Mortgages for Physicians

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Heavy student loan debt is often cited as a barrier to homeownership for 25- to 34-year-olds. But many mortgage lenders are eager to extend credit to one category of debt-burdened graduates: those coming out of medical school.

Special mortgage products for physicians are designed to meet the needs of doctors just starting out. New doctors typically have heavy student loan debt and very little money saved, given the modest salaries typically paid to residents. They almost always have a negative net worth when they begin attending.

Eighty-four percent of graduates from medical school this year reported having student loan debt, and the median amount was $180,000, according to the Association of American Medical Colleges.

But at the same time, after long periods of “delayed gratification,” these young doctors are also eager to buy their first home.

Physician home loans make it easier for them to qualify. The down payment is typically 10 percent or less, with no private mortgage insurance required.

Lenders make adjustments to their debt calculations to account for the doctor’s future earning potential. Most physician mortgage lenders would not count the student loan debt if they’re in a residency. They know their income’s going to jump dramatically when they get out.

Once doctors are out of residency, that debt is a factor. But if they enrolled in a federal pay-as-you-earn or income-based repayment program for student loans, which caps monthly payments at 10 to 15 percent of discretionary income, then that lower monthly payment is figured in. Physician loans generally require only an employment contract as proof of income rather than pay stubs, which is helpful for doctors who are relocating for their first job and want to be all moved in before they start.

Physician loans are usually offered with the option of a 30-year fixed rate, or a five- or seven-year adjustable rate.

Citing Sources: [HSH.com, NYTimes.com, and whitecoatinvestor.com]: [June, 15 2016]