By Dr. James M. Dahle, WCI Founder
Physician mortgage loans have been around since before I started writing this blog in 2011. All of the doctor mortgage lenders on our recommended list will lend to physicians and most will lend to dentists. Other professionals such as CRNAs, attorneys, veterinarians, pharmacists, podiatrists, optometrists, and even accountants often qualify as well.
What Is a Physician Mortgage Loan?
While some definitions differ, my definition of a doctor mortgage loan is one that:
- Does not charge PMI despite having a down payment of less than 20%
- Will close with a signed employment contract rather than pay stubs
- Only considers the payments of student loans (not the entire loan burden)
- Is not an FHA or VA loan
Often these loans are “portfolio loans” (i.e., are kept in house at the bank that issued them). These lenders will also have experience working with self-employed (1099/independent contractor) doctors—which adds a level of complexity to getting a mortgage.
As a general rule, the rates and fees on these loans can be slightly higher than what you can get with a 20% down conventional mortgage. That's the price you pay for the convenience of not having to meet conventional mortgage rules and for being able to use your down payment money to pay off student loans, max out retirement accounts, or something else.
The terms are highly variable and include 30-year fixed, 15-year fixed, 5/1 ARMs, 7/1 ARMs, and 10/1 ARMs. As a general rule, I'm a big fan of a 15-year fixed mortgage, but there are certainly other circumstances that merit using other types of mortgages. For example, if you know you will sell in 7 years, a 7/1 ARM is a fixed mortgage for you. Others prefer a 30-year amortization so paying it off in 10 or 15 is optional, not mandatory.
Physician Mortgage Lenders
Available lenders in your state can be easily found in the map below:
In today's post, I wanted to discuss the real-life experiences of doctors who have shopped for a doctor mortgage in the last year or so. So I sent out an email to thousands of my readers and received a couple of hundred responses. Don't worry, not all will be included in this post, but it will be enough to provide a good sample of what I received.
Bear in mind that a lot of the variation in interest rates you will see below is explained by the fact that we are looking at people who took out mortgages between 2017-2019. These are not the same rates available to you today.
This can be an input to help you understand if a physician mortgage would be a good idea for you.
Doctor Mortgage Experiences from WCI Readers
Read Up and Shop Around
Lance went to Fulton Bank for his physician mortgage loan because he didn't have a down payment and a friend had a good experience there. He put 0% down and ended up with a rate of 3.75%. He advises “read up and shop around.”
10% Down Payment
Richard checked out US Bank and Fairway Mortgage and ended up with US Bank because “They were very helpful throughout and offered the best interest rate by quite a bit.” He put 10% down for a rate of 4.375%. That was a lot better than he could get with any other mortgage given the lack of a 20% down payment.
Closing Four Months Before Contract Start Date
Luke took a look at Arvest and US Bank and chose Arvest “because they allow closing up to 4 months before contract start date and they offer 100% financing up to a certain house price. I have been very happy with my choice to go with Arvest. Previously used Suntrust for my current home 5 years ago, and there was a bit more ‘red tape' in getting things finalized compared to Arvest.” 0% down, 4.25%. He went with a physician loan because he is “just finishing residency and do not have enough liquid cash for a conventional down payment.”
Low Down Payment on an Expensive Home
Alexander bought in 2017, using a physician mortgage in order to only put 10% down on a $930K home a year out of fellowship in a high COLA. Rate was 3.99% with Suntrust, the lowest rate he found.
“Pushed Off to Someone Else”
Michael got a doctor's loan because he wanted to use his saved money for home improvements. He went with BMO Harris but was disappointed because the rate (4.75% with 5% down) ended up being 0.75% higher than the original quote and the agent “pushed me off to someone else in a different state who was not good at communicating or coordinating with the title company so we did not meet our deadline.” He wishes he would have used a 10-year ARM instead of the 15-year fixed he got.
Used a Local Credit Union
Andy checked out many options in Michigan but ended up with a local credit union because he got better rates, 0% down, and a 3% checking account up to $30,000. He ended up with a 4.24% 10/1 ARM because he plans to pay it off in less than 10 years.
