What is a Doctor Loan? - The Broke Professional

What is a Doctor Loan?

Anyone who has ever looked into securing a mortgage knows there are many different types of loans out there.  Most people know about your typical 30 or 15 year home loan with a fixed interest rate and a 20% down payment.  There are variable interest rate loans which potentially start with a low interest rate but can change after a designated amount of time, usually 3, 5 or 10 years.  There are loans that are longer than 30 years or shorter than 15 years.  You can also get loans for less than the ideal 20% down payment, but you’ll have to pay Private Mortgage Insurance.  There are also loans out there for certain professionals, such as members of the military.  There is also one such loan that is not talked about frequently, and that is the Doctor Loan.

The Doctor Loan, also known as a Physician Loan, is a special loan available to MD’s only.  There are also similar loans available to other professionals such as optometrists, lawyers, dentists and pharmacists.  They are a little harder to find but they have similar characteristics to a Physician Loan.  Not many banks offer Physician Loans.  Some banks like Bank of America offered them at one point and then stopped.  The only bank I’ve seen that has consistently offered Physician Loans is SunTrust.  The main advantages of a Physician Loan over a traditional mortgage are:

-Very low down payment requirement.  Some loans even allow no down payment (This can be an obvious disadvantage if you’re not careful).

-Don’t factor student loans into credit worthiness.  This is huge because doctors can easily come out of school with a student loan balance in the six digits.  This can make it troublesome to get approved for a traditional mortgage even though the doctor would easily be able to afford the house.

-No private mortgage insurance.  Ever.  This is probably the biggest benefit.  Most mortgages require PMI payments until you achieve around 20% equity in the property.  This is money that goes straight from your pocket to the lender.  It is not even tax deductible and it can be hundreds of dollars per month.  Not having to pay PMI is a huge advantage.

The principle behind a bank offering physician loans is to obviously make more money and establish a relationship with individuals who make a high, stable income.  Because physicians usually have steady high paying jobs, the risk of them not making their payments is pretty low compared to the rest of the population.  This is why the bank is willing to offer a no down payment loan with no PMI and overlook student loans.  This sounds like a pretty good deal to a fresh out of residency doctor, but they still need to be careful not to buy more house than they can afford.

There are some restrictions on who can qualify for this loan.  Most doctor loans I’ve seen are only for those docs who have graduated in the past 10 years.  This takes most established older docs out of the picture.  Also, these loans just aren’t available in certain states.  There is also obviously more documentation needed than a traditional home loan.

A Doctor Loan is a nice financial tool for those who can qualify.  But just like any tool, it needs to be used for the right reason or you can risk really hurting yourself financially.  It is a good tool for doctors coming out of school who are having trouble qualifying for a mortgage because of high student loan balances.  Not having to pay PMI is a nice perk as well.  It’s good to know that there are special loan programs out there that actually have pretty good terms for those who can qualify.

 

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Comments

  1. Interesting. I like products that are personalized for certain groups who have different characteristics. I’m currently on a 2 year transfer abroad, and no-one will remortgage my property (despite the fact that my savings and income are sufficient and my transfer is a 2 year contract with the UK firm and hence is the same as being employed at home).

    Too many banks, especially high street ones, only offer one product for everyone and adopt a “computer says no” attitude.

    • I agree it’s good to see some banks offering something different than the one size fits all approach. I personally use this loan and it’s great I have an affordable payment and I would’ve had trouble getting a traditional mortgage because of student loan debt. Thanks for the comment!

  2. Which bank were you able to get a doctor loan from? I had no idea about this type of loan. This would be so much better than the traditional mortgage I was thinking of getting soon.

    Thanks!

  3. Hey doc. I had to call around a little bit to find a loan for optometrists but I found one with BB&T. Let me know if you want the agent’s info I can email it to you. Thanks for the comment!

  4. Hello,

    I am a Doctor Loan Specialist with SunTrust Mortgage

    Our Doctor Loan Program is a residential mortgage loan developed specifically for medical residents, interns, fellows, Doctors of Osteopathy (DO), and licensed medical physicians that have completed their residency within the last 10 years.

    Our program offers:

    • 100% up to $650K
    • 95% up to $1M
    • 89.9% up to $1.5M

    Mortgage insurance is not required – Available for both home purchases and mortgage refinances – Competitive pricing – Both fixed rate and adjustable rates offered – No penalty for prepaying your loan – Gift funds or seller contributions may be used for closing costs

    The program is offered in the following States: Alabama, Arkansas, Delaware, Florida, Georgia, Maryland, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, Washington, D.C. & West Virginia.

    With unparalleled commitment to serving physicians’ needs, you can rely on me and my dedicated team of mortgage professionals to work with you every step of the way. I can’t wait to tell you more so call or email today!

    Stephanie Arcelay
    Asst. Vice President
    SunTrust Mortgage, Inc.
    615-484-6690 Direct
    Email: Stephanie.Arcelay@suntrust.com
    Web: https://www.suntrust.com/PeopleFinder/stephanie.arcelay
    NMLSR# 897166

  5. Hello,
    I am looking for a Doctors loan for a Pharmacist (PharmD, Doctor of pharmacy). Any idea where I could find one?
    Thank you

    • Hey there. I’ve been searching online but can’t seem to find one for pharmacists. You might have to call around a lot of times they aren’t advertised online. That’s how I found one for optometrists. Sorry good luck in your search!

  6. Working Doctor Loans I can tell you that the key is to ask questions when you can.

    Whenever it comes to anything like this, really, the secret to getting a good deal is knowing the deal you’re getting. A lot of people are scared to ask questions, or don’t know what questions to ask.

    If that’s the case, just ask the person you’re working with what questions THEY would ask or that you should ask.

    Just make sure you ask any and every question that comes to mind.

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  1. […] wrote about Doctor Loans in a previous post, but since I’m now a few years into having one, I wanted to revisit the subject.  Here are […]

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