Physician Home Loan

There is a very distinct difference between physician home loans and conventional loans. They are more commonly known in the lending world as a portfolio loan. A portfolio loan is a mortgage that is borrowed from the lending institutions balance sheet or deposits and held with that bank until the home is refinanced to another lender or the home is sold. Because the bank is lending its own money, it is taking a calculated risk by not taking out a mortgage insurance policy or by paying for it outside of the loan. A conventional loan is secured by an investor and a servicer, where the mortgage can be pooled together with other similar mortgages and sold. Because of this process a conventional loan does require PMI or private mortgage insurance to cover losses potentially incurred by the investor should a borrower fail to repay the mortgage.

Physician Home Loans are designed to increase the affordability of homeownership for individuals that go into the medical doctor field. As a physician or medical doctor, you have a set income type that has a likelihood of increasing over time. This allows for the lender to limit the down payment requirements, and not likely require mortgage insurance for the loan down payment loan. A conventional mortgage requires mortgage insurance for any amount borrowed over 80% of the homes value. This is because a conventional mortgage is likely to be pooled together with other conventional loans and sold to an investor and or servicer for the mortgage. The private mortgage insurance is required by most investor and or servicers to purchase the loan from the originating lender. It will ultimately protect the investor from any potential loan losses arising from a borrower not repaying the mortgage as agreed.

Mortgage rates are tied closely to the 10yr Treasury, widely the topic of financial news channels. Physician Home Loans tend to have better interest rates than conventional mortgage rates. This is because physician home loans are borrowed against a bank’s balance sheet. This means that the bank can set their own rates, terms, and margins. This allows them to offer a lower mortgage rate than the conventional mortgage market. Conventional mortgage rates are loosely tied to the 10yr treasury and a likely to be sold and serviced by different companies. This requires more margin or profit per loan to generate the value for these companies to purchase and service the mortgage.

This is a controversial question because both types of mortgages offer different pros and cons to each other. They are very transaction and borrower specific for better or worse. If you are a new physician going into a specialty field or investing in a practice, then a physician loan is likely going to be a better option for you. It will allow you to buy a more expensive house closer to your hospital or place of employment. If you are a resident physician who will be moving for residency, fellowship, and then final practice, a conventional loan might be better for you. A conventional loan will offer more flexibility if you wanted to retain that home as an investment property and purchase a new home.

We recommend speaking with a loan officer about the difference between a conventional mortgage and a physician home loan. They will be able to help you determine which is the best option for you based on your plan.

One of the benefits of a physician home loan is the ability to close prior to starting your new job. Some physician loan programs will let you close as early as 120 days prior to starting your new full-time employment. The lender may require additional assets for reserves after closing to ensure you can make the mortgage payment. And with a physician loan, you can use that future income to qualify to buy the home. This also adds to the benefit of you the physician, allowing you to buy a dream home and get situated before starting your busy work schedules.

YES! The physician home loan is not just for those going into practice. It is also for these just entering residency or fellowship. With the ability to borrow 100% o the homes value and reduce or exclude student loan debt form qualifying for the purchase, the physician loan is a great option for those just starting their career.

Speak with a loan officer at NorthPort Funding to learn more about buying a home when just starting in the medical profession.

Because a physician home loan is a portfolio mortgage product. It is at the discretion of the lender to accept newly self-employed income for a physician. Depending on the practice type or employment contract type, it is possible to buy a home on a new 1099 income as a physician.

Book a time with a NorthPort Funding Loan Officer and find out your options as a newly self-employed physician.