The complete guide to physician mortgage loans
A physician mortgage loan is a loan that is available for doctors. Sometimes, these types of loans may be available for other high income professionals. It comes with many benefits to consider, but has some restrictions to limit the amount of people these loans are available to. Here is a guide to help you understand a physician loan and determine if it is a viable option for your needs and your situation.
Why does a physician loan exist
New doctors and physicians often have a significant amount of student loans and debts that they need to pay off. In conventional settings, these debts can be crippling to your options, having to defer your large purchases such as a home until you find more financial stability. However, a physician loan exists to provide doctors access to options to purchase a home. As a doctor, your earning potential is much higher, which helps offset your substantial debts, providing these types of mortgages to have confidence in your ability to pay. This gives you access to different benefits.
Private mortgage insurance
First thing you need to be aware of when it comes to physician loans is understanding what private mortgage insurance is, as it is a key term when it comes to going through a mortgage process as a medical professional. The physician mortgage will allow you to put down less than 20% on a mortgage, as well as not requiring you to pay PMI, or private mortgage insurance. This private mortgage insurance is required for you to purchase. It protects the lender from you defaulting on your payments. As a borrower and someone looking for a loan, this insurance has no benefit to you. This is why it is in your best interest to avoid paying such fees. This can be avoided by paying more on your regular mortgage, but for doctors, they have the benefit of utilizing a physician mortgage loan.
In some situations depending on your area, you don’t have to put down anything for your doctor loan, while other times, you have to put down a down payment of 5% to 10% of the value of the home. The cost will vary depending on the price of the home, interest rates, and the years you agree to pay them off, which can be calculated through a physician mortgage calculator. More traditional loans and mortgages require you to put a down payment of 20%, otherwise you need to pay private mortgage insurance. If your mortgage is within this range, you can easily just get a more conventional mortgage and avoid your PMI that way. The benefit of a more conventional mortgage is the competitive prices they are available in, with typically lower fees and interest rates than a doctor or physician mortgage. Regardless of your choice of mortgage, if you are a doctor, you should not have to pay for private mortgage insurance.
Attaining the doctor mortgage
You can get a doctor’s mortgage without having to show pay stubs or tax returns, but with an employment contract that is signed in order to prove your practice and legitimacy. This is ideal for new physicians and doctors starting new jobs, allowing them to buy a new house with the mortgage you need. This is common for residents and attendings starting their careers and wanting a home to settle into as quickly and early as possible.
Self employed doctors
As previously mentioned, you can get approved for a doctor’s mortgage with a signed employment contract. If you are independent however, getting this documentation is more difficult. A physician mortgage also considers the required payment on your student loans.
Deciding on a physician loan
Ultimately, your decision to utilize the availability of a physician loan is up to you and your individual situation. You should consider if you will be working and living in the same place for a long period of time. If you are not planning on staying in the area for at least 5 years, you are potentially losing money on your home investment as you are not giving enough time for appreciation on its value to build. You want to evaluate your income and financial situations, making the ideal situation for you. Financial stability plays just as much of a factor into your home purchasing choices.
If you have just graduated from med school, and want to build a future in your personal life and not just a professional setting, a physician loan is able to help you attain your goals. This extends flexibility when you are in a financially difficult situation, providing even those in the most debt with the chance to find a home.