Should I Get a Physician Mortgage or a Conventional Mortgage? Spring is a busy season for both doctors and residents. Physicians across the country will prepare to relocate and start their medical careers, and you may be one of them. The process of moving to a new city, and buying a new home, can be daunting. Thankfully, as a doctor you have multiple options to consider when pursuing homeownership. Physician mortgage loans (also known as doctor loans) are tailored to their needs of medical professionals like you. Doctor loans are ideal for new residents and attending physicians, who will enter the workforce with entry-level salaries and large amounts of student loan debt. Every borrower has a unique set of circumstances, however, and a doctor loan is not always the best solution. In certain situations it may be more beneficial for you to apply for a conventional loan.
What Is A Physician Mortgage Loan? The first physician mortgages came on to the market a decade ago, when national banks realized that physicians had low mortgage default rates and untapped earning potential. Today there are many financial institutions that cater to your needs and they are actively looking for more clients. Physician mortgages are available to residents, physicians (MD, OD, DPM), and in some cases dentists. They require little to no money down (0-10%), have no private mortgage insurance (PMI), and can be either fixed or variable. Most lenders will accept an employment contract as proof of income for a physician mortgage, which can help you purchase your home and get settled in before you start work. Doctor loans allow banks to reach a prime market while potential borrowers are launching their careers. Because of this, most lenders will not include student loan debt as part of your debt to income ratio. The low down payment requirement, easy income verification process, and favorable debt-to-income ratio make doctor loans easier for you to obtain than a conventional loan.
Why Should I Consider A Conventional Loan? Conventional loans are offered through banks, private lenders, and credit unions, but unlike FHA or VA loans they are not insured by the federal government. Because lenders assume all of the risk when they sell a conventional loan to a new borrower, they are some of the hardest mortgages to qualify for. Fortunately, conventional loans also offer the most favorable terms on the market. A conventional loan with a 20% down payment has the lowest rates and fees of all traditional loan options. In exchange, lenders have strict credit, debt-to-income ratio and income verification requirements (often through borrowers’ W-2 forms, paycheck stubs, and prior year tax
returns). If a borrower decides to put less money down (between 520%), their lender will add PMI to their monthly mortgage payment. You may decide to go with a conventional loan if you have money set aside and want to pay less over the full term of your mortgage. This option is best suited for you if you are an established physician and you are prepared to make a down payment. You may also choose a conventional loan because of its low rate of interest; however, you should be prepared to put at least 20% down or the cost of PMI might make a physician loan a better option.
Why Should I Consider a Physician Mortgage? Although conventional loans have amazing benefits, physician mortgages are a far better deal for most medical professionals. Physician mortgages can help cash strapped new residents and physicians pursue a path to homeownership. Many physician loans also have higher limits than conventional loans, and may have lower monthly payments than conventional loans with PMI. While debt may present a barrier for many doctors to traditional homeownership, most physician mortgages will not include student loan debt as part of a borrower’s debt-to-income ratio. Physician mortgages offer doctors the most flexible terms, but conventional loans offer a viable alternative for those who decide to put money down. Read our extensive physician mortgage loans FAQ for more information. Compare the features and benefits of both mortgages to decide which option is right you.