Make the Lenders Compete for Your Business
Lindsey looked at Citizens One and SunTrust and ended up putting 11% down with Citizens One to get a 3.375% 15-year mortgage. She advises “Make the lenders compete for your business. My husband and I have credit scores in the 800s so all the banks wanted our business. Be creative and don’t just focus on interest rates. Ask for credits at closing too.”
Days of 0% Down Gone for Jumbos
Rishi put 10% down to get a 4.375% interest rate on a jumbo loan with Citizens Bank. He says “make sure you have enough money saved prior to looking. Sounds obvious but you need more than just an attending contract before you get approved. The days of 0% down are almost gone, definitely unavailable for jumbo loans.”
Two Doctor Loans in Three Years
Benjamin has done this twice, once in 2014 (Key Bank, 10% down, 30-year fixed, 3.675%) and once in 2017 (Fifth Third Bank, 10% down, 30-year fixed, 4.125%).
Locked It in Instead of Saving Up a Down Payment
Adam went with the physician mortgage because he found the rates to be very competitive with conventional mortgages but only had to put 5% down. He says “I could have saved up a bit more for a higher down payment but rates were rising at the time so I wanted to lock it in quickly. Overall, it's been a good experience.” He looked at US Bank and PNC Bank before going with Huntington Bank with a 3.325% 7/1 ARM.
A 5/1 ARM
Anton chose the physician loan because he didn't have a down payment. He chose Simmons Bank over Bank of America, put down 5%, and got a 5/1 ARM at 4.25%. He recommends looking for the best interest rate and locking it in.
Just Rent, a Cautionary Tale
Ashmi closed on her doctor loan (5% down, 3.75%) with Bank of America after checking out Wells Fargo and Union Bank. She says, “I was in the middle of finishing fellowship, moving, preparing for my new job, and also studying for my specialty boards. In retrospect, I don’t think I was in the right mindset to make all these decisions. Waiting 3-6 months until we had the 10% down payment (and interest rates relatively low still) would have been a much better deal. Or waiting 1-2 years to have the full 20% down.
We underestimated the costs of buying, closing, and the amount of repairs/renovations buying a 40-year-old home in Los Angeles (which actually is “newer” for our neighborhood) would cost. Now that I have read WCI, I would definitely recommend waiting. Renting what you need (i.e., we would have been fine in 2 bed/2 bath townhome or apartment) and then deciding the next step based on 1) finances, 2) children/family, 3) choosing the best neighborhood after exploring for a year or two.”
Mortgage Broker Instead of a Bank
Aaron, a self-employed periodontist, ended up working with a mortgage broker because the banks would not even look at him without two years of tax returns. 0% down, 5.25%. He recommends “explore the options of “buying down” the interest rate by paying points. My broker gave me that choice and if you’re financing that large a number ($330K) it’s advisable to pay the thousand or so up front to buy a lower interest rate.”
Rates a Little Higher Than Before
This doc closed in November 2018 with 0% down and a rate of 5.4% on a $225K loan with Sun Trust. He is pleased but hated all the paperwork.
A Serious Mortgage Loan Shopper
Ryan bought early in attendinghood and so didn't have a down payment, but doesn't regret it given other job options he had in the area if the first didn't work out. He emailed 8-10 lenders off this site and 3 local banks and credit unions but only had 3-4 email back. He simply chose the best rate he could get which was a local bank who gave him a 90/10 loan instead of a doctor loan. The 90% loan had a 30-year term 10% loan had a 5-year term, but both were fixed at 4.25%.
He says “Everyone seemed helpful, I'm sure they will be because they are about to make a lot of money off of you. I seemed to get the best responsiveness from the local folks and actually the best rate as well. I highly suggest shopping around—I had rates range from 4.375% to 5.75% that can really change payment structures. Overall this was a bit more stressful and difficult than refinancing my student loans.”
Ask Who Will Service the Loan Post-Closing
Sara used First Citizens Bank and then refinanced from 4.75% to 3.99% with Suntrust 6 months later after her credit score improved and she had an improved loan to value ratio after doing some renovations. Both were 30-year mortgages. Sara found SunTrust to have a lower rate but higher credit standards. She was surprised to find rates to be similar to conventional mortgages.
