I’m often asked, “What is a doctor mortgage loan? And how does it compare to a conventional loan?” This question holds a lot of relevance as some of us have friends and family who are finishing up graduate school and will potentially become first-time buyers. For that reason, I’d like to spell out some key differences between the two loan types today.
No matter what loan you’re considering, your lender will carefully examine three criteria:
Your credit
Your income
Your collateral (or money available for the down payment or reserves)
Starting with credit, let’s discuss each point of consideration. To qualify for a physician loan, you’ll generally be required to have a credit score of 700 for 95% financing or 720 for !00% financing. However, the standard credit score requirement for conventional and government loan programs tends to be much lower; as a matter of fact, some can go as low as 580.
The second criterion on the list is income. For doctor, physician, and preferred medical professional loan programs, your lender will look at one of two things: the income you’re receiving under your current employment contract or if you’ve yet to graduate but have a conditional offer of employment lined up, the starting income you’ll receive upon hire. That’s rarely the case with government or conventional programs; more often than not, they’ll want to see that you’ve been with the same employer for some length of time.
That brings us to our final factor: collateral. With a physician loan, you can qualify for loan up to $750k with 100% financing. Need to go higher? You can also get up to an $850k loan amount with as little as 5% down. Plus, you won’t be required to purchase private mortgage insurance. As far as cash reserves go, your lender will check that you have at least six to nine months’ worth of payments at hand.
Conventional and government loans are quite a bit different here too. For example, once you pass the $729,000 threshold amount here in San Diego, your loan will be considered a jumbo loan, at which point the investor(s) will require a 20% down payment. On a $850k home loan, putting 5% as opposed to 20% down is a massive difference—$42,500 versus $170,000.
Keep in mind that different investors go with different underwriting styles, so it’s best to meet with a service provider or mortgage professional who has ample experience working with physician loans. If you have any questions or would like more information, please let us know. We look forward to serving you!