What are Physician Loans?

To become a doctor takes an extreme amount of perseverance. It takes the dedication of years-upon-years, learning how to guide us through life’s most complex and delicate situations. 

And, unfortunately, it takes an average student loan payment of $2,288 per month. If the average salary for a first-year resident is $83,085, their debt-to-income ratio (DTI) is going to make qualifying for a conventional loan pretty difficult. But there is a solution. 

Physician Loans Explained  

Simply put, Physician Loans (also known as Doctor Loans) allow new doctors to overcome the obstacles they face in qualifying for a traditional loan. To illustrate, the average DTI requirement is 43%. So, let’s say you have an affordable car payment and a couple of credit cards with revolving balances. Your DTI will likely fall right around or under the 43% maximum. Now, add a considerable monthly student debt payment to the ratio… It goes skyrocketing. 

The solution is a forgiving calculation of student loan debt. The Physician Loan is a non-conforming program, meaning that the underwriting guidelines are different from that of your standard Fannie Mae/Freddie Mac mortgage. As long as you are recently graduated, in residency, or have a contract to soon be employed as a physician, underwriters can reasonably assume that you will be able to afford your mortgage.

$0 Down, $0 PMI

Now for the really good news. Qualifying med school graduates can borrow up to $2 Million with only 10% down. There are also $0 down, $0 PMI options on loans up to $750,000 for borrowers with a credit score of 700+.* Moreover, all Physician Loan programs are offered with a low interest rate with -0- points. On loans over $750k, the use of gift funds for the down payment is permitted. Borrowers also have a great variety of loan terms to choose from – which is important when considering how long you plan to stay in the home and what you predict your future income will be. 

Who Qualifies? 

• Available to medical doctors including Dentists, Podiatrists, Ophthalmologists, and Veterinarians.
• Graduates, those in residency, and physicians with an executed employment contract, effective within 60 days or less. 
• Buyers who are looking for a primary residence, owner-occupied, single-family home, condo, or townhouse. 

What Could You Buy? 

A mortgage banker will examine your unique situation and offer loan scenarios with the best interest rates, a loan term that meets your specific goals, and the price point that makes the most financial sense. In other words, you don’t have to figure this out on your own. Download the free guide or talk to a mortgage expert to get started.

SOURCES

*See APR and payment example with assumptions here

(10 June 2021). First Year Medical Resident Salary. Ziprecruiter.com. https://www.ziprecruiter.com/Salaries/First-Year-Medical-Resident-Salary-in-Chicago,IL

Lane, R. (21 May 2021). What is the average medical school debt?. Nerdwallet.com. https://www.nerdwallet.com/article/loans/student-loans/average-medical-school-debt