She and her husband really liked the “portfolio loan” aspect of the physician loans. “For us, it seems like physician mortgages are serviced by the actual bank who loans the money. This has been a much better experience than previous conventional mortgages that were sold to a third-party servicer. For example, I had a house before meeting my husband (he's the physician in our relationship), and it's serviced by Rushmore Lending Group after being sold from the original bank I financed through. Horrible, horrible experience with Rushmore in attempting to obtain information, early pay-off, escrow, etc.
In contrast, both First Citizens and Suntrust kept our loan in their portfolio. It's been super easy to set-up extra principal-only payments, as well as obtain information anytime about the loan. That can be a real win time-wise. And, if needed, I could go into my local branch and talk to the bank about the loan at any time.”
Did as Much by Email as Possible
Jimmy is now coming out of fellowship and recently got preliminary quotes from 13 lenders (Suntrust, Synovus, First Tennessee, BB&T, BBVA, Citizens, Physician Loans, US Bank, FNB, IBeria, Simmons, UMB, and Willow Bend) and went with First Tennessee because they had the best terms (0% down to $1M, 5% down to $1.5M), rates were as good as anyone else's, and the agent was easy to work with. 5% down, 4.25%. He says “I sent a form email to everyone on your website and got some information on basic terms and conditions and then circled back with those who had agreeable basic terms to get final rate quotes before proceeding with the “winner.” I tried to do as much as possible via email so as to have minimal impact on my day-to-day work. If people weren't willing to work via email, they were cut. At the end of the day, I figure that they are competing for my business and that I'm not required to bend to their needs in order for them to get my business.
Used the WCI Recommended Mortgage Lenders
Nabil looked at Regions Bank, BBVA, and Fairway before going with Cadence Bank with 5% down and a 4.375% 30-year fixed mortgage. He says, “All the lenders I reached out to were recommended by WCI for physician loans in Texas. They all provided good service and an overall good experience. I mentioned I found them through WCI. Went with the one that gave me the best rate. No issues with the process and closed on time and everything went smoothly.”
Careful with Construction Loans
Elizabeth looked at Bank of America and then settled on SunTrust for a 4.49% loan with 5% down. She warns, “I found not all banks were willing to do physician mortgages for new construction, so that's something to ask about up front if that's what you're planning. ”
Expect Some Inconvenience
Tyler just closed on a house last month with a physician mortgage to avoid PMI and put less down. He put 10% down and got 4% with US Bank. He notes “Working with someone in another state was a little inconvenient since there were no person to person meetings. There were lots of emails and scanned documents with some things getting lost.”
Rate Was Most Important, But Service Matters Too
Steven's wife is coming out of residency and they wanted a mortgage that didn't count her student loans and would accept her signed contract. They were quoted 5% down, 4.99% by Fairway but are looking at a local bank offering 0% down, 4.25%. They were willing to put more down, but there wasn't much benefit. He said, “Fairway was great to work with. They went back and forth with me on the various options (fixed vs. variable, 30 vs 15, buy down options, etc.), updating the presentation with each of my requests. They answered all my questions. Honestly, Fairway was so helpful I feel kinda bad going with the local bank, especially since Fairway doesn't charge an application fee (so we got all their help for free). But the rate difference is significant, and it gets us established with a local bank, which could be helpful down the line, especially since I'll likely be self-employed (in a non-medical field).”
Aubrene looked at Fifth Third Bank and some local banks and chose Fifth Third because “they were more willing to be flexible with closing dates and paperwork.” She put 5% down and got a 4% rate.
Closing This Month
Jessica is closing this month with Fulton Mortgage after looking at SunTrust. 4.25% on a 15/1 ARM with 6% down on an $850K home. She is looking forward to using her cash to pay off student loans instead of a down payment.
I don't dare make this post any longer, but after looking through more than 100 emails, the story is mostly the same. Mostly great experiences with minor inconveniences and the occasional major hassle. Rates mostly in the 4-5% range—again, be mindful that these experiences were sent to us in 2019 and rates are sure to change. Down payments mostly in the 0%-5% range. People mostly doing it because they don't have down payment money or have a better use for it but still expect to be in the home for many years. The amazing thing is just how many different lenders people are using. There really was no one lender that stood out over the others. You just need to take a look at the ones in your state and shop around to get the best rate, terms, and service for your personal situation.
What do you think? Have you taken out a physician mortgage loan in the last year? Why did you choose it? What rate and terms did you get? What companies did you look at and how was your experience with each? Comment below!