Physician Loans: Pros, Cons, & Who Qualifies

The average medical school debt is over $200,000, which is a hefty amount at the start of a career. This is why professionals in the field are required to rely on loans to buy their dream homes.

Physician home loans have gained prominence in the home-buying market. This allows them to address issues like limited cash flows and deter debt-to-income ratio to buy a house. They have a looser requirement when compared to other loans.

If you are a doctor looking for a physician loan, you can check out reAlpha. The platform has a list of vetted lenders who can help you get a loan for your home-buying process.

A physician loan is designed for doctors and medical professionals. The loan has generous terms with lower qualifying requirements. This is because most medical professionals have a harder time getting a typical mortgage due to their college debts.

These loans for physicians don’t usually require a down payment. Further, there is a waiver from Private Mortgage Insurance even when the downpayment is lower than 20%.

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A physician loan operates similarly to a conventional mortgage; however, they are more accommodating to physicians. They are quite flexible and you don’t have to put a down payment or pay a PMI. This is why a doctor mortgage loan is attractive to those practicing medicine.

The home loans for doctors are available as adjustable-rate mortgages (ARMs). So, physicians have to pay lower fixed interest rates in the first few years. The initial period is temporary, but this gives physicians more time to pay their other debts.

A lender will not look into the debt-to-income ratio (DTI) for loan for doctors. Doctor dti is the ratio between the money spent on interest and the total income. To qualify for a conventional loan your debt-to-income ratio has to be between  36 to 45%. This is not the case for physician loans.

To qualify for a physician house loan, you are required to have a medical degree that meets the lender's requirements. Here are some common ones

• Medical Doctors (M.D)
• Doctors of Osteopathic Medicine (D.O)
• Doctors of Dental Surgery (D.D.S)
• Doctors of Dental Medicine (D.M.D)
• Doctors of Podiatric Medicine (D.PM.)
• Doctors of Veterinary Medicine (D.V.M)

There are also special loan programs for physician assistants (P.A.), nurses, and nurse practitioners (R.N, D.V.P., and N.P.). Apart from this occupation and physical therapists (D.P.T., P.T., and M.O.T.) can avail of the loan.

Home loans for medical doctors open doors for graduates at a critical stage of their lives. They have their advantages and disadvantages; we’ll look at that below.

• No down payment- Mortgages for doctors don’t require a down payment in most cases. This makes it a more viable option for new doctors who don’t have substantial savings.
• No PMI required- There is no requirement for a PMI, even though the down payment is less than 20%, which reduces your monthly payments.
• Flexible DTI ratio- A lender will look at the potential earnings instead of the existing debt-to-income ratio.
• Student loan considerations- Mortgages for physicians are available right out of school as long as an offer letter has been signed.

• High interest rates- Mortgage loans for physicians have higher interest rates due to the lenient terms offered to you when the loan was approved.
• Strict eligibility criteria- A physician loan is only available for resident medical professionals. The loan cannot be availed if you want to get a mortgage to invest in a second home.
• Limited Lender options- Physician loans are available with a few lenders. This may limit the flexibility in the loan terms and providers.
• Limited property types- Home loans for physicians are available for limited types of properties. Commonly condos and townhomes are not eligible for this loan.

Physician loans are a great option for young doctors who are planning to buy a home. The loans offer a great option as they have no down payments or PMI requirements. When you compare them with conventional loans they have higher interest rates.

The conditions offered by each lender vary significantly and you need to check several factors to contrast them with other lenders. If you want to take a physician’s loan, you can check out reAlpha. Its AI-powered features allow you to get the best lenders near you to get offers that best suit you.

With reAlpha, you keep a substantial portion of the buyer agent commission back while gaining access to AI-powered insights on affordability, timing, and market forecasts.

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