Questions About Physician Mortgage Loans & Eligibility
Q: Who qualifies for physician mortgage loans?
A: If you are a medical resident or a licensed medical doctor (MD), you are potentially a good candidate. The following list of licensed doctors usually qualify for physician mortgage loans:
- Doctors of Optometry (OD)
- Doctors of Osteopathy (DO)
- Doctors of Ophthalmology (MD)
- Doctors of Podiatric Medicine (DPM)
- Doctors of Dental Medicine (DMD) (select markets only)
- Doctors of Dental Science (DDS) (select markets only)
Lenders will look at many factors when evaluating your application for any mortgage. These include your debt-to-income ratio, credit score, the property you’re considering, when you are graduating, what your future (or current) salary will be, etc. Banks like extending physician mortgage loans to MDs because of their future (or present) earning power, so as long your credit score is in good standing, you shouldn’t have any problem qualifying. Most well-known national banks are looking for people with 700+ credit scores to qualify for doctor loans. Of course, there are exceptions to the rule. Be aware that lower credit scores typically mean you’ll pay higher rates and the terms won’t be as favorable.
Q: I’m not a U.S. Citizen or permanent resident. Can I still apply?
A: Unfortunately, you must be a citizen or permanent resident to qualify for physician loans. These are requirements that all banks have in place.
Q: I’m a medical student? Can I apply?
A: As of date, unfortunately, all banks require you to be a practicing resident or attending physician to apply for physician mortgage loans.
Q: Would I be considered for a physician loan as an M4 before residency?
A: Possibly, but with most banks, you’ll need to provide a signed residency contract before your closing. Typically, you’ll receive your contract three or four weeks after Match Day (usually the 17th of March each year). You may also need to demonstrate you have enough money in your bank accounts to cover the mortgage payments until you start receiving your salary.
Q: What documents will I need to provide?
A: Getting a mortgage loan requires a significant amount of documentation. The requirements for submitting paper and electronic documentation has skyrocketed over the past five years. It’s a pain, honestly. To help with this process and ease the stress a bit, we’ve written a detailed document checklist to make getting organized easier when applying for a doctor mortgage loan. Please keep in mind, though: whatever they ask for, there will always be more. It’s just a part of the process. We recommend you grin and bear it. You’ll get through eventually, promise. Keep your head up and keep the larger goal in mind: your new, beautiful home that you own and can use to build wealth.
Q: Are physician mortgage loans still available in all 50 states?
A: Many banks are only able to offer their doctor loans in a select number of states. This is because they are only licensed to lend and do business in states where they have a physical branch. However, we have relationships with many different banks—so yes—we work with physician lenders that offer the program all 50 states. Keep in mind that the loans, rates, and terms provided in each state depend on which banks have a footprint (brick and mortar bank) in those areas. Some banks in certain states allow you to purchase with zero money down while others require 5% down. Please get in touch with us and provide the state you’re looking to buy in. We’ll connect you with the best match in your state. Our goal (95% of the time we deliver on this) is that someone will get in touch within one business day to discuss your options.
Q: What properties are eligible?
A: Single-family homes, townhomes, and condos (in most markets). There are still a few “declining markets” in the United States, so those areas tend to be a bit more restrictive. The lending officer you’re matched with will be an expert in these areas and can provide definitive guidance on what properties are eligible.
Questions About Student Loans?
Q: My student loan is deferred. Do conventional mortgage financing programs overlook these loans in my debt-to-income ratios?
A: No. If you were to quit your residency at any time with deferred student loans still pending, those loans would become active again. Thus conventional mortgage programs would count this as current, active debt. The physician loan is the only loan program that allows lenders to forfeit this debt. This is one of the main benefits of the physician loan program.
Q: Do existing student loans affect my ability to get a doctor mortgage loan?
A: With conforming mortgage loans (traditional mortgages), your student loans are calculated into your debt-to-income ratio (click here for more info on what this is and how it’s calculated). With physician loans, they do not affect the ratios at all. Student loans are simply overlooked because as a physician, banks know that you are statistically one of the demographic groups that are least likely to default.
What Are My Options For Physician Mortgage Loans?
Q: What loan options are available for physician mortgages?
