What are the Best Physician Mortgage loans?
Having a doctor’s mortgage can offer a range of advantages that conventional mortgage clients are not able to enjoy. Dr. Home Finance finds the best physician mortgage loans to address the unique financial requirements of recently graduated medical professionals, who have minimal savings, sparse income history, and substantial debt.
Lenders created special doctor loan programs to accommodate this group because they recognized the profession’s high earning potential and job stability. Physician mortgages are generous, accommodating, and growing in popularity. You can read more about them here.
All doctor home loan lenders on the Dr. Home Finance platform are willing to lend to the following medical designations: physicians, veterinarians, chiropractors, and PharmDs.
The U.S. Bank physician mortgage only applies to physicians. However, veterinarians, chiropractors, PharmDs, and other medical professionals can be eligible for a physician mortgage, depending on the lender. You should note that, in general, nurses do not qualify for physician home loans.
You may not be able to obtain a physician mortgage intended for outside of your medical specialty. Lending and brokerage regulations are such that many lenders can only offer special financing in certain areas, which can mean that loan plans in one state can differ from another. Lenders who offer physician mortgages in California, for example, are different from those who service physician mortgages in New York.
It’s best to do your research—Doctors can use Dr. Home Finance to learn about the physician mortgage qualification process, how to connect with physician mortgage loan officers, and more. For example, physician mortgages are famous for offering 100% financing, but not all lenders do. The PNC Bank physician home loan requires a 5% down payment to qualify.
Are you ready to begin? Click here to see which lenders are available for your specialty and state.
Having a doctor’s mortgage gives you access to several benefits that conventional mortgage customers don’t have:
You can avoid paying for private mortgage insurance by using a Down Payment Assistance Loan.
If the borrower puts down less than 20% on a conventional mortgage, he or she must purchase private mortgage insurance (PMI), which can cost as much as 5% of the loan. Fortunately, physician mortgages don’t require PMI!
You can choose to make a down payment or pay in full if you want to.
There is at least one 100% financing product open to residents, fellows, and doctors on Dr. Home Finance. In other words, you might get a physician loan in Florida (for example) to purchase a $1 million home and not put a single penny down.
The thing is, there’s been a lot of discussion about whether or not 100% financing is as wonderful as lenders want you to believe. That’s because if you don’t make a down payment, your initial mortgage payments will be 100% interest, and it will take a long time to accumulate equity.
No work history is needed.
A physician mortgage can be obtained regardless of prior work history, as long as the individual has received the necessary education. Some financial institutions don’t even require the resident to be working! Self-employed medical professionals, on the other hand, may obtain a loan with just six months of historical revenue, rather than the conventional two years of 1099s.
A person’s debt-to-income ratio is not relevant to whether or not they qualify for the best physician mortgage loans.
Lenders created doctor loan programs with the understanding that this segment of the population has more debt than the average individual of similar age. Physician loans disregard or recalculate the impact of student loan debt. Are you concerned about your $150,000 in student loans? Lenders that offer doctor home loans do not take into account your DTI (debt-to-income ratio).
You have access to large mortgages.
When you apply for a physician mortgage, you may borrow up to $1 million without putting down a cent! Because doctors are likely to buy more expensive, nicer homes, doctor loans typically have higher loan balances. It is not uncommon for doctors to want to construct their homes from scratch. Physician construction loans are frequently provided by lenders. If you are prepared, it doesn’t matter if it’s a “real” build or if you’re paying somebody to do the build and the loan goes to them rather than directly to the contractor.
It’s common knowledge that resident physicians don’t make much money. So why do lenders provide such generous mortgages to residents and fellows? Here are a few reasons:
Doctors are considered low-risk borrowers.
It’s true that physicians or dentists may be fired, but there is a doctor shortage in America, which makes it less likely for a doctor to lose his job than a regular worker. In addition, many medical professionals seek student loan forgiveness, which requires them to remain in the medical field as a result of legal provisions.
Doctors invest in low-risk properties.
A lot of people are curious to know how much physicians spend on their homes. Doctors frequently purchase nicer homes in nicer areas, and they have worked and studied hard for years to achieve something. Lenders favor borrowers who buy a nicer home because it will be easier to resell if they ever need to foreclose.
Doctors are potential loyal customers.
