A physician mortgage, commonly called a “doctor mortgage,” is a mortgage that is offered to medical professionals. These loans are designed to help new medical professionals who would otherwise not qualify for a traditional mortgage get approved for a mortgage loan. 

New physicians generally don’t qualify for traditional mortgages for the following reasons:

• No savings 
• No employment records or proof of employment 
• No credit or minimal credit history 
• High debt-to-income ratios (due to medical school loans)

That said, banks understand that, although new physicians may not meet traditional mortgage requirements, they have a high-income potential and are at much lower credit risk than the numbers indicate.

Physician loans work like traditional mortgages, except they are more accommodating to new physicians entering the medical field. Specifically, they allow for:

• More flexible down payment options, including 100% financing
• Less than 20% down payment and no PMI requirements
• Signed employment contracts are accepted if W-2s are not available
• Flexible DTI requirements – above 50% is accepted 
• Flexible loan limits 

Physician mortgage loans don’t offer better mortgage rates. Because these loans have less strict requirements than traditional mortgages, they typically come with higher interest rates. Specifically, you can expect to pay anywhere from 0.125% to 0.25% higher interest rates with a physician mortgage loan than a conventional mortgage, although this can vary depending on the lender.

Note that physician mortgages generally only come with a variable interest option, which means your payment will change as interest rates change. Fixed-interest rate mortgage loans are available with physician mortgage loans, however, they are not common.

In most cases, you can refinance and or pay a physician mortgage off early without any penalty. 

Make sure to read the contract for your mortgage to identify if you can refinance your loan,

Refinancing your physician mortgage can be very beneficial for the borrower. This is because, as time passes, a doctor’s income level is expected to increase, decreasing the debt-to-income ratio and improving credit. These conditions can help you get better terms or interest rates on your mortgages. 

Further, if interest rates have fallen, you can refinance your loan to get better interest rates. If interest rates have increased, you can refinance to get better terms, such as switching from a variable rate to a fixed-rate mortgage. 

One important thing to consider is that most physician mortgage loans must be refinanced using a traditional mortgage. You can’t refinance a physician mortgage loan with another physician mortgage because they are generally only offered for new purchases. 

The required credit scores to qualify for a physician mortgage lenders vary from lender to lender. However, ideally, lenders would want to see a credit score of between 700 and 720. In general, you would need a credit score of at least 680 to qualify. 

Keep in mind, similar to traditional mortgages, your credit score will have an impact on your interest rate. The higher your credit score, the lower your interest rate will be. 

Yes, you can apply for physician mortgage loans with student loan debt. Physician mortgages are designed to take this into account. In particular, student loans under an Income-Driven Repayment (IDR) plan, such as SAVE, PAYE, IBR, and ICR, are given special treatment. 

Lenders assume physicians will have high student loan debt at the beginning of their careers. As a result, physician mortgages offer less strict debt-to-income ratios than traditional mortgages. 

Yes, you can still apply for a physician mortgage if you are self-employed and meet the lender’s other requirements. 

Most lenders will accept a signed employment contract for employed individuals without a work history instead of proof of income. Unfortunately, if you are self-employed, lenders will require proof of employment and payment history over a specific period of time. 

Physician mortgage loans are more lenient regarding debt-to-income (DTI) ratios than traditional mortgages. 

The ideal DTI for a traditional mortgage is less than 35% or less. However, with a physician mortgage loan, you will likely get away with a DTI higher than 50%.

Further, physician mortgage lenders do not provide an exact DTI since they look at student loans differently, particularly those with an income-driven repayment plan. Only the current monthly payments you are making on student loans are considered in your DTI rather than the total loan balance. They also take into account student loans in deferment. Payments that have yet to start are not counted towards your DTI. Due to these adjusted calculations,  you can still qualify for a physician mortgage loan even if you have a high DTI due to student loans.

No, if you are working full-time, you can qualify for Physician mortgage loans with an employment contract. This will make you eligible for a physician mortgage if you don’t have the necessary W-2 support for a traditional mortgage. 

With that said, if you are a contract worker or self-employed, you must provide W-2 or pay stubs as proof of income. 

1. Low Downpayment Requirments

Physician mortgage loans have significantly lower down payment options than traditional mortgages. In some instances, requirements can be anywhere from 5% to 10%, and in many cases, a 0% downpayment mortgage is offered. 

2. No PMI 

Physician mortgage loans don’t require private mortgage insurance (PMI). This type of mortgage insurance is generally required when you take out a traditional mortgage loan if you make a down payment below 20%.

Because physician mortgage loans don’t require PMI, you can skip these additional monthly payments that won’t go toward their mortgage principal or interest. 

3. Higher DTI Accepted / Student Loans Treated Differently 

Physician mortgage loans treat student loans differently than traditional loans. In particular, student loans on income-driven payment plans are given special treatment.  Rather than factoring your entire loan balance into your DTI, only your current student loan payments are considered. As a result, even if you have a large student loan balance, you can still qualify for a physician mortgage. 

4. Higher Loan Limits

Physician mortgage loans also generally offer higher loan limits than traditional mortgage loans. 

Lenders understand that as time goes on, a physician’s income will increase significantly.  Therefore, they tend to allow higher loan limits despite low down payments. For example, many banks offer between $500,000 and $1,000,000 loan limits, even with a $0 down payment. 

Remember that loan limits will depend on your specific financial situation and the lender. 

1. Variable Interest Rates 

Physician mortgages generally come with variable interest rates. While you may be able to get fixed interest rates, they aren’t as common as variable interest rates. 

Variable interest rates mean that your interest rates can increase, which increases risk.

2. Potentially Higher Interest Rates and Fees 

While physician mortgages have fewer restrictions than traditional mortgages, they commonly have higher interest rates and fees than conventional mortgages. The specific fees and interest rates you receive will depend only on our lender and specific financial situation. 

3. Restrictions on types of purchases

Most physician mortgages have restrictions on the types of homes you can purchase. 

With a physician mortgage, the property you are purchasing must be your primary residence. This means that you must live in the home for the majority of the year. Further, you can’t buy secondary homes or investment properties with a physician mortgage. 

*While most lenders restrict purchases, some specific lenders allow physician mortgages on investment properties or second homes.