesota
Mortgage loan agreement application for physicians in Minnesota

As you can see, the advantages of physician mortgage loans usually far outweigh the cons.

However, before you rush into applying for a physician loan, it’s always a good idea to shop around and compare your options. Here are some of the lenders that currently offer the best physician home loan terms.

1. Huntington

Huntington isn’t the biggest bank in the US, but it offers some of the most attractive physician mortgage loan terms. Ranking as the 26th largest bank, Huntington operates primarily in your backyard after the merging with TCF.

One of the things that set Huntington’s physician mortgage loans apart is they offer no-money-down financing options. If you’ve just recently graduated, and haven’t had a chance to save up for a down payment—this could eradicate one of the biggest stumbling blocks around buying a home.  Not to mention the ability to close 90 days prior to your start date.

Here are the general terms Huntington offers on physician mortgage loans:

  • 0% down payment on mortgages up to $1 million
  • 5% down payment on mortgages up to $1.25 million
  • 10% down payment on mortgages up to $2 million
  • Max financing for physician mortgage loans is $2 million
  • 15-year and 30-year fixed-rate mortgages
  • ARMs are also available (in either 7/6, 10/6, or 15/6 terms)
  • Minimum credit score required of 700
  • Physician mortgage loans are available to those holding MD, DO, DDS, DVM, or DMD degrees
  • Residents are also eligible for physician mortgage loans
  • Reserves required, to be held in bank or investment accounts (2 months for regular loans, 6 months for jumbo loans)
  • Gifts funds for down payments allowed
  • Closing allowed on new employment contracts without paystubs
  • PMI not required
  • No pre-payment penalties

If you want to apply with Huntington or compare your options further, you can leverage our application tool that makes finding doctor home loan lenders easy.

2. BMO Harris Bank

BMO Harris Bank is another top contender if you’re looking for a mortgage as a doctor. BMO Harris is a multi-billion-dollar bank with hundreds of branches over the country, including Minnesota.

BMO Harris Bank offers physician mortgage loans with the following terms:

  • Newer physicians are eligible for loans of up to $750,000 with no down payment
  • Physicians who’ve been practicing for more than 10 years are eligible for 90% financing
  • No PMI required
  • No income history required for approval
  • Minimum FICA credit score of 700 required
  • 10, 15, 20, and 30-year terms available
  • Both doctors and dentists are eligible
  • Open to residents, fellows, and practicing physicians

You can also choose between a 3/1, 5/1, 7/1, or 10/1 ARM loan.

3. Bank of America

Bank of America is one of the oldest (if not the first) lenders to offer physician mortgage loans. Bank of America owns over $3 trillion worth of assets and is one of the largest banks in the US.

Bank of America still offers physician mortgage loans with attractive terms. These include:

  • 5% down payment up to $1 million
  • 10% down payment up to $1.5 million
  • Residents and fellows can close on a home 90 days before starting a new job
  • Student debt can be excluded from total debt when applying for a mortgage
  • PITIA reserves required for 4-6 months depending on the mortgage amount

Bank of America does not offer as competitive a program as Huntington, but they are still a good option to consider, especially if you already bank with them. If you do not, you will need to open a closing, savings, or checking account with them.

Additionally, if your position doesn’t start until after closing, they will need to verify that you have sufficient reserves to cover all debt obligations between the date of closing and employment. Finally, Bank of America doesn’t offer physician mortgage loans to research physicians.

4. U.S. Bank

U.S Bank is a reputable, long-standing bank that offers physician mortgage loans in addition to its wide range of other financial services. They do not offer 0% down payments, but, like most physician mortgage loans, down payment requirements are relatively low.

Here are their down payment requirements:

  • 5% down payment for $548,250
  • 10% down payment for $1.25 million
  • 15% down payment for $1.5 million
  • 20% down payment for $2 million
  • 25% down payment for $2.5 million

Other requirements and terms include:

  • No PMI necessary
  • Minimum credit score of 710
  • Construction loans are not available
  • Proof of rental payment history required
  • Proof of 3, 6, or 12 months of savings is required depending on the loan amount

Physician mortgage loans through U.S. Bank are only currently available to physicians, including fellows, residents, and osteopathic doctors. Nurses and dentists aren’t eligible.

5. Citizens Bank

Headquartered in Rhode Island, Citizens Bank is another of America’s larger financial institutions. It controls over $160 billion worth of assets and offers an extensive range of financial products, including physician mortgage loans.

Here are some of the specifics on their physician mortgage loans:

  • 5% down payment for $850,000
  • 10% down payment for $1 million
  • Practicing doctors (MD and DO), dentists, residents, and research physicians
  • Self-employed physicians are also eligible (with proof of self-employment income for 2 years)
  • No PMI required
  • Student loan debt can be excluded from DTI ratios if it has been deferred for +12 months from the closing date
  • Construction loans available (89% financing)
  • The option of either fixed rate or adjustable rate

Besides these terms, Citizens Bank physician mortgage loans do have certain limitations. These include:

  • Physicians who are 10 years out of residency cannot qualify
  • The maximum debt-to-income ratio is 40%
  • Licensed residents, interns, and fellows can only borrow up to $600,00
  • Unlicensed residents, interns, and fellows can only borrow up to $400,00

Overall, Citizens Bank offers good terms on physician mortgage loans, but with certain limitations.

6. Flagstar Bank

Flagstar Bank is a medium-sized bank and holds fewer assets than the larger lenders already listed. However, Flagstar Bank shines when it comes to mortgage programs. They are currently the sixth largest bank mortgage originator in the country.

As it happens, one of the big ingredients of Flagstar Bank’s success is its physician mortgage loan program.

Here are some of the factors that make Flagstar Bank’s physician mortgage loans so competitive:

  • 0% down payment for up to $1 million
  • 15% down payment for up to $1.5 million
  • 20% down payment for up to $2 million
  • 25% down payment for up to $2.5 million
  • No application fee
  • No prepayment penalties
  • Recast, buy down, and float down options are available
  • 5, 7 & 10 year ARM products are available

Flagstar Bank can also submit a full file to underwriting for approval before you have signed a purchase contract. Being fully approved for a loan, instead of pre-approved, can make your offers as competitive as a cash offer.

One thing to take note of is that the above down payments only apply to first-time home buyers or homebuyers who haven’t owned a home within 3 years.

7. Bank of England

If you’re thinking we’re suggesting you apply to the UK central bank, don’t worry. The Bank of England is located in England, Arkansas. Although it is a smaller bank, the Bank of England lends in all states, barring NY.

Its main physical loan terms are:

  • 0% down payment for up to $1 million
  • 5% down payment for up to $1.5 million
  • No PMI required
  • Minimum credit score of 700 required
  • 2-month payment reserves required
  • The program is available for both seasoned practitioners and those just graduating med school

One limitation to the Bank of England’s physician loan program is it can only be used for condos, family residences, or two-unit properties. It is also only available on 3, 5, and 7-year ARM terms.

Compare Physician Mortgage Loans the Easy Way

As you can see, there are a number of banks that offer attractive mortgage loan programs for physicians. The best ones to apply for will depend on your unique needs.

Unfortunately, comparing loan programs can be very time-consuming. That is why we are here.

At Dr. Home Finance, our mission is to make it easy for doctors to find the best physician mortgage loans for their individual needs.

Through us, you can contact multiple banks on one quick and easy form.

Or, would you like some one-on-one assistance? We’re committed to providing high-value real estate loans to medical professionals. Contact us today to get the assistance you need.