The Doctor Loan has a long history in the United States. First offered to attract new physicians to growing towns in the Wild West, they have evolved to what we have today. 18,000 new doctors graduate from medical school every year. These borrowers can have very specific credit and income profiles that represent a different kind of risk, not reflected in a normal borrower profile.
Other than a “Doctor Loan”, what other options are there for Physicians?
20% Down Conventional Mortgage– Often this is the best choice for borrowers. Conventional loans generally offer the most term options and lowest fees, with the lowest rates. It does require proof of earnings and a substantial sum of money to put down.
FHA Loan– This loan can have higher fees and rates than a conventional mortgage. FHA mortgages can have a smaller required down payment, and a monthly mortgage insurance premium. This loan requires the lender to use the credit report amount of the student loan payment, or if none listed, 1% of the outstanding balance unless the borrower can provide documentation that the loan is in deferral. The interest rate could be slightly lower than a Doctor Loan, but could wind up costing more because of PMI costs.
VA Loan– This loan requires that you qualify for VA benefits. There is no down payment or mortgage insurance requirement. Rates are similar to FHA rates, but the funding fee is slightly higher.