Physician Loan - 42 Answers for Physicians

The purpose of this article is to describe what a physician loan is and how it is used. It will also answer some of the top questions people have regarding physician loans. In addition, we will investigate investment property issues, private mortgage insurance (PMI), credit scores, physician mortgage loan payments, buying a home, loan types and loan programs. If you are thinking about getting a doctor loan, buying a home, or refinancing your existing home loan to reduce your interest rate or decrease your monthly payments, begin the quick Loan Pre-Qualification process below.

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What is a Physician Loan?

A Physician Loan is a mortgage loan that is available to licensed physicians, dentists and other qualifying medical licensees who are looking to purchase, refinance or build a home. Physician loans typically offer more favorable terms than those available to the general public such as low down payments and higher loan-to-value ratios.

How do Physician Loans work?

Physician loans are built around the stability licensed physicians are known for. Physicians generally have more stable income and very good credit allowing lenders to be more aggressive in lending to them. In addition, physician loans often have lower interest rates, lower down payment requirements and borrowers are not required to pay for private mortgage insurance (PMI). These features can save borrowers thousands of dollars over the life of their home loan.

What are the benefits of Physician Loans?

There are many benefits to Physician Loans including the ability to finance up to 95% of the purchase price of a home, no private mortgage insurance (PMI) required, lower down payments, higher loan-to-value ratios, student-loan payment calculation flexibility and flexible repayment options. They also offer the flexibility to choose between a fixed-rate or adjustable-rate loan.

Like most conventional mortgage loans, Physician home loans offer two loan options: Fixed and Adjustable-Rate Mortgages (ARM). The fixed option provides a thirty-year loan where the interest rate will never change. The ARM loans offer a couple different options: The 10/6 ARM and the 7/6 Arm. Both options provide a period where the loan has a fixed interest rate, for either ten years or for seven years. Following the selected fixed period, the loan can adjust semi-annually. The rate can adjust either up or down depending on how the market and the interest rates have changed over time.

Most lenders offering Physician loans will have a limit regarding the Loan-To-Value (LTV) they will lend to. The LTV determines how much of a down payment the borrower will need to qualify. 

Fixed-rate loans are best for borrowers who want to know exactly how much they will have to pay each month. This type of loan is also good for borrowers who plan on staying in their home for a long time. However, fixed-rate loans typically have higher interest rates than adjustable-rate loans.

Adjustable-rate loans are best for borrowers who want to save money on interest over the life of the loan. This type of loan is also good for borrowers who plan on selling their home or refinancing within a few years.  Adjustable-rate loans typically have lower interest rates than fixed-rate loans.

In most cases, Physicians are better served with an ARM loan as they save money on interest and upgrade their home or move to another area more often than most people.

While Physician loans offer many advantages, there is one drawback.

Limited availability: Not all lenders offer physician loans and many that do don’t lend in all 50 states. Physician Bank’s loans are available in all 50 states.

To qualify, you must be a licensed physician, dentist or another qualifying medical licensee and be in good standing with your state medical board. You’ll also need to have good credit and a strong, verifiable income.

Yes, you can get pre-qualified.

Not necessarily. Physician Bank can qualify physicians and close on a new home up to ninety (90) days prior to them beginning their contracted employment.

In general, no, you do not need to be a U.S. citizen to qualify for this type of loan.  However, specific visa documentation is required in these instances and will be reviewed for eligibility.

If you are in your residency or fellowship, you may still qualify. Some lenders require that you have a contract with a hospital or group practice before they will lend to you. With Physician Bank, select licensed medical professionals and medical residents are eligible. For physicians, you must be licensed with one of the following medical degrees: Medical Doctor (MD), Doctor of Dental Surgery (DDS), Doctor of Medicine in Dentistry (DMD), Doctor of Optometry (DO), Doctor of Osteopathic Medicine (OD), Doctor of Podiatric Medicine (DPM), Doctor of Veterinary Medicine (DVM), or Registered Pharmacists (PharmD).

No, you must be a licensed medical professional or have verified copies of passing transcripts, boards, or verification of a medical license application. Residents qualify but students do not.

Some lending institutions provide the ability to “ignore” student loan debt that can be verified to be in forbearance. This option allows the Physician applicant to qualify at a higher debt-to-income (DTI) ratio than they would normally qualify for. Physician Bank provides this option for its applicants.