Medical professionals are an attractive clientele for lenders because they are likely to stay employed for a long time and earn more money as a result. Veterinarian home loans, dentist mortgages, and pharmacist mortgage loans are just some of the options available to this group. During this time, lenders hope the client will need more products, such as physician personal loans or medical office loans.
Interest rates on physician mortgages are usually lower than those available on standard mortgages, even though they rely heavily on factors such as the federal funds rate and monetary policy. Lenders are confident that a doctor will make their monthly payments, and so lenders offer physicians lower loan interest rates. In addition, most mortgage companies don’t keep your mortgage on their balance sheet forever. Investors purchase your mortgage on the secondary market because of its interest rate. Before purchasing a property, you should understand the primary and secondary mortgage markets to avoid any surprises!
Dr. Home Finance operates with over 30 financial institutions in the United States to offer tailored medical mortgage alternatives. This form will tell you which ones are available in your state and for your profession! Here are some popular choices in the meantime:
BMO Harris offers one of the most flexible physician loan programs available in Colorado. You can get either a fixed-rate or a variable-rate loan, and you won’t have to pay any special fees. You also won’t have to pay private mortgage insurance, even if you don’t have a 20% down payment.
BMO Harris allows you to take out a very large loan even with no down payment or employment history. You can borrow as much as $1 million with no down payment and up to 95% of a $1.5 million loan. You can even borrow up to $2 million as long as you have a 10% down payment.
U.S. Bank is one of the largest lenders in the country, so it should come as no surprise that they have a physician loan program. That being said, their loan program is slightly more restrictive. For one thing, they only offer this loan to certain medical professionals – nurses and dentists won’t qualify.
In order to get a U.S. Bank physician loan, you have to have a credit score of 710. You will also need a down payment of at least 5% to purchase a home that costs up to $548,000.
If you want to buy a home that costs up to $1.25 million, you’ll need 10%, and if you want a home that’s $2 million or above, you’ll need to put at least 20% down.
Veterinarians can get physician mortgages from Huntington Bank, as well as dentists and physicians. They provide up to 100% financing of up to $1 million, 95% up to $1.25 million, and 90% up to $2 million, as well as up to 100% financing for primary residences. TD Bank operates in the same way for physician loans.
Like U.S. Bank, Citizen Bank’s physician mortgage program is something of a mixed bag. On one hand, you can buy condos and even build a new construction home with this loan. You can also borrow up to $1.5 million, and their down payment requirements are much lower than those of U.S. Bank.
However, you can only get up to 95% financing on a loan of any size up to $850,000. If you want to buy a home that costs up to $1 million, you’ll need to have an 11% down payment. And if you want to buy a $1.5 million home, you’ll have to put 15% down, and you may still have PMI.
KeyBank is a renowned doctor’s mortgage company. They offer physician home loans on both primary residences and vacation homes, in addition to cash-out refinances (which are rare). Loans up to $3.5 million are available, with 100% financing on up to $1 million mortgages. Learn More: KeyBank Physician Mortgage Review
What it takes to get a mortgage:
If your medical practice generated $100,000 in revenue last year but just $85,000 the year before, lenders would average the two amounts to come up with an average of $92,500. This method is risky for business owners who experience fluctuating revenue each year because some years are leaner.
Starting up, expenses will outweigh income, and lenders might not even recognize any income at all.
There are some lenders that provide doctor loans and accept self-employed income. It requires several documents, including tax returns, accounting statements, and a business license to verify your employment. You will likely find a lender to suit your needs, but you will be treated more harshly as a business proprietor than you would as an employee on a W-2.
Regardless of your employment status, it might take one to two months for an application for a mortgage to be processed and approved.
Prior to applying, get pre-qualified.
An alternative way to speed up the process is to obtain pre-approval from a mortgage broker. Pre-approval refers to having a lender grant you approval before you select a property.
Remember that a mortgage broker is a loan officer employed by a bank, whereas a real estate broker shows you properties. You may get pre-approved before your real estate agent shows you houses, enabling you to establish a budget range.
Your pre-approval process will determine how much you can borrow, based on your credit, income, and down payment. Having a mortgage loan is not guaranteed; however, it is much more likely with a pre-approval in hand.
Before the bank will issue a mortgage, the house must also be inspected and appraised.
Approval requires certain documents.