A: 30 year fixed, 20 year fixed, 15 year fixed, 5/1 ARM, jumbo loans, etc. For the most part, you’ll see all of the familiar loan terms and lengths available for conventional mortgages. As always, this depends on the bank and state you are working with or buying in. Read this article for an explanation of loan types and the difference between fixed rate and ARM mortgages.
Q: Can I refinance with a physician mortgage?
A: In many states, you can absolutely re-fi with a physician loan. Every year there are more and more banks that offer this benefit. It all depends on the individual bank’s policy, so please consult with the lending officer you’re matched with to determine eligibility. Usually, there are various banks that offer physician mortgages in one particular state. Make sure you do your homework and talk to a few lenders to see what they offer and choose the most beneficial offer and lending officer you’re most comfortable with.
Q: Do your lending partners offer a jumbo loan?
A: Yes, most banks do offer a jumbo loan (large, non-conforming loans over $417,000 that are not guaranteed by Freddie Mac or Fannie Mae) as part of their physician loan portfolio.
Q: What should my FICO score be to get the best rates and terms?
A: There isn’t a magic number, but in theory, your score should be in the 700 – 720+ range to qualify for the best terms. This number will be similar to scores necessary to be eligible for a conventional mortgage. If your score is higher than 800, you’ll have access to rates and terms that most people won’t. Side note: your guiding force in life should be to gain and maintain the highest credit score possible. This will help you with just about every major purchase you’ll make.
Q: My FICO score is low. What can I do to improve it?
A: Many books and websites have written guides on how to improve your credit score. If you made past mistakes but vow to work hard and correct them, the good news is you can eventually get your scores into the 700+ range. We like this guide on How to Boost Your Credit Score in Months, written by the good folks at The Motley Fool.
In general, you’ll need a 750 and up to get the absolute best rates on physician mortgage loans, but if you have at least a 700, you should be okay. Again, this depends on the individual lender and the physician loan program they offer. If you’re not quite there yet, you should consider waiting and taking steps to improve your score. You should probably look into taking this step anyway, as having a good credit rating is a major factor in getting a good (or even fair) deal on anything these days.
Other Questions About Physician Mortgage Loans
Q: Should I rent a home or buy one?
A: This is a very personal question and depends on the situation. In many instances, it is very beneficial to own a home, financially and psychologically. There are many advantages, including peace of mind, wealth building, the potential for conversion into investment property, etc. There are some disadvantages, though. We’ve laid out an extensive list of pros and cons for you to contemplate because you really do have to weigh all the options and make the best choice for YOU. Check out our objective article on renting vs. buying with a physician loan.
Q: How are physician mortgage loans and conventional loans different?
A: The big differences are: zero down (in most areas), no PMI payments and deferred loans won’t be counted in your debt-to-income ratios. There are many, many differences, advantages, and a few disadvantages. Mortgages are complicated. To get the full picture, please read our in-depth guide on how physician home loans are different.
Q: What is private mortgage insurance, or PMI?
A: PMI is insurance most lenders require as part of a mortgage loan to offset any losses if you default. In other words, if you’re not able to make your payments, the PMI company makes the loan payment for you and protects the bank’s investment. PMI is also seen as a huge waste of money because your payment goes directly out of your pocket into an insurance company’s coffers. Any money you’re spending on PMI isn’t being used to pay down your loan balance, save for your retirement nest egg or fund an exciting European vacation. In other words, you should be doing anything you can to avoid paying it. On conventional loans, if you have more than 20% equity in your home you can circumvent paying PMI.
Or, if you’re a doctor, there’s a better way. You can just get a physician mortgage loan. Read our in-depth article about physician loans and PMI here.
Q: Approximately how much money can I borrow to buy my home as a resident?
A: This depends on many factors. Most residents make roughly $40,000 – $50,000 per year, depending on the state in which they are practicing and how far along they are in their residency program (ex. PGY-3). If you have credit card debt, a car loan, unsecured debt, or other liabilities, they will affect how much lenders will allow you to borrow for your mortgage. For more information, read our article: How much can I borrow with a doctor mortgage?
Q: Is it wise to consider buying down the rate?
