Residential mortgage transactions can be broken down into 3 basic categories: refinance, purchase, and construction. When dealing with physician lenders you will not get a size fit. Some are more interested in refinancing loans vs. purchases. This will be reflected in how aggressive they are with their pricing and terms. (see typical terms here). As for a physician construction loan, those are harder to come to find due to the risk associated with this type of transaction. Even with the housing market’s current boom, there is still a bit of bad taste for construction loans. Refer to our list of lenders nationally and locally that can help you find the right product for your needs.
Physician Loan Programs
This is the most basic mortgage provided by any lender (physician mortgage or otherwise). It is what previous generations flocked to due to the security of fixed rates over 360 monthly payments. This isn’t a bad option if you plan on staying in the house for the long term. If you know this is your forever home or don’t want to sell the home and keep it as a rental in the future, then this isn’t a bad option. Keep in mind if you pay on a mortgage for 30yrs you will be paying almost twice the purchase price over that 30yr term.
This probably comes in a close 2nd place as the most chosen mortgage option based the physician mortgage lenders we have interviewed. You will get a lower interest rate than a 30yr fixed but the payment will be considerably higher. The trade off being that you are giving the lender less money over time and building equity faster.
Adjustable Rates: (ARMS)
This is where strategy and planning for your future comes into play. Physician mortgages are not a one size fits all. And the adjustable rate is a great example of just that. Adjustable-rate mortgages are fixed for an initial period, you can find them in a wide variety from 3 to 15 years. All adjustable-rate programs on a standard residential mortgage are based on a 30 year or 360-month payment schedule. The rates will typically be better the shorter fixed period. A 5-year ARM will be slightly lower than a 7-year arm and so on. Once the initial fixed term is completed your mortgage converts to the remaining term for example a 10-year arm will adjust to 240-month payment schedule based on the market rate. This depends on what index your ARM is associated with (SOFR is the most common currently).
If, for example you are just starting residency or your first attending position and don’t plan on being in the home or keeping it. Why would choose a higher rate on a 30yr fixed mortgage? Give the bank less money and go with an ARM term that fits your plans.