It is possible to speed up the loan approval process by having the required documents collected and ready to be submitted. Exactly what you need depends on the lender. Typically, you’ll need to provide the following records:
- You must provide your full name, birth date, and current address on a government-issued ID. You may also need a birth certificate. You must provide your Social Security number.
- Be prepared to provide proof of residency to the lender if you are matched to a residency program. See here for more information about purchasing a house during residency.
- Tax returns and W2s from the previous two years if available. Physician loans may only require six months of pay stubs if you’re in business. If you’re employed, you should have two months’ worth of pay stubs.
- Pertinent paperwork for student loans, vehicle payments, and credit card payments. You must provide loan documents and statements of payments.
Be prepared to provide the following if you are self-employed:
- Lenders may wish to see the previous three months’ statements for your checking, savings, and brokerage accounts. In addition to providing the address and lender of any real estate you own, provide information on your current assets.
- Verify the source of your down payment funds if you are making one. Indicate whether you are using a retirement account, a savings account, or another source. Verify that the money is available, regardless of the source.
- The lender may require detailed information about the property you want to purchase. Include the price, address, year built, and type of property.
The closing process.
There are several steps in the purchase of a house, and the process is a complex financial transaction. Once you have applied for a loan on a particular house, you will be assessed by multiple professionals to determine whether you are able to pay the mortgage. Note that each step requires you to pay a fee.
Closing a mortgage loan involves these steps:
- An appraisal of the property is required to ensure that you are not borrowing more than the property is worth.
- A certified home inspector and pest specialist must examine the house. These fees are usually charged to the purchaser. The wiring, plumbing, roofing, HVAC system, and structural integrity of the house will be inspected by a home inspector.
- Pest specialists will look for termites in the house. In addition to building codes, pest specialists will look for the presence of termites. Tests for radon, lead, and soil stability, among other things, may be required depending on the age and location of the house.
- A title search will be conducted by the lender to verify that the property is properly owned by the seller. An attorney will also provide a title opinion, examining the title for any charges or claims that might prevent the sale of the home.
- A lender usually requires a survey to ensure that the property’s legal description matches what is on the property and that the structures are in compliance with legal requirements.
You don’t need to get a physician mortgage simply because you’re a physician; the mortgage industry offers several kinds of loans depending on your specific requirements. If, for example, you were able to work through medical school and have accrued savings, you might not require a physician mortgage. Here are your other choices:
A conventional mortgage may be an option for physicians if the terms of a physician’s mortgage are not appealing to them. But it’s worth noting that when you put less than 20% down, you will most likely have to pay private mortgage insurance. The premium will be added to your monthly mortgage payment.
There are three types of FHA mortgages.
An FHA-insured mortgage is one in which the lender accepts additional risk and relaxes underwriting standards to compensate for the fact that the loan is guaranteed by the Federal Housing Administration.
With an FHA loan, you are not able to borrow more than $300,000, or whatever the FHA loan cap for that year is in your area. In high-cost areas such as New York City or San Francisco, the cap is higher than $300,000 to reflect market prices, but you should contact your loan officer because the caps change annually.
In addition to not being able to borrow as much, FHA loans also require you to pay private mortgage insurance. The percentage varies, but it will be somewhere around 1.75% extra each month.
Veterans Affairs provides mortgages.
Veterans, current members of the military, and surviving spouses of veterans killed in the line of duty may be eligible for a VA loan. A physician mortgage has favorable terms similar to those associated with a VA loan, which is guaranteed by the U.S. Department of Veterans Affairs.
A piggyback mortgage allows you to avoid paying PMI by splitting the mortgage into two loans and making a 10% down payment.
When you buy a house, you usually take out a standard 30-year fixed mortgage for 80% of the purchase price. In addition, you may take out a line of credit for 10% of the price, which is known as a home equity line of credit. If you are not eligible for a physician mortgage loan or are not interested in one, this is a unique approach to financing your home.
Start Your Research Process. Find a Dr. Home Finance Verified Banker Today.
We are not a lending company. We help you find the best physician loan on the market.
You can find doctor loans through an online tool like Dr. Home Finance that compares multiple lenders for you. Simply select which state you are looking at living in and compare the rates of the best physician mortgage lenders.
Apply now to begin the process of owning your dream home.