A physician mortgage loan is a type of mortgage intended for doctors and similar high-income medical professionals. It is designed to accommodate their financial circumstances, often including high student loan debt and limited savings for a down payment, rather than offering a conventional loan or FHA loan.
What are the main benefits of a physician mortgage loan?
Here are the key benefits:
- Low or no down payment
Physician mortgage loans often require little to no down payment, sometimes as low as 0% to 5%. This helps if you have high student loan debt and limited savings. - No private mortgage insurance (PMI)
Typically, these loans don’t require PMI, which is an extra cost usually needed for conventional loans with less than a 20% down payment. - Higher loan limits
These loans often offer higher limits than conventional loans, allowing you to buy a more expensive home. - Flexible qualification criteria
The loan approval process considers your future earning potential rather than just your current financial situation, making it easier to qualify even with high student loan debt or a short work history. - Specialized underwriting
The underwriting process for physician mortgages is more lenient, taking into account your professional status and potential income.
The downsides you should know about
There are a few things to watch out for:
- Higher interest rates
These loans might come with slightly higher interest rates compared to conventional mortgages, though this is often offset by the lack of pmi and lower down payment. - Fees and costs
Some physician mortgage loans may have higher fees or costs, so it’s important to compare these with other mortgage options. - Loan limits
While higher loan limits can be advantageous, they might also encourage you to stretch your budget further than you intended.
How does a physician mortgage loan compare to a conventional mortgage?
Criteria | Physician Mortgage | Conventional Mortgage |
Down Payment | Often requires little to no down payment (0% to 5%). | Typically requires a down payment of at least 5% to 20%. |
Private Mortgage Insurance (PMI) | Usually does not require PMI, saving on monthly payments. | Requires PMI if the down payment is less than 20%. |
Qualification Criteria | More lenient, considering future earning potential and professional status. | Based on current income, credit score, and down payment. |
Interest Rates | May have higher interest rates. | Rates can be lower, especially with a higher down payment and strong credit. |
Loan Limits | Generally offers higher loan limits, accommodating more expensive properties. | Limits vary, but high loan limits may require larger down payments or PMI. |
How do I determine if a physician mortgage loan is right for me?
If you’re a doctor or similar professional with high student loan debt and limited savings, and you’re looking to buy a home, this type of loan could be a great fit. It’s especially useful if you’re early in your career and need a mortgage that understands your financial situation.
What should I do before applying for one?
Instead of going it alone or trying to figure out the best deal by shopping around endlessly, you’re better off chatting with someone who knows the ins and outs of physician loans. You don’t need the guesswork.
Hit up one of our mortgage experts here at Tomo Mortgage to walk you through the options. We’ll break down the tradeoffs, costs, and give you the real deal on if a physician mortgage loan is the right choice. Just give us a call at 737-510-2523 and we’ll give you the straight talk on your options.
If you’re ready to start your journey to homeownership, get pre approved with Tomo Mortgage today.