Residents and existing Doctors can benefit from a mortgage offered by some banks called a Doctor or a Physician Mortgage. The Doctor Mortgage offers special underwriting and rates to residents as well as just starting out doctors who may not have significant salary history yet or a long credit history. This can resolve the problem that many young professionals face of having excellent earning prospects but being unable to quality for a mortgage and buy a home.
In general, a doctor/physician mortgage provides the following benefits:
- Is made to a resident or Doctor (7-10 years out of residency), and often dentists, veterinarians, attorneys, and other skilled professionals.
- Requires little down payment (between 0-5%).
- Doesn't require the use of Private Mortgage Insurance (PMI).
- Will accept a job contract as evidence of earnings versus most mortgage programs that require up to two years of pay stubs and tax filings.
- May allow the purchaser to use gifts as a down payment (many mortgages do not allow gifts to be used for the down payment).
- Usually do not calculate student loan debt towards the loan/income ratio.
- Provides the same rate whether the loan is a conforming or jumbo loan.
- Requires a decent credit score and a loan to payment ratio of between 30-40% depending on the bank.
Below is a comparison of a doctor mortgage versus a conventional mortgage for a 30 year fixed rate loan.
Doctor Loan Conventional Loan
Amount: $435,000 $435,000
Down Payment %: 0% 5%
Down payment amt.: $0 $21,750
PMI: $0 $213.51
Interest rate: 4.490% 4.250%
Monthly Payment: $2,201.50 $2,246.46
* Data supplied by Stephanie Arcelay from SunTrust Mortgage as of May 14, 2014.
As you can see, the rate on doctor mortgages are often are slightly higher than a conventional loan or an FHA loan but the low down payment and fees often offsets the higher rate. And once a doctor has built some earning history and equity, they can refinance to a lower conventional rate.