There are many different mortgage products available to accommodate a variety of buyer needs and one that many borrowers are not aware of is what is known as a “physician mortgage.” If you are a medical resident, medical doctor, dentist, optometrist or pediatrician you may be eligible for a physician mortgage which has relaxed qualification requirements and often a higher maximum loan amount. Becoming a physician is incredibly noble, requires significant dedication and also leaves many students with a significant amount of debt when all is said and done. The amount of debt that someone has directly impacts their ability to qualify for a mortgage and the loan amount that they ultimately are approved for. For doctors, this would be a significant hurdle since, as LendEdu reports, many doctors have hundreds of thousands of dollars of debt when they are finished with medical school, “The Association of American Medical Colleges reports that the average medical school debt balance for graduating physicians in 2015 was $183,000, and is no doubt higher today. Add that burden to their average undergraduate balance of $24,000 and the total average student loan balance for a doctor is $207,000.”
Because physicians have a high earning potential, many lenders have special loan programs for physicians because the likelihood of them being able to pay their mortgage is high. Medscape notes that in their 2017 Physician Compensation report, the annual income average for a full-time physician among all physicians surveyed (specialty and primary care) was $294,000. Though physician loans vary from lender to lender, they typically feature a number of advantages over traditional mortgages. First, they typically do not require employment and income history, only proof of current employment. Many recent grads often do not have significant liquid assets or a long employment history since they are brand new to their career but because they can show proof of future income with significant earning potential, lenders will often be more lax about employment history. Additionally, a lender will often give a break on student debt and their usual requirements for DTI (debt-to-income ratio) because physicians tend to have large amounts of debt but with a physician loan, deferred student debt is not counted toward a borrower’s DTI. Further, with a physician mortgage a lender will typically not require a significant down payment. Down payment requirements usually range from zero down – to 10% depending on the specific loan program. While an average borrower would have to pay private mortgage insurance if they made a down payment less than 20% that is not the case with a physician loan. Also, a physician loan will usually allow for a high loan amount that is usually significantly above the conforming loan amount. And, physician loans often carry a lower mortgage rate than traditional loans. Though a physician loan carries a wide array of advantages, it is important to note that a high credit score is still ideal and will help offset a low down payment.