Essential guide to physician mortgage loans

Content Type: Article

Special loan programs make homebuying more accessible to physicians and other emerging professionals. See how you might qualify.

After investing years of your life earning an advanced degree and getting started in a lucrative career, you may think getting a mortgage to buy a home would be a cinch. But as many doctors, lawyers and other emerging professionals with little savings and high debt loads learn, qualifying for a conventional mortgage is not always so simple.

Fortunately, many financial institutions recognize the unique situation of such young professionals and offer special loans, sometimes known as “white coat mortgages,” designed specifically for them. These private loans recognize that while such workers may have higher debt and less savings than peers in other professions, they also have relatively high career and income security going forward. Because of this future financial stability, many banks are willing to relax some of their requirements for mortgage lending.

Qualifying for a physician mortgage

The requirements for a physician loan will vary depending on the institution. In general, however, these loans typically do not penalize applicants for having high levels of student loans and have lower requirements around down payments and your debt-to-income ratio. You will need proof of your employment (or a commitment for future employment) and salary.

At Regions Bank, any medical physician, including residents, fellows, doctors of dental medicine and doctors of osteopathy, can apply for a mortgage through Regions’ Doctor Loan Program. Applicants may qualify for loans of up to $1 million and low-down payment options up to $1.5 million.

The Regions Emerging Professionals Program is open to attorneys, certified pharmacists, nurse anesthetists, physician assistants, nurse practitioners, optometrists or podiatrists who have been practicing for seven years or fewer. This program provides loans of up to 97% of a property’s value up to $766,550.

Keep in mind that while lenders will not disqualify you based on the balance of your student loans, you will need to be current on your student loan payments.

The benefits of a physician mortgage

While the best loan for you will depend on your personal financial situation, there are several potential advantages to using a physician mortgage to purchase a home. One is the ability to make a purchase with little or no money down and without having to pay for mortgage insurance. (With a traditional mortgage, those who put down less than 20% on a home purchase typically must pay an additional fee each month for mortgage insurance, since banks consider them riskier borrowers.)

Another advantage to this type of loan is the ability to close on the loan before you begin employment (though you typically must have a job offer already in hand). That can be particularly helpful if you’re transitioning out of student housing or moving to a new area for your job and need a place to live right away. It’s also different than traditional mortgages, which typically require pay stubs and two years of tax returns to prove your income as well.

Preparing for a mortgage application

Whether you’re applying for a traditional mortgage, a physician mortgage or some other type of loan, there are a few steps you can take to make yourself a more attractive borrower to lenders. Start by requesting a copy of your credit report (get it for free at annualcreditreport.com) to make sure it’s accurate and taking steps to improve your credit score. That might include paying down high-interest debt, such as credit card balances, and avoiding taking out new loans immediately before you apply for a mortgage.

You can also use a mortgage calculator and current interest rates to get a sense of how much monthly mortgage payments would cost depending on the price range of the houses you’re considering. It may be helpful to speak with a lender to find out what types of mortgages you might qualify for, so you can decide which one makes the most sense for your financial situation.

While a physician mortgage may not require a large down payment, you may still need to build up some cash reserves prior to making the purchase. In addition to closing fees and moving costs, you’ll also want to have an emergency fund available to cover the unexpected costs—like a leaky roof or a broken water heater—that inevitably come with homeownership.

Managing student loans and a mortgage

Even if your lender isn’t factoring your student loans into their mortgage approval decision, you still need to factor them into your budget, after you’ve closed on the home loan. No matter how high your income, it’s important to have a plan to manage your mortgage and your student loans, as well as to make progress toward other financial goals, such as saving for retirement or putting money aside for a child’s education.

You may want to see whether you qualify for any consolidation or refinancing options for your student loans, which may lower the amount that you pay on such loans each month and streamline your payments. If you have federal student loans, you may have access to additional programs, such as the Pay As You Earn plan, or Public Service Loan Forgiveness (if your employer is a nonprofit or government agency).

While you’re paying down your student loans, you may also want to be careful to avoid so-called lifestyle creep, in which your expenses start to go up along with your income. While getting a new car or new wardrobe to go with your new house and new job can be tempting, consider holding off until you’ve built up your emergency fund and made more progress on paying down those loans.

Physician loans or mortgages for emerging professionals can be a smart way for young early-career workers to become homeowners. Whether you use this type of loan or a traditional mortgage, it’s important to have a plan for how you’ll manage the new payments along with student loans or other existing debt.