Physician Loans: The Guide That Will Save You Money and Time

Settle in—this definitive guide on physician loans covers everything you need to know, from identifying the best banks to negotiating top mortgage rates, to help you secure a home loan that meets your unique needs as a doctor.

1. How They Started:

Physician mortgage loans are a fairly recent but impactful financial product. In the mid-2000s, Bank of America pioneered the physician loan, recognizing that doctors often have high student debt and limited early earnings but an extremely low default rate (around 0.2%) and excellent future earning potential. Banks realized that offering favorable terms to physicians early in their careers could create long-term relationships with these high-income professionals. Today, many banks have developed physician loan products, each with its own twist to suit the unique needs of doctors.

2. What are the Characteristics of Physician Loan?

Physician loans differ from conventional loans in ways that make them more accessible to doctors:

• Low or No Down Payment: Many physician loans offer 100% financing, eliminating the need for a large initial down payment.
• No PMI (Private Mortgage Insurance): Physician loans often exclude PMI, saving buyers hundreds to thousands per year.
• Student Loan Flexibility in DTI Calculations: Many lenders don’t factor student loans into the debt-to-income (DTI) ratio, making it easier for doctors with high education debt to qualify.
• Income-Based on Future Earnings: Physician loans allow borrowers to use employment contracts or residency agreements as proof of income, so you can qualify even before your full earnings come in.
• Higher Loan Limits: Most physician loans allow for larger loan amounts, supporting higher-income professionals aiming to secure a property that meets their needs.

These features make physician loans suitable for residents, fellows, and practicing physicians, whether they’re buying a single-family home or a multi-unit property. Be aware that some lenders may have specific requirements for condos.

3. Physician Loans vs. Conventional Loans

Conventional loans typically come with stricter requirements and may not be as accessible for new physicians:

• Higher Down Payment Requirements: Conventional loans usually require a 3%–5% minimum down payment.
• PMI Requirement: PMI is necessary for buyers putting down less than 20%, adding to monthly expenses.
• Student Loans Impacting DTI Ratios: Conventional loans consider all debts in DTI calculations, which can impact qualification for doctors carrying large student loans.

Physician loans exist because they meet specific needs that conventional loans can’t address, offering significant advantages that can streamline the path to homeownership for doctors.

4. Nationwide Availability of Physician Loans

Physician loans are available in every state, but offerings vary by bank and region. Major banks like Bank of America and Capital One offer physician loans in all 50 states, while regional banks may have more localized availability. Regardless of your location, there’s likely a physician loan option available to fit your needs.

5. Banks Offering Physician Loans

Several banks offer physician loans, from national institutions to online lenders:

• National Banks: Bank of America, Capital One, Fifth Third Bank, Huntington Bank
• Regional Banks: Wintrust Bank, First Horizon Bank, PNC Bank
• Online Lenders: SoFi, TD Bank, The Federal Savings Bank

Connecting with loan officers experienced with physician mortgages can save time, so consider a specialized service like Dr. Home Finance to connect you with experts and streamline the application process.

6. Finding the Right Bank and Mortgage

To secure the best physician loan, follow these steps:

1. Research: Focus on banks known for working with physicians, such as those on this list.
2. Consult with Specialists: Look for loan officers experienced with physician mortgages—they understand the unique needs of medical professionals.
3. Request Loan Estimates: Gather estimates from multiple lenders to compare rates, terms, and fees.
4. Evaluate Beyond the Rate: Consider other factors like customer support, loan flexibility, and overall reputation to choose the best match for your career path and financial goals.

7. Understanding Mortgage Rates

Mortgage rates are influenced by multiple factors:

• Secondary Mortgage Market: Banks bundle loans and sell them as mortgage-backed securities. The prices investors are willing to pay for these securities can affect the rates offered to new borrowers.
• Inflation Rates and Treasury Yields: Mortgage rates often rise with higher inflation and Treasury yields.
• Federal Reserve Rates: While not directly tied to mortgage rates, the Federal Reserve’s rate decisions influence broader financial markets, impacting borrowing costs.

Knowing these factors can help you better understand market trends, making it easier to decide when to lock in your mortgage rate.

8. Should You Buy or Rent?

For many new physicians, buying a home may be ideal for building equity, yet renting offers flexibility. If you’re likely to relocate or are uncertain about your long-term plans, renting may be the wiser choice. However, if you’re confident in your location and can afford a down payment, purchasing a home could lead to substantial savings and wealth building over time.

9. Finding Your Ideal Home

Once you’ve secured your physician mortgage, start your home search using resources like Zillow or Redfin. Many loan officers specializing in physician mortgages also have networks of real estate agents experienced in working with doctors. Accessing this network can make it easier to find a home that meets your unique needs.

10. Our guide to buying a home

This guide is here to simplify your path to homeownership with a physician loan. With the right loan and support, you’ll soon be on your way to owning a home that suits both your professional life and personal aspirations as a physician.