Physician mortgage loans always appear attractive in the beginning, as you don’t have to put any money down, have a PMI, and there are no jumbo limits.
As a physician, you would feel special when applying for a loan that is marketed as a “special program”; it’s like you’re being rewarded for all the time you spent training for this title.
But are these loans really what the lenders claim they are? After all, the lenders’ main goal would be to make more money off of these loans.
If you’re thinking about applying for a physician mortgage loan, you may need to start here.
This guide covers everything you need to know about what physician mortgage loans are, who are they for, how to apply, and how much it would cost you. Keep reading to find out.
What Are Physician Mortgage Loans?
Physicians are considered very profitable customers for lenders as they tend to take out large loans at the beginning of their careers.
They are also always guaranteed to pay these loans off in time, which makes them very appealing customers to big lenders.
Lenders typically compete against each other by offering larger loans with fewer stipulations to attract young doctors early in their careers.
Of course, their ultimate goal is to lock their customers and sell them more products as their needs change over time.
This means that most of the time, these loans end up being more expensive than other types of loans available for the same qualifications.
This is why it’s very important to understand how these loans work and compare them to the other available options before making a decision.
Why Are These Loans Special?
Physician mortgage loans are quite unique and are special compared to typical mortgages, but what makes them so special? First off, you don’t need to have private mortgage insurance to apply for a physician mortgage loan.
You don’t need to pay a down payment, sometimes only a very little fee is required. Big loans or jumbo loans don’t have a rate increase, which is great for physicians at the beginning of their careers.
Lenders who offer physician mortgage loans usually approve these mortgages without checking for the student loan debt, also perfect for this customer category.
Finally, lenders only base their approval on physicians’ signed employment contracts which makes the application process very easy.
Who Lends Physician Mortgage Loans, and Who Are Qualified Borrowers?
Qualified borrowers are attending physicians or medical residents who have a signed contract of employment.
This is not only inclusive to physicians though, but physician mortgage loans are also offered to veterinarians, dentists, and other doctors.
In terms of lenders who offer these types of loans, there are many big names. Some banks didn’t offer these mortgages until there was a demand; maybe you’ve heard of the merger of BBVA and PNC which allowed their customers to benefit from new physician mortgage loan options.
Other lenders who offer physician mortgage loans include BB&T, Fifth Third, Regions Bank, Trust, Central Bank, Bank of America, Bank of Nashville, Citizens Bank, Huntington Bank, US Bank, BancorpSouth, and Republic Bank.
Like any mortgage loan, physician mortgages come with expenses too, it’s a matter of weighing your options and choosing based on the lowest expenses.
It’s easy for many applicants to overlook some essential costs that make up their mortgages, they rather focus on the amount they pay every month when they buy out a new house.
You can be overpaying for your mortgage loan without noticing. First, there is the interest rate which depends on the loan balance and repayment term.
Then there are other additional costs such as PMI which is the monthly fee which you pay until you achieve 20% equity and the closing costs.
The closing costs are a one-time expense that is paid out of your pocket to wrap into the loan at a higher interest rate.
You should choose your mortgage options based on how long you see yourself staying in the home you plan to buy.
If you don’t plan on living in the house for more than 5 years, you should consider renting, instead of paying for a mortgage. Otherwise, the shortest mortgage period is usually 7 years.
If you plan to live there for longer, you can consider 7+ years of physician mortgage loans.
You can get a 30-year mortgage with a fixed rate, or you can get a 16-year mortgage if you have enough cash flow to cover the expenses.
It can be very appealing to apply for a physician mortgage loan; it may feel like a reward after a long time you spent studying and training for this title.
However, sometimes, your other mortgage options may be lower in costs as compared to physician mortgage loans that turn out to be very expensive when you consider the total mortgage expenses.
It’s important to consider all available options before taking out a loan, even regular loan options in order to make the best decision based on how long you’re willing to commit to your loan and how much is the mortgage expenses.