Doctor Mortgage Loans
Frequently Asked Questions
Doctor mortgage loans are a specific type of home loan available only to those with medical training. Doctor mortgage loans are also called physician home loans, physician jumbo loans, physician mortgage loans, or even veterinary home loans.
They are becoming more and more popular as time goes by. In fact, the number of doctor mortgage loans offered throughout the country has about doubled every year, since 2009.
At Good to Go Mortgage, we are frequently asked about Doctor Mortgage Loans. Although each doctor’s situation is unique, here is some general information.
- What Makes Doctor Mortgage Loans Different from Other Types of Home Loans?
- Are Jumbo Doctor Mortgage Loans Available?
- How Do I Qualify?
- What About PMI?
- Can doctors get other kinds of home loans?
- Are the Rates and Fees Comparable?
What Makes Doctor Mortgage Loans Different from Other Types of Home Loans?
The biggest difference between physician mortgage loans and a typical mortgage is the down payment and PMI requirements. Plus, the fact is that only medical personnel can apply.
- You can have less than a 20% down payment and not have to pay PMI (Private Mortgage Insurance).
- The cash you would normally use for a down payment, or additional PMI payments, you can use to pay off your student loans.
- Medical professionals tend to have high income levels.
- Default rates in the medical profession are as low as 0.2%, which is much lower than for other borrowers.
- Lenders use doctor mortgage loans as an incentive to physicians for future financial dealings with the lender.
Early in a doctor’s career, it can be difficult to qualify for a typical conventional mortgage. You may have had expensive educational costs, high student loans, no savings and lower earnings before you finished your training. That is the problem doctor mortgage loans are here to solve.
If you now have a contract for employment in the medical field, you may be able to secure doctor home loans even before you begin working. Without pay stubs, or previous tax years it would normally be impossible to purchase a property.
You may not have a down payment, or if you do have savings you have another use for them. Perhaps you are making student loan payments, or making investments.
The 3 main differences with doctor home loans are:
- Your proof of income can be a future contract for work.
- Your student loans are considered differently. The lender will usually only consider the payments that you need to make, not the total balance.
- Even with zero to less than 20% as a down payment, you won’t need to pay private mortgage insurance. That PMI payment can be as much as 1.5% annually on the face value of your loan (divided up and paid monthly). It can easily amount to several hundred dollar a month that you are not required to pay.
There are some other differences that may or may not apply to your situation:
Some of the doctor home loans are limited to those who have only been out of residency for 7 to 10 years. Some only apply to physicians and dentists. At Good to Go Mortgage we work with veterinarians, podiatrists, nurse practitioners, physician assistants, optometrists, and even some attorneys. We work with doctors at any stage of their careers, for a primary residence, vacation home or investment property.
- A conventional mortgage with a 20% down payment will usually offer a slightly lower rate and fees than doctor mortgages loans
- Check to see if you are looking for a condo if it qualifies. Sometimes condos are restricted from doctor home loans.
- There is no difference in your rate if you go over the jumbo limit in your area.
- You may be allowed to use money that was given to you for a down payment, closing costs or your cash reserves.
Are Jumbo Doctor Mortgage Loans Available?
Yes. Not only are jumbo amounts available, it does not change the rates of your doctor home loan.
How Do I Qualify?
The criteria for approval are different, but the process of making an application is pretty much the same as for any mortgage. You will need:
- A decent credit score.
- Cash reserves vary based on the strength of the rest of your application. From zero to a year’s worth of payments could be required. These payments are the total of your principle, interest and taxes. Since you won’t need the PMI, that isn’t included.
- Rather than a full debt-to-income ratio comparison, your student loans will be compared to your income. Usually, a loan payment to your income ratio should be 38% or less. Sometimes it can be as much as 50%.
What About PMI?
Private mortgage insurance is the extra amount that a borrower pays every month to protect the lender from you defaulting.
- Even with zero to less than 20% as a down payment, you won’t need to pay private mortgage insurance.
- That PMI payment can be as much as 1.5% annually on the face value of your loan (divided up and paid monthly).
- It can easily amount to several hundred dollars a month that you are not required to pay.
Can doctors get other kinds of home loans?
Absolutely. Each situation is unique. Here at Good to Go Mortgage we will assess your situation with you and present you with the options available to you. It is always your choice which type of financing you decide to use.
If you have a 20% down payment, this is frequently the best idea. Conventional mortgages offer several options, like 30 yr fixed rates, 15 yr fixed rates and ARMs. Often the fees are the lowest and so are the interest rates. You will have to provide proof of income, not just an employment contract.
Many physicians who qualify for doctor home loans prefer to go that way because they want to keep their cash available for investments and to pay down their student loan debt.
You might not have seen anything from these types of mortgages in the last 10 years or so, but they are making a come back. Basically, you get 2 (or 3) different mortgages that add up to the total you need. Each one has a little higher interest rate. You still avoid the PMI, like with doctor home loans.
Conventional Mortgage but with less than a 20% down payment
Again, the fees and interest rates are higher than with the conventional mortgages with 20% down payments. You will have to pay the PMI. 5 or 10% down payments are common options.
An FHA loan will have higher interest rates plus fees than the typical 20% down payment mortgage. There is also an up-front “funding” fee. There is a minimum required down payment, and there is no avoiding the PMI.
This loan can be difficult to qualify for if you have student loan debt. Rates are often lower than doctor mortgage loans, but the payments may not be lower once the PMI costs are added.
If you can qualify for the VA benefits, you could also qualify for a VA loan. It is better than an FHA loan with no down payment and no PMI. The interest rates are about the same as the FHA mortgage rates. The funding fees are higher. The funding fees are waived for you if you are a disabled veteran.
Are the Rates and Fees Comparable?
The doctor mortgage loans tend to have fairly high rates, as compared to these other options. On the other hand, the down payments are the lowest. The fees make it harder to compare. You will want to talk to your Good to Go Mortgage representative to get the details.
Should I Get a Doctor’s Loan?
Every medical professional needs to look at their individual situation to decide what to do. Renting can be quick and easy, but the choices are usually limited and expensive, especially close to major medical facilities.
Doctor mortgage loans are specifically designed to overcome the challenges that physicians have in the process of qualifying for home loans. They take into account the student debt burden, and accept employment contracts instead of a past history of income. With low to no down payment options, doctor mortgage loans simply make it possible for some physicians to even consider their dream of home ownership.
At Good to Go Mortgage we will take the time to understand your situation and present you with the options you have for different rates and terms. Make a fully informed decision. This is your financial future we are talking about here.