Physician Mortgage Loans: Avoid Doctor-Specific Hurdles

Published:
May 11, 2022
Last updated:
May 17, 2022
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Are you a doctor or a soon to be physician or another type of medical professional? You may be struggling under medical school debt and thinking it’s impossible to buy a home. A medical professional mortgage could be the answer to your woes.

Many people might assume that doctors are rich, so of course they would have no problem purchasing a home. However, this simply isn’t true for a lot of doctors who are just starting out their careers.

Medical school debt, no savings, and a sparse official work history can make getting mortgage loans for doctors a difficult task. Fortunately, there are physician loan mortgage programs designed exactly for this type of situation.

What Is A Physician Loan Mortgage?

Doctors often run into trouble when applying for a regular mortgage at the start of their career due to a large debt-to-income ratio (DTI) after going through years of college and medical school. They may not have any savings, and can’t even provide proof of employment and income when they’ve recently graduated or even if they’ve only just started their residency.

A physician mortgage loan takes into account the fact that medical professionals may look bad on paper at the start of their career, but their income will probably make up for it. This kind of loan usually doesn’t require a down payment of any amount, and unlike most other no-down-payment mortgage loans, there is also no requirement for private mortgage insurance (PMI).

While it might appear odd for so many common requirements for mortgage application approval to be waived just because someone is a medical professional, banks are usually willing to make exceptions for physicians based on their projected career trajectory. The odds of the loan being paid off are high, and the interest on a no-down-payment loan is significant.

How Mortgage Loans For Doctors Work

Mortgage loans for doctors are typically made available via a special program and work differently from conventional mortgages in several respects. The idea is to make sure medical professionals can buy a home of their own much sooner than they could if they had to wait to meet all the requirements of a conventional home loan.

Conventional Mortgage LoanMedical Professional Mortgage
Down PaymentConventional loans demand a mortgage payment of at least 3% to 10%, all the way up to 20% or more in some cases.A physician loan usually has a down payment of 10% or less, and often there is no down payment required at all.
Private Mortgage InsurancePMI is required for most loans with a higher than 80% loan to value (LTV) ratio.There is no PMI requirement on mortgage loans for doctors, regardless of the LTV ratio.
Debt To Income (DTI) RatioThe DTI for a conventional loan typically tops out between 40% and 50%.The DTI for physician mortgages can be much higher than 50%
Proof Of EmploymentYou have to prove steady employment for most conventional loansA signed contract for employment will suffice for most doctor loans.
Proof Of IncomeIncome must also be proven to get approved for a mortgage in most cases. This can either be from investments or a job.Income requirements can be relaxed in the case of a doctor who is just starting their internship or residency.
Interest Rate And TypeChoose between a fixed rate home loan or an adjustable rate mortgage (ARM).In many cases, physician mortgages are set up as ARMs instead of a fixed rate.

There are some differences about the type of property that you are allowed to purchase with a medical professional loan compared to a conventional loan. For example, you will likely be limited to only single family homes, condos, townhomes or properties with a maximum of 2 units. You will also likely be required to use the home as a primary residence, so no vacation homes or investment properties under the program.

Who Qualifies For A Healthcare Worker Mortgage

Medical professional loans can be used by more than physicians. If you are currently practicing medicine in one of the following functions, or will be practicing within 90 days of loan closing, you may qualify for a mortgage loan for doctors or healthcare workers:

  • Medical resident or fellow
  • Medical doctor
  • Specialty doctors
  • Surgeon
  • Chiropractor
  • Pharmacist
  • Dentist
  • Veterinarian

Pros and Cons of Mortgage Loans For Doctors

Physician mortgage loans offer many advantages over conventional mortgages for new doctors and healthcare professionals looking to buy a home. Here are some pros and cons to consider when deciding if a doctor loan is right for you.

Pros

If you’re a new doctor who:

  • Can’t qualify for a conventional mortgage
  • Don’t have money for a down payment
  • Can’t afford the added expense of PMI
  • Have an extremely high DTI ratio
  • Only have a contract of employment
  • Can’t show income history yet

… then a physician mortgage loan could be just the right option for you.

Cons

Many mortgage loans for doctors come with a few variables in the interest front. First, your interest rate will probably be somewhat increased over that for a conventional mortgage. Second, you’re unlikely to be offered a fixed rate; most doctor loans are set up as adjustable rate mortgages (ARMs). This is where you have a fixed rate for a few years that switches to an adjustable rate after that the initial time period is up.

There is also a risk associated with starting off your homeownership journey in a loan with a 100% LTV ratio. Since you won’t have any equity in your home, if home values drop, you could end up owing more than the house is worth. This is known as being underwater on your mortgage, and it can make it difficult to refinance or sell your home.

Physician Loans From Sammamish Mortgage

Our mortgage loans for doctors and other medical professionals feature the following options:

  • Low or no down payment required
  • Purchase and rate/term refinance loan amounts up to $1,500,000
  • No mortgage insurance options
  • Loan-to-value ratios up to 100%
  • Multiple ARM options
    • 3/6 ARM
    • 5/6 ARM
    • 7/6 ARM

Don’t let student loan debt or limited savings keep you from owning your own home. Medical professionals deserve the same chance at home ownership as anyone else.

Why Choose Sammamish Mortgage?

At Sammamish, we believe everyone should have the chance to buy a home. Our medical professional mortgage loan programs are designed to assist you in starting your home ownership journey now instead of waiting years.

Sammamish Mortgage has been in business since 1992, and has assisted many home buyers in the Pacific Northwest. If you are looking for mortgage financing in Washington State, we can help. Sammamish Mortgage offers mortgage programs in Colorado, Idaho, Oregon and Washington, including our Diamond Homebuyer Program, Cash Buyer Program, and Bridge Loans.

Contact us if you have any mortgage-related questions or concerns. If you are ready to move forward, you can view rates, obtain a customized instant rate quote, or apply instantly directly from our website.

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