A doctor home loan typically requires no down payment or mortgage insurance. Avoiding mortgage insurance can typically save hundreds per month in a mortgage payment. Most of the time a person would have to put at least 20% down to avoid mortgage insurance. In addition, doctor home loans may not include student loans in the debt ratio calculation. This is important because many residents and fellows would not qualify for a mortgage loan or they would have to get a less expensive home if student loans were included in their debt ratio. In order to qualify for a loan, some banks require the physician to open an account at the bank from which the mortgage is paid. Many loan programs offer loans up to $650,000.
Typically, 4th year Medical School Graduates, Residents (MD), Fellows (MD), Attendings (MD), Doctors of Podiatry Medicine (DPM), Doctor of Osteopathy (DO), Doctors of Dental Science (DDS), and Doctors of Dental Medicine (DMD) can qualify. Most doctors are eligible upon Medical School graduation. A recent graduate will need to provide a “Match Day” letter showing your residency program. This letter should include position, start date, and salary. Most banks will allow a doctor to close on a new home up to 90 days prior to starting residency. Some doctor loans can only be used for single family homes and not condos. Some doctor loan companies will even allow a doctor to use a doctor home loan to refinance their home. Typically, banks will not allow these loans to be used for investment properties.
It is very important that a doctor has enough reserve funds to cover mortgage payments for the number of months between closing the mortgage and the residency start date. Most times a doctor will need money in their bank account to cover closing costs. Some programs will allow family members to gift income for a down payment, required reserves, or closing costs. Most banks require a credit score of at least 680, and based upon desired down payment higher scores may be required. If a credit score is too low, then a mortgage officer can do a “Rapid Re-Score”. This may make home ownership available without waiting months for the score to rise.