On the surface, physician mortgage loans look great. No money down. No jumbo limits. No private mortgage insurance (PMI). Finally, it seems like a product exists to reward you for your time training to be a physician. After all, it’s been tough. For the past few years, you’ve watched many of your friends become homeowners.
While they were posting their latest photo of a fun, DIY home renovation, you were stuck in the library studying pathology. While they hosted a summer barbeque in their own backyard, you were sitting through an 8 hour board exam (and timing your breaks perfectly so you could scarf down a protein bar).
But, let’s be real. Lenders are in the business to make money, and they can’t just give you a free ride. So, how do physician mortgage loans stack up against everything else that’s available? Are they really as good as they sound? Let’s find out.
At this point in the home buying process, you’ve already made a solid decision about how much to spend on your home and you have your financial ducks in a row. So, the next step is to decide how to finance your home and whether a physician mortgage loan is the best option for you.
Before we jump in, if you’d rather listen in on an overview of how physician mortgages work, check out this podcast from Finance For Physicians:
First, let’s talk about why physician mortgage loans even exist. The reason is that physicians are extremely profitable customers for lenders. They take out big loans early in their careers and almost always pay them off. Lenders use physician mortgage loans to lock in early-career doctors by lending them more money with fewer stipulations than their competitors. They make it even more appealing by just for physicians.
Keep in mind, though, that their ultimate goal is to get you in the door and sell you other products as your needs change. A medical student transitioning into residency with zero earnings history, no cash and a boatload of student loans would normally never qualify for a mortgage if it wasn’t for physician mortgage loans. However, there’s no such thing as a free lunch. These loans are appealing at first, but often end up being more expensive than the alternatives. That’s why it’s so important to compare physician mortgage loans to other types of mortgage loans before making your decision.
A qualified borrower is normally a medical resident, fellow or attending physician with a signed contract for employment. Some lenders also include dentists, veterinarians, and other doctors.
Also, please note that we do not have a financial relationship with any of these lenders we just want to help you explore your options. If you’re a lender and would like to be added to our list, please let us know.
So now that I’ve explained why physician mortgages are different and why they appeal to many young docs, it’s time to take a look at mortgage expenses. Many people focus on the monthly payments when considering buying a home, but there are several costs that make up your total mortgage expenses: