Answers from Your Michigan Bank About Physician Mortgage Loans
Student loan debt often makes the news because the average debt is close to $30,000 and is a burden for college graduates. Medical students face unique financial challenges because they spend more time (and more money) on their education. About 80 percent of medical students graduate with a whopping $215,900 in debt. When other people in their mid-to-late 20s with a few years of full-time employment can explore homeownership, medical professionals are often just graduating and starting their residency.
With traditional mortgage programs, borrowers who have large amounts of debt and are just beginning their career will have a difficult time qualifying for a loan. Fortunately, most medical professionals enter the workforce with higher-than-average income potential, with average salaries of more than $200,000 annually. With income in mind, some banks in Michigan offer flexible home mortgage programs designed specifically for physicians and medical personnel.
We've gathered answers to frequently asked questions to help medical professionals understand their home mortgage options.
- What is a physician loan or doctor loan program? It’s a mortgage for medical professionals (including doctors, dentists and veterinarians) that typically does not require private mortgage insurance (PMI), often has smaller or no down payment requirements, and provides flexibility with medical school debt. For a traditional mortgage, borrowers putting less than 20 percent down on a home are typically required to pay PMI to help mitigate the lender’s risk of non-payment.
- Who qualifies for a physician mortgage? Programs vary across banks in Metro Detroit, Ann Arbor, and Grand Rapids, but you're often eligible for a physician loan if you have one of the following degrees:
- Doctor of Medicine (MD), including Ophthalmology
- Doctor of Osteopathic Medicine (DO)
- Doctor of Dental Surgery (DDS)
- Doctor of Medicine in Dentistry (DMD)
- Doctor of Pharmacy (PharmD)
- Doctor of Podiatric Medicine (DMP)
- Doctor of Veterinarian Medicine (DVM)
- If I’m completing my residency, can I apply for a physician mortgage? Yes, some Michigan banks will offer mortgages to medical residents if they have an employment contract.
- What do I need to know about the application process for the physician loan program?
- Lenders always review an applicant’s debt-to-income (DTI) ratio to assess the ability to make monthly loan payments. More debt creates a higher percentage and makes the borrower a greater risk for repaying the loan. With some physician mortgage programs, banks exclude medical education debt from the DTI calculation.
- Banks will also assess your credit score, a metric that gauges your ability to manage debt. With higher scores representing stronger debt-management skills, a good credit score to target is at least 700.
- Mortgage bankers also ask for verification of employment or medical residents' proof of an executed employment contract.
- How much money do I need to put down to qualify for a physician loan? Each bank in Michigan will have unique terms, but on average, down-payments range from 0-10 percent of the home value.
- Can I purchase any house with a physician mortgage? Generally, banks will finance purchases of most homes, including condos and second homes.
- Are there limits to the amount I can borrow for a physician loan? Yes, most Michigan banks have caps on the loan amount. We recommend checking with your home mortgage lender to get specific details.
- Can I use a physician loan to refinance my current home mortgage? Yes, many banks in Michigan do include refinancing options in their physician mortgage programs.
Ready to find your new home in one of our Michigan communities? Learn more about Level One Bank’s physician loan program, or contact a mortgage banker for a free, no-obligation consultation. We’re here to help fuel your dreams!
“There is something permanent and extremely profound in owning a home.”
–Kenny Guinn, academic