Medical Students, Residents, Physician Loans, Realtor, New Orleans

FYI = Only certain doctors qualify

Physician loans are available to only a select group of doctors, including medical physicians (MD), doctors of osteopathy (DO), dentists (DDS/DMD), and veterinarians (DVMM), says McRae. Some lenders also offer physician loans to podiatrists (DPM) and optometrists (OD). Consequently, health care providers such as chiropractors, registered dietitians, and respiratory therapists do not qualify for physician loans.
Moreover, physician loans are frequently restricted to individuals who graduated from medical school within the past three years.
They require little to zero money down
A physician loan can be a good option for doctors who are having trouble scraping together cash for a down payment, since they typically require down payments of only 10% or less, says Sylvia Gutierrez, a loan officer in South Florida and author of “Mortgage Matters: Demystifying the Loan Approval Maze.”
They also don’t require the borrower to pay private mortgage insurance. (By comparison, home buyers who get a conventional mortgage must make a 20% down payment to avoid paying PMI.) Hence, “the product allows for easier entry into homeownership,” says Gutierrez.
Maximum loan amounts can vary by lender
Most physician loans are capped at $1 million, says Gutierrez; however, some lenders offer larger loans. Chicago Financial Services, for example, offers physician mortgages of up to $2 million, says McRae. Nonetheless, the size of the loan will depend on what the nonconforming jumbo loan limit is in your county.
Physician loans can be fixed or adjustable-rate mortgages
Like traditional home loans, physician loans are offered as fixed-rate or adjustable-rate loans. Choosing what type of loan is best for you will depend on your risk tolerance, says McRae.
"Those who require safety and security can opt for the 30-year fixed at a higher interest rate. Those who are willing to take on more risk with an adjustable-rate mortgage can take advantage of a lower interest rate," she says.
Deferred student loan payments don’t inhibit borrowing power
Another big selling point for physician loans is that student loan payments that are in deferment for a year or longer don’t factor into whether the borrower can qualify for the mortgage. But whether you have the option to defer your loan payments will depend on what type of student debt you have. (The Association of American Medical Colleges provides a chart that shows which loans allow deferments.)
If you can’t defer tuition loan payments, your servicer may offer forbearance—a period of up to 12 months during which you can either make lower payments than those previously scheduled or delay making payments completely. However, interest accrues during forbearance—meaning you’ll pay more money over the life of the loan. Still, forbearance may enable you to get approved for a mortgage that you wouldn't qualify for otherwise.
Borrowers must provide proof of employment
Physician loans generally require only an employment contract for proof of income, as opposed to conventional loans, which require pay stubs. Thus, doctors who are in the process of entering residency can use their future salary to qualify for a physician loan. (Note: Conventional, FHA, and VA loans do not allow borrowers to do this.)
A minimum credit score of 680 is required
While a perfect credit score is 850, most physician loans require a credit score of only 680 or above. You can use a website such as, Credit Sesame, or Credit Karma to get a free estimate of your score; you can also check with your credit card company, since some (like Discover and Capital One) offer customers free credit scores. If your score is shy of 680, there are steps that you can take to boost your score, but you should know that it may take several months for you to increase your score.

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Physician loans, also referred to as doctor loans, present a unique set of circumstances for lenders because new doctors do not have any work history and usually have a significant amount of student loan debt. This situation will typically prevent physicians from getting approved on any conforming conventional products, so many banks have developed special portfolio products to originate and service these types of loans. Along with taking a risk to accommodate these borrowers, there also comes reward.

Why Do Banks Offer Physician Loans?
Cross-Selling – Physicians will most likely turn into future “high-earning” borrowers who will soon need some place to do their banking and investing.

Low Default Rates – The default rates on these loans are substantially below normal levels.

Referrals – Physicians (including doctors, dentists and veterinarians) are a group of professionals who typically would recommend their bank to their colleagues.

Questions about physician loans? Find a local lender who can help Arrow

Unique Criteria for Physician Loans
These loans, since they are lender portfolio products, do not have the same characteristics or qualifying criteria. Many will have some or all of the following unique options:

Made only to their target group (doctors, dentists and veterinarians).
Require very little down payment (0-5 percent).
Normally does not require private mortgage insurance (PMI), even if less than 20 percent down payment.
Often does not include student loan payments in debt-to-income ratio (or a lesser payment).
Will accept a contract as evidence of future earnings—in lieu of pay stubs or W-2s, which don’t yet exist.
Interest rate will be slightly higher than conventional rates, but there normally would be no difference in rates even if loan amount is a jumbo size (>$417,000).
Many banks covet these loans for the borrower’s high earning capability and the potential to cross-sell additional bank products. These loans are rarely in default and promote goodwill among a profession that banks find extremely profitable to do business with.

Ryan J. Rogers, Realtor
Keller Williams Realty 4550100
3197 Richland Ave.
Metairie, LA 70002
504-455-0100 (Office)
504-715-9867 (Cell)
Licensed Real Estate Agent in Louisiana
Each Office is Independently Owned and Operated