A: A rate buydown can be an excellent way to save money on interest payments over the life of the loan. But, is it a good idea? This is a highly personal decision and depends on your goals and situation. For many people, especially residents this may not be a wise decision. If you’re a practicing physician with positive cash flow, considering a shorter term (10-20 years) mortgage with a rate you buy down could be a great idea. To help weigh your options, we created this guide: Should You Consider Buying Down Your Physician Mortgage rate?
Questions About Doctor Loan USA?
Q: Am I obligated to use the lender you connect me with?
A: Absolutely not. You can, and should, talk to many different lenders until you find the person who offers you rates and terms you’re comfortable with. We also encourage you to work with people you feel good about and can have an open, honest discussion with. Getting a mortgage and buying a home is a big step, so you’ll want a patient, kind and understanding lender on the other end of the phone. You also want someone who is responsible, efficient and savvy. It’s imperative to find a great bank with great rates, but you simply cannot afford to underestimate the importance of having a great lending officer. Sometimes this person can mean the difference between closing on time or not.
Make sure you like who you’re doing business with and that they’ll go the extra mile for you. Life’s too short to work with people that don’t value your time or are condescending to you if this is your first mortgage. Most people in this business are honest, hardworking and place a premium on putting their clients first. However, there are a few bad seeds, as there are in any industry.
One benefit of working with Doctor Loan USA first is that we only work with honest, friendly and proven lending officers and banks. We’ve had these relationships for years, and we vet each lender personally, ensuring you’re only working with the best from the very beginning.
Q: Is Doctor Loan USA a lender, bank or mortgage broker?
A: No. We connect physicians and residents with lenders that we have personally vetted and determined to be the best, most knowledgeable individuals in their market. We don’t originate any physician loans, so we do not answer questions about rates, amounts, etc. In essence, we don’t engage in any lending or finance activity; we just connect you with lenders that do. We also pride ourselves on writing and providing interested residents and doctors with information and thought leadership that will make the home buying process just a little bit easier.
Q: Are there any fees or payments associated with using the DLUSA service?
A: There are no fees, obligations, commitments, requirements or pre-payments for using our services. Our sole purpose is to connect you with lenders you may not have access to locally that specialize in physician loan mortgages. This is free of charge for anyone that wants to connect with mortgage lending officers who specialize in physician mortgage loans.
Q: After submitting my information, when can I expect to hear back from a lender?
A: Typically, someone will email you within one business day. In the rare case that you are not contacted, please get back in touch with us and we’ll look into the delay. As we mentioned above, we’re able to get someone in touch with you in this timeframe 95% of the time. You’ll also get an introduction email from them almost immediately after you submit your information. We encourage you to be proactive and reach out to them as well. Especially if you’ve got a short runway before your closing date.
Q: How will a lender contact me?
A: Usually the first form of communication is via email. Our lending partners are very sensitive to your busy schedule and will go out of their way to accommodate you. If you prefer email only, please tell your lender and note it in the contact form, and he or she will call only when absolutely necessary. If it helps, suggest a date and time for a call so you can make sure you’re not in the ICU and have reception.
Q: Will my information or email address be shared or sold to other companies?
A: Absolutely not. We hate spam as much as you do. Our company was founded to help people, not burden them with unnecessary and unwanted communication. We do not publish, list or sell your private information to anyone other than the sole lender you are matched with. We exist to provide you information and access to banks that offer physician home loans. Period. This is a promise we’ve upheld for over 8 years. For more details, see our privacy and security policy.
Q: I prefer someone who lives near me. Isn’t it risky to work with a lender I haven’t met before?
A: Due to the nature of physician mortgage loans and the limited amount of banks that offer them, working with a lender across the country is very common, especially for new residents that are moving to a new city. With access to email, text, snail mail, and a mobile phone, you will be able to provide the lender with all the information needed and vice versa.
When Doctor Loan USA started in 2008, this was a big concern for many people. But, as more and more Internet services appeared, people became more comfortable with the idea of doing business remotely. You have to keep in mind, online shopping for clothes or groceries wasn’t even “big” back then.
Of course, if you feel safer and more comfortable dealing with someone locally, that is your decision, and we respect it completely. Some people prefer being able to walk into an office and deal with a lender face-to-face.
Please note: This FAQ is not meant to be a comprehensive list of all program guidelines associated with physician mortgage loans and is not legal advice. Mortgage programs may change without notice, so please consult with your individual loan officer when you have specific questions.