What You Need to Know About Physician Mortgage Loans

Physician mortgage loans are specialty mortgage products for doctors. They are designed with more flexible loan underwriting to help doctors with high student loan debt qualify for a mortgage. 

Here’s what to know about this product, the pros and cons, and several lenders to consider.

Lender	Downpayment	Min. credit score
DFCU Financial	0% for up to $1.25M	700
First Merchants Bank	0% for up to $500,000	680
Fidelity Bank	0% for up to $750,000	720
Liberty Federal Credit Union	0% for up to $970,800	Not listed
TD Bank	0% for up to $1,000,000	Not listed
Huntington Bank	0% for up to $1,000,000	Not listed
Bank MD	0% for up to $1,000,000	Not listed

What are physician mortgage loans?

Doctors, especially recent medical school graduates, typically have high student loan debt, low savings, and a limited work history. This can make it challenging for doctors to qualify for a conventional mortgage. 

Physician mortgages offer more flexible criteria for borrowers, meaning lenders typically view student loan debt differently. Some lenders don’t count student loans as part of the DTI ratio, while others raise the acceptable DTI ratio to a higher percentage than a conventional mortgage.

This helps to accommodate a doctor’s high student loan debt, which averages $215,000. Each lender differs regarding the qualifications required for a physician mortgage, the types of eligible doctors, interest rates, and fees.

Do all lenders offer doctor loans for a mortgage?

Not all lenders offer physician mortgages. However, physician mortgages are still common, and lenders are available in every state. Here are some examples.

Lender	Availability
DFCU Financial	Available in MI and FL and several accounts offer cash back.
First Merchants Bank	Available in Indiana, Michigan, Ohio, Illinois and Kentucky
Fidelity Bank	Available in Wichita, Kansas City, and Oklahoma City markets
Liberty Federal Credit Union	Availability may vary based on property location, receive up to a $500 gift card at closing
TD Bank	Property must be in an area where TD Bank operates, which is primarily on the East Coast
Huntington Bank	Only ARM loans available
Bank MD	Only bank in the country specifically tailored to physicians, availability in all 50 states and D.C.

Most physician mortgage lenders don’t publish current interest rates, as interest rates are subject to change regularly. If you want to purchase a house that costs more than the thresholds listed here, some lenders require 5% to 10% as a down payment but still don’t charge PMI.

Pros and cons of a doctor mortgage loan

If you’re considering applying for a physician mortgage, here are some pros and cons. 

Pros

• Low down payments

  Most physician loans enable doctors to get a mortgage with either no down payment or a very low down payment. Down payment requirements depend on the lender and the cost of the house you want to buy.

• No private mortgage insurance

  Typically, if borrowers have less than a 20% downpayment, they have to pay what’s called private mortgage insurance (PMI). This insurance can add $30 to $70 per month for every $100,000 borrowed. Lenders don’t charge PMI with a physician mortgage loan, even if borrowers put down $0 when buying a home.

• Flexible underwriting

  Lenders consider a borrower’s future earning potential, which allows doctors to qualify for mortgages even with substantial student loan debt and little to no down payment, so long as they have a medical degree, proof of employment, and good credit.

Cons

• Higher interest rate

  Most lenders don’t publish the mortgage rates for physician loans, as rates tend to change. However, White Coat Investor, a leading physician personal finance website, reported that physician mortgages could be 0.125% to 0.25% higher than conventional mortgage loans.

• Qualifications vary by lender

  Some lenders allow pharmacists, optometrists, podiatrists, and specific types of nurses to apply, and other lenders only allow physicians, dentists, and veterinarians to apply.

• Limited number of lenders

  Although there are physician mortgage lenders in every state, there are far more lenders that offer conventional mortgages. If you want to apply for a doctor’s home loan, you only have a handful of options depending on where you live.

Ask the expert

Rand Millwood

CFP®

If this is a home you’re purchasing when you start working, don’t overextend yourself by overestimating your future earnings. Understand that things take time and this is likely not to be your last home. Also, don’t get caught up in keeping up with the Joneses. Stick to proper debt-to-income calculations along with covering all your savings goals.

Eligibility requirements for physician loans to buy a home

Eligibility requirements vary by lender, but here are some common ones. 

