Most physicians can expect to earn a good living once they complete their education and training. But by the time they graduate and start their first job, many new doctors are also likely to find themselves deep in student loan debt.
That debt may make it difficult for physicians to qualify for a conventional home mortgage — even though they have a promising financial future. That’s where home loans for doctors come in. Some lenders offer special mortgages called physician loans or doctor mortgage loans. These loans have terms designed to meet the unique needs of newcomers to this profession. Note: SoFi does not offer physician mortgages, but it does offer home mortgage loans with a low down payment for first-time homebuyers.
Read on for a look at how physician mortgages work, some pros and cons, and what it can take to qualify.
Key Points
• Physician mortgage loans offer flexible terms, accommodating high student debt.
• Loans often do not require a down payment or private mortgage insurance (PMI).
• Debt-to-income (DTI) ratio requirements are more flexible, recognizing future income potential.
• Interest rates are typically variable, starting lower and potentially adjusting.
• Proof of a medical degree and employment is required for qualification.
What Are Physician Mortgage Loans?
Physician mortgage loans are private mortgages designed specifically to meet the needs of doctors, dentists, medical residents, and fellows. The terms and benefits of these home loans for medical doctors can vary from one lender to the next. But they generally offer more generous terms and/or looser qualifying requirements than conventional home loans. This can make borrowing easier for physicians who have a high income potential but may be struggling with student loan debt or haven’t been able to set aside enough for a down payment.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Questions? Call (888)-541-0398.
How Physician Mortgage Loans Differ from Traditional Loans
Doctor loans are a type of nonconforming loan, which means they aren’t backed by the federal government like FHA loans, and they aren’t bound by the same Fannie Mae and Freddie Mac standards as conventional loans. Here are a few important differences you can expect to find with this type of mortgage vs. a conventional loan:
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Low or No Down Payment
Most lenders require at least a 3% to 5% down payment for a conventional mortgage, with the lowest rates typically available to first-time homebuyers. Lenders who offer physician mortgages may not require any money down. (Or the down payment amount required may be very low.)
No Private Mortgage Insurance (PMI)
With a conventional loan, private mortgage insurance, which is meant to protect the lender in case of a default, is usually added to borrowers’ monthly payments until they reach 20% equity in their home. Though PMI rates vary, they typically range from 0.50% to 2% of the loan amount. But doctor loans don’t require PMI, even though the borrower may not make any down payment.
Flexible Debt-to-Income (DTI) Ratio Requirements
As part of their underwriting, lenders typically calculate a borrower’s DTI ratio (all monthly debt payments ÷ gross monthly income = DTI). For conventional mortgages, they usually require a DTI ratio below 45%, although some require the DTI to be below 36%. But lenders who provide physician loans may look at a borrower’s student loans (which they expect to be high) as separate from other debt and not include them in the DTI, or they may include the student loans but set a higher DTI limit.
You may want to keep in mind, though, that just because you can get a loan with a higher DTI ratio doesn’t mean you should. A home affordability calculator can help you see what might fit into your budget and a mortgage calculator can show you what your monthly payments would look like at different interest rates.
It might also be helpful to talk to a financial advisor about how much house you can really afford, and what the costs of homeownership could mean for your overall financial well-being.
Looser Employment and Salary Requirements
Proving that you have stable employment as well as an adequate income is usually part of qualifying for a conventional loan. (Lenders generally like to see at least two years of work history.) Employment requirements may vary with a doctor loan, but lenders who offer these types of mortgages typically understand that a new doctor could be working as an intern, resident, or fellow, and may not be earning as much starting out as they will take home even just a few years into their career. (Borrowers still can expect to provide paperwork that documents their salary and employment, however, along with their medical license.)
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Benefits of Physician Mortgage Loans
If you’re eager to get into your own home once you wrap up medical school, a physician home loan may make that possible — and less expensive. Avoiding PMI on a new home could save you hundreds or even thousands of dollars a year, for example. And if you don’t have to make a down payment, you can use that money for other expenses.
Lenders also may offer higher loan amounts with a physician loan than with other loan types. And though some lenders offer doctor loans with fixed rates, most come with variable interest rates, so you can expect to start out with a lower, more affordable interest rate when you begin making payments. (That means you’ll have an adjustable rate after a fixed introductory period, so your monthly payments could change. But if the rate becomes unmanageable down the road, you can look at refinancing to a conventional loan with a more competitive mortgage rate.)
How to Qualify for a Physician Mortgage Loan
Though the underwriting requirements may be more relaxed for doctor loans, you should be prepared to provide the following:
• Proof of identity (this might include your driver’s license, Social Security number, or other documentation)
• Proof of employment and income (you may be able to use an employment contract if you don’t yet have a W-2, pay stubs, or similar documents)
• Documentation of assets and debts
• A contract for your home purchase, including the purchase price
• Information about the type of home you’re purchasing (condo, single-family home, etc.)
• Proof of a medical degree (M.D., D.O., D.D.S., etc.) that meets the lender’s requirements
Other parts of the mortgage process — from determining what you can afford to choosing mortgage terms to closing on the deal — will likely be similar to what you’d expect if you were applying for just about any type of loan.
The Takeaway
If you’re finally starting your career as a doctor and you’re wondering if student debt or minimal savings could keep you from reaching the goal of home ownership — despite your income potential — a physician home loan may be an option worth researching.
Because these special loans typically don’t require a down payment or private mortgage insurance payments, and the eligibility requirements are often less strict than for conventional loans, doctors may not have to wait until they’re on firmer financial footing to purchase a home.
Of course, you’ll want to compare all the pros and cons of a physician mortgage — or any home loan. Buying a home is a big decision, and you’ll likely want to balance your eagerness to reach this milestone with your ability to keep pace with your mortgage payments and your debt payments, as well as other expenses.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
FAQ
What credit score do I need to get a physician mortgage loan?
A credit score of at least 700 or 720 may be required to get a physician loan, although some lenders may accept a lower credit score. Each lender has its own criteria.
Are physician mortgage loans available for residents and fellows?
Employment requirements may vary, but lenders who offer these types of loans typically understand that a new doctor could be working as an intern, resident, or fellow.
How do interest rates compare for physician mortgage loans vs. conventional loans?
Doctor’s mortgage loans generally come with a variable interest rate. After a fixed introductory period, your payments could go up or down, depending on several factors. With conventional mortgages, you may have a wider range of interest rate types to choose from.
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SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
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