The physician mortgage loan was born to overcome the challenges many physicians face, including significant personal and student loan indebtedness, limited down payment availability, and in many instances a desire to close on a new home before starting a new, higher paying position.
These programs allow doctors and other medical professionals to secure home financing with fewer restrictions than conventional loans. These loans are designed specifically to accommodate the unique financial situations of medical professionals.
But what exactly is a physician mortgage loan, and how does it differ from a conventional loan? We’ve gathered all the unique features of these loan programs for you so you can be fully informed as you begin your home buying process.
Features of Physician Mortgage Loans
There are several advantages to physician mortgage loans.
No Private Mortgage Insurance (PMI)
Perhaps the most notorious feature of a physician mortgage loan is the option to avoid private mortgage insurance. With conventional loans, PMI is required on homes financed with less than a 20% down payment. This insurance protects the lender should you fail to make your payments and can range from .1% to 3% of the loan amount depending on the amount financed and your credit score.
Choosing a physician loan program allows you to greatly reduce or exclude mortgage insurance altogether and potentially save hundreds of dollars every month.
Better Financing Options
Another benefit of a physician loan is the ability to qualify for higher loan amounts with less money down. At NEO Home Loans, we have unique financing options specifically for physicians and medical professionals, including:
– 100% financing up to $750k
– 95% financing up to $1.25M
– 90% financing up to $2M
Ability to Qualify with Future Income
Rather than requiring pay stubs to prove their income, doctors applying for physician mortgage loans only need to submit their employment contracts to prove their income instead of current pay stubs as would be the case for a conventional loan. Physician programs also allow for loan closings up to 90 days prior to the future employment start date.
Ability to Qualify with Deferred or Income-Driven Student Loan Payments
Physician mortgage programs also take a different approach when calculating debt-to-income ratios. Typical guidelines would require applying a 1% student loan payment to your monthly liabilities regardless of what the credit report shows.
Many mortgage lenders differ in how they calculate these payments. At NEO, we are able to qualify physicians based on income-based payments. This can significantly decrease the debt-to-income ratio and allow for qualification when other payment structures could not. We are also able to completely exclude deferred student loans that are in deferment for physicians.
Programs Available for Other Professionals
While most lending institutions offer these specialized programs strictly for physicians, NEO applies similar underwriting programs to other professionals, such as:
– Registered Nurses (RN)
– Certified Registered Nurse Anesthetists (CRNA)
– Physician Assistants (PA)
– Doctors of Physical Therapy (DPT)
– Doctors of Medicine in Dentistry (DMD)
– Doctors of Dental Surgery (DDS)
– Doctors of Veterinary Medicine (DVM)
– Lawyers (JD)
– Certified Public Accountants (CPA)
– and several other professional designations
Physician loans can be an excellent solution to help you qualify for a home when you might not otherwise with a conventional or FHA loan.
However, it is important to note that just because you are a physician or other medical professional that does not mean a physician loan is the best option for you.
You have a unique situation, and there are many loan options available to you. As a medical professional you have more options than most and it’s important to review a total cost analysis showing you the total cost of all the solutions available to you.
We’d invite you to schedule a consultation with one of our mortgage advisors who will educate you on all the available programs and create a solution that is best suited to fit your needs.