The Physician Home Loan Program, or “doctor loan” makes it faster and easier for medical professionals to purchase a home. These Doctor (or Physician) loans are mortgage programs that allow for faster and easier home ownership for medical professionals. They differ from conventional loans in several ways.
In a conventional loan, debt-to-income (DTI) ratios play a key role in both approval, approved amount and interest rate.
In general, 43% is the high end of DTI ratio a borrower can have to qualify for a mortgage. Ideally, conventional lenders prefer a debt-to-income ratio lower than 36% in qualified buyers.
Even though medical professionals normally carry a heavy school loan burden, the Doctor Mortgage Loan Program makes allowances for med school debt. Doctor Loan lenders are more flexible and med school debt can often be waived from the borrowers overall DTI or deferred 12 months after closing.
Another major advantage of these types of loans is that they require no private mortgage insurance (PMI.) Also called “Principal Mortgage Insurance,” this type of insurance protects the bank/lender if a borrower defaults or fails in making their payments. PMI is normally very expensive and not tax deductible. However, with a physician mortgage loan, medical professionals are able to borrow 95% to 100% of the home price with no PMI.
Yet another way in which a physician mortgage loan is an optimum choice over a conventional loan, is that most doctor loan lenders accept residency contracts as verification of employment. Conventional loan lenders usually require a physician to be licensed. However, with a physician loan, documentation that indicates a physician has been matched with a residency program is normally enough for approval. In some cases residents are able to close on a home before even starting a position.Though doctor programs tend to have higher maximum loan amounts for attending physicians, than for interns, residents and fellows, unlike conventional lenders, they do offer those who are moving from medical school to residency a chance to own a thome.
With a physician loan, lenders are able to offer a mortgage with zero to very little money down – depending on the lender. Most conventional loans require at least 3 to 5 percent – on the low end. Many other conventional loans require 20 percent down. Lenders feel they can take a chance on medical professionals considering their high earning potential.
For a conventional loan, loans have set loan limits. In 2020, the limit was $510,400. In 2021, it’s $548,250. With the doctor mortgage program, there are higher maximum loan amounts – though these are higher for attending physicians rather than for interns, residents and fellows. Lenders typically allow up to $850k/$1.5 Million.
Other advantages of a Doctor Home Loan include:
- Fixed rate options
- Less strict credit score requirements
- Up to 100% financing (with no monthly mortgage insurance payments)
- Early closing on a loan: up to 60-90 days before starting any new employment (depending on the lender)
- Competitive Fixed and Adjustable rates available
- Gift funds or seller contributions may be used for closing costs
Finding a qualified lender to work with is crucial to the process and not all banks or credit unions offer these types of doctor mortgage loans. MD Mortgage Loan helps physicians find the right lender while also weighing each individual pros and cons of the program in light of what conventional loans have to offer.
MD Mortgage Loan has compiled a list of Physician Mortgage Lenders and Banks by state and qualifications. Qualified borrowers can narrow down the list to find the right lender for their individual needs. Sorting through industry-leading competitive rates that fit a variety of financing needs, is the first step.