How Does A Doctor’s Mortgage Work?
If you’re wondering if there is a doctor’s home loan designed with physicians in mind, the answer is yes. Doctor’s mortgages are unique loan products for physicians and help them buy a house sooner than expected.
Let’s face it, having a medical degree doesn’t make mortgage approval easier. Traditional home loans often disapprove borrowers with a high DTI or debt-to-income ratio, which is what recent medical graduates have in common. It’s also no surprise that most new physicians have little to no savings and may not have a permanent job.
On the other side of the spectrum, given some time, doctors are among the most financially stable workers we have. They have higher incomes, fewer debts, and low default rates on home loans. This is why doctor’s mortgages came about.
As of late, we can see more and more doctor mortgage loans being offered in the market today.
Let’s find out how this loan type works and if you should get one.
What is a doctor’s mortgage?
A doctor’s mortgage is a type of loan with less stringent requirements meant for medical professionals. Med school costs are now at astronomical heights, which has hindered many from owning a home. It’s no surprise that new graduates have a harder time qualifying for a loan due to huge college debts and limited savings. However, doctors have the income needed to qualify for a home loan.
The good news is, with a doctor’s mortgage, you can buy a home without a down payment, nor are you required to pay for PMI or private mortgage insurance.
How does it work?
A mortgage for doctors offers borrowers up to 100% financing with PMI payments not required. Typical conventional loans require PMI when you put down less than 20%. Doctors can save a significant amount by not paying for PMI.
Doctor’s loans also have higher loan limits than other loan types, you can get a loan with a $1 million limit depending on how much you plan to finance. Let’s say you opt to finance 90%, your loan limit can go up to $2 million. Other types of physician loans can offer up to a max loan limit of $5 million.
It’s common for new doctors to have sizeable student debt. When you apply for a doctor’s mortgage, you can have a higher DTI or debt-to-income ratio due to your student debt situation. In short, student loans are not counted against the borrower when you take out a physician’s loan.
This helps doctor’s a lot since a conventional loan usually requires a DTI ratio of 50% or lower, a number most doctors have a hard time reaching. This doesn’t mean that a doctor's car loans and credit card debt are not examined, they are taken into consideration but with more relaxed restrictions.
Who is qualified to get a doctor’s loan?
A doctor’s loan is generally offered to doctors with specific degrees like MDs and DOs. You may also find loans for other healthcare professionals like vets, dentists, and orthodontists who have DMV, DDS, DPM, and DMD degrees.
Remember that you can only use a doctor’s mortgage to purchase or refinance a primary home, so you should ensure that you’ll be staying in the property for the majority of the year. Another restriction to remember is that doctor’s loans cannot be used to buy a second home, townhouses, vacation homes, multifamily units, or investment properties. You may also have difficulty financing a condo with a doctor’s loan.
Should I get a doctor’s mortgage?
If you are confident that you can manage all your debt payments like student and credit card debts, and still have enough for mortgage payments, then a doctor’s mortgage may just be the loan you are looking for.
If you have tried applying for a conventional mortgage but can’t qualify, don’t worry, you can still own a home through a physician’s mortgage. With more lenient DTI requirements, no downpayment, and PMI, this loan type may be the right choice for you.
Conclusion
A doctor's mortgage is an excellent option if you are a new doctor looking to buy a home. Imagine owning a home with no downpayment and PMI required, plus a higher chance of qualifying due to lenient DTI ratio requirements.
At Accelerated Lending Group, we work with physicians and medical professionals and help them buy their dream homes.
Check out our loan options by calling or sending us a message on our website.
* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.