• Proof of employment: Some lenders allow doctors to take out a mortgage even if they are 30-90 days before their work start date.
• Good credit: Credit requirements vary by lender, but most require a 680+ credit score.
• Be a doctor: Some lenders only allow physicians, dentists, and veterinarians to apply, while others allow a wider range of healthcare professionals to apply, including pharmacists and certain types of nurses.

How to apply for a physician mortgage loan

Here are the steps to take to apply for a doctor’s mortgage.

1. Research lenders

Find lenders in your state that offer this type of mortgage. Try to speak with at least three different loan officers about the requirements.

2. Prequalify

Submit prequalification applications, which might require you to submit proof of your degree, an employment letter, and personal identification documents. 

3. Choose a lender and apply

Once you get prequalified with several lenders, compare the terms, rates, and fees. Choose the one that offers you the most competitive overall package.

4. Find a home and close

Once you have a preapproval letter, sellers tend to take your home offer more seriously. Once you have your preapproval in hand, you can enjoy house hunting. Hopefully, you find a house you love quickly and close.

How to choose the right doctor mortgage loan

There are several steps to take to choose the right physician mortgage loan.

Establish your budget

First, establish your budget for purchasing a home. Physicians just starting residency typically have a different budget than attendings who have been in practice for many years. 

Remember that lenders might approve you for a larger mortgage than you can afford. 

Consider your net income to help you determine your budget. Lenders typically use gross income when calculating affordability, which is not always an accurate portrayal of your cash flow.

Finally, familiarize yourself with the future of your student loan payments. Depending on the type of student loans you have and your repayment plan, your student loan payment can vary from year to year. Make sure you can afford your mortgage payment even if your student loan payment increases in the future. 

Get referrals

When determining which lender to choose, get referrals from other physicians who might be in your residency program or who work at your hospital. Ask them questions, like if a lender was responsive and closed on time. 

Doctors have busy jobs, and it is vital to have a lender who completes paperwork on time and prepares a loan package in time for closing.

Compare every category

When comparing lenders, look at more than the interest rate offered. For example, some lenders only offer variable-interest mortgages for physician loans, while others offer fixed-rate mortgages. 

Some lenders might advertise lower interest rates; however, the loan cost might be more overall than others when you look closer at the bank fees and closing fees. To truly compare lenders, you must consider the interest rate, the term, closing costs, and any other fees added to the mortgage. 

Finally, look at the lender’s reputation, especially its reputation for customer service. Borrowers who are as busy as physicians will likely appreciate responsive lenders.

FAQ

What is the typical down payment for a physician mortgage loan?

Physician mortgage loans often require little to no down payment. Depending on the lender, physicians might secure a loan with 0% to 10% down for a home purchase. This can be advantageous for newer doctors who may not have substantial savings yet.

Can physician mortgage loans be used for investment properties?

Physician mortgage loans are generally designed for primary residences, not investment properties. Many lenders want to ensure the borrower lives in the home to reduce risk. So if you’re eyeing an investment property, you may need to explore other loan options.

Are there any special benefits for residents and fellows?

Yes, physician mortgage loans often extend special benefits to residents and fellows. These benefits can include lower down payment requirements, deferred student loans in the debt-to-income calculation, and more flexible lending criteria. 

Such advantages make purchasing a home easier for medical professionals still in training.

How do physician mortgage loans compare to conventional loans?

Physician mortgage loans often offer higher loan limits, require little to no down payment, and don’t always require private mortgage insurance (PMI). However, conventional loans might offer lower interest rates if you have an excellent credit score and a substantial down payment.

What are the interest rate trends for physician mortgage loans?

Interest rates for physician mortgage loans can be competitive, but they vary depending on the lender and your credit profile. While these loans may come with slightly higher rates than conventional ones, the flexible qualifying criteria and other benefits often offset the difference. 

It’s essential to shop around and compare rates from multiple lenders to secure the best deal.

Recap of physician mortgage loans

Lender	Downpayment	Min. credit score
DFCU Financial	0% for up to $1.25M	700
First Merchants Bank	0% for up to $500,000	680
Fidelity Bank	0% for up to $750,000	720
Liberty Federal Credit Union	0% for up to $970,800	Not listed
TD Bank	0% for up to $1,000,000	Not listed
Huntington Bank	0% for up to $1,000,000	Not listed
Bank MD	0% for up to $1,000,000	Not listed