No. Physician Bank loans are used to purchase, refinance, or build a home.

Yes! A Physician Mortgage Loan can be used when purchasing a home either for a primary residence or for a 2^nd home.

Physician Loans often come with very competitive interest rates and terms. However, your interest rate will ultimately be based on your credit score, DTI, LTV, and other factors.

Physician loans are designed for doctors, so the application process is usually simpler than it is for other types of loans. However, you’ll still need to meet the lender’s requirements to qualify.

How much you can afford to borrow will depend on several factors, including your income, debts, and the down payment you’re able to make. Physician Loans typically allow you to borrow up to 95% of the purchase price of the home, so you may be able to finance most of your purchase with a low down payment.

No. Investment properties do not qualify.

The biggest difference between Physician Loans and loans for conventional mortgages is that Physician Loans are designed specifically for physicians. This means that they often have lower interest rates and down payment requirements than conventional loans. In addition, they offer more favorable terms and no PMI payments.

Yes. Although “perfect” credit isn’t a requirement, the ability to show good debt and credit management is a must.

Physicians typically need to have good credit. A good credit score is generally considered to be 720 or above. If your credit score is below this threshold, you may still be able to qualify, but you may have to make a larger down payment.

The minimum credit score is 660. The higher your credit score the better your rate & terms will be and the smaller your required down payment will be.

“Bad” credit is a relative term. What is bad to one person isn’t so bad to another. The minimum credit score to qualify for this type of loan is 660. However, Physician Bank provides options for those who fall below this threshold to rebuild credit for future qualification.

The approval process can take between 1-15 days. The speed of the approval is based largely on how quickly the applicant can provide the requested documentation required to obtain an approval.

Yes, you can use a co-borrower.

No. However, the co-borrower must occupy the property as their residence. Non-occupying co-borrowers are generally not allowed.

No. This can be your first home purchase.

No, you do not need to have a certain amount of money saved to qualify for this type of loan. There are costs that will need to be paid for when closing but there is no “standard” amount required.

The amount you can borrow depends on the financial institution, but most will lend up to only $750,000. Physician Bank can qualify physicians up to $4,000,000+¹

No, there is no Physician Bank Loan limit. Many lenders put a cap on the available loan amount. Physician Bank does not.

Yes, our program allows for a primary residence and second home.  You can have up to 2 physician loans.

The interest rates can vary depending on the lender and are based on several factors, including credit score, loan type, DTI, LTV and length of loan. Typically, Physician loan rates are similarly priced to conventional mortgage loan rates.

No, there is no prepayment penalty for Physician Loans. You can pay off your loan at any time without penalty.

The fees associated with Physician Loans vary depending on the lender but generally remain consistent with conventional mortgage loan fees.

The terms of these loans can vary depending on the lender and their product mix. Regardless of whether the loan is fixed or adjustable, the loans are amortized and paid over the amortized term, which is typically 15 or 30 years.

Down payment requirements vary from lender to lender. At Physician Bank, there is just a 5% down payment required for loans up to $725,000 and credit scores 720 and over.

PMI is an insurance that protects the mortgage lender in case you default on the loan. PMI can add to your monthly payment, so be sure to factor it in when you compare Physician Loans to other types of loans. Physician Bank does not require borrowers to pay PMI.

On a conventional loan, the best way to avoid PMI is to put down 20% of the purchase price of the home.  Physician Bank loans do not require borrowers to pay PMI.

PMI protects the lender in the event of a default and is typically required on loans with higher LTV’s. Many lenders require the borrower to pay PMI on their Physician loans…Physician Bank does not require this.

If you’re a licensed Physician and in the market for a new home, this type of loan may be just what you’re looking for. Although there are many loan options available, licensed medical professionals find a Physician Bank loan saves them time and money in their home purchase.

You can apply through Physician Bank or any lender that offers them.

Is there anything else I need to know about a Physician Loan?

If you’re a physician or medical professional looking for 95% financing to purchase a home with flexible purchase options, Physician Bank may be your best choice. If you have any other questions about a Physician Loan, please let us know and we will respond within a few short minutes.

Member FDIC | NMLS ID #446440

Physician Bank is a division of Heritage Bank NA.

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¹ Subject to approval, 95% financing not available on loans over $725,000. Contact us to learn more.