What is a Physician Loan?
Understanding a Physician Loan
A physician loan, sometimes called a doctor loan, is a specialized mortgage designed to help medical professionals purchase a home, often with unique financial advantages that other loan types don’t offer. Physician loans generally cater to doctors, residents, and sometimes other high-earning healthcare professionals, with eligibility requirements and terms that account for the unique financial situation of medical careers. Here’s a closer look at how physician loans work and why they might be a great fit for qualified buyers.
Key Benefits of Physician Loans
Low to No Down Payment: Many physician loans allow qualified applicants to purchase a home with little or no money down, which is particularly helpful for recent graduates who may not have a significant amount of savings.
No Private Mortgage Insurance (PMI): Physician loans typically waive PMI even with a small down payment, which can mean significant savings compared to conventional loans.
Debt-to-Income Flexibility: Lenders recognize the high student loan balances typical for doctors and often allow higher debt-to-income ratios. Student loans are often excluded from determining debt as well.
Income-Based Approval: Physician loans often consider future earning potential, which can help applicants secure favorable loan terms even with limited current income, as is common with medical residents or recent graduates.
Common Eligibility Requirements
Physician loans are generally available to a wide range of medical professionals, but eligibility varies by lender. Here are some common qualifications:
Proof of employment or a signed contract indicating future employment
Typically offered to MDs, DOs, DDS, DMD, and sometimes professionals like veterinarians and pharmacists
Limits on the number of years post-graduation, often within 10 years of completion
Things to Consider
Physician loans can have benefits, but it's wise to review the interest rates, as some physician loans may come with higher rates.
Local banks often offer extremely competitive rates and terms. Their goal is to earn the business of high net worth individuals, which includes physicians.
Some real estate agents are not familiar with physician loans. Find one that is so they can assist you through the application process and communicate the benefits of a physician loan to the listing agent when you decide to make an offer.
While they can offer easier qualification criteria, it’s important to consider monthly mortgage costs in relation to a realistic budget.
Find a financial partner
Physician loans are tailored to the unique financial profile of healthcare providers, making them an option worth exploring for qualifying professionals interested in securing a home without compromising on favorable terms. Local banks are great financial partners.