Physician home loans

I have had a total of 3 physician home loans from Suntrust Bank. Conventional wisdom would say to wait until you can put 20% down and then buy your house. Unfortunately, many physicians are not conventional, at least not when it comes to finances. Combine a desire to buy a home in residency (not a good idea) or right out of training (also likely best to wait a year or two), banks are all too ready to give out money. For physicians, this comes in the form of a physician home loan.

Caveat: I still think you will get a better rate if you can put 20% down and obtain a conventional loan. If, however, you cannot or would rather do something else with your money, then take a look at these physician loan options.

 

What is a physician home loan?

  1. A physician home loan is a loan provided to Doctors (whether it be of medicine, osteopathy, podiatry, optometry, dentists, etc.). Pretty much any high earning professional.
  2. There is typically little down payment (most are 0-0%) versus a conventional 20% mortgage. For instance at SunTrust bank (no affiliate relationship) you can get 100% financing up to $750,000, 95% financing up to $1 million dollars, and 90% financing up to $1.5 million. Also with Sun Trust if you put 10% down, it is the same rate as a conventional loan at 20% down. If you put 5% down, the rate is 0.125 higher and at 0% down it is .25 higher. Thus, if it is a jumbo loan then 0% down is at a similar rate as a conventional with 20% down.
  3. Typically there is no private mortgage insurance (PMI) which many banks require if there is little money down.
  4. There is no need to prove prior income, but typically a letter of employment with your upcoming salary is required. For conventional loans you have to prove your income for the last few years. This can be a problem for new attendings who were making $50K a year and now are making $200 to 400K.
  5. There are options such as a 15 or 30 year fixed mortgage, adjustable arms (here is why I went with a 7 year arm), etc. Basically any of the options  you have with a 20% down conventional mortgage you will have with the physician loan.

These loans are good if you want to buy a home out of residency (some money mistakes I have made), put little down, and get started with your life. They are also good for trainees who want to buy a place (again I would caution against it).

Not my house

What banks provide physician’s loans?

You will be limited by your region. Some banks only work in certain areas, and therefore will not provide you a loan if you live in another state. Therefore, I recommend you call around to multiple banks in your state and see if they provide a physician’s loan.

I have gone with SunTrust for all 3 of my mortgages. Each time I look for better rates and never receive them. Actually, a competitor’s mortgage broker once told me that if I can use SunTrust then I should go with them because they offer the lowest rates. Still I would recommend using them. Suntrust offers loans for people in the following states: AL, AR, DE, FL, GA, MD, MS, NC, SC, TN, VA, WV, DC and select counties in PA. So mainly the south. If you do have a bank account with them, then you can use them for out-of-state mortgages. For instance, I used them both in Louisiana and California because I had a prior mortgage and continued bank account with them from Tennessee. All in all I am happy with Sun Trust.

There are many other banks that also provide them. For instance, Bank of the West, Fifth-Third Bank, Bank of America, BBVA, Capital One and  the list goes on and on. White Coat Investor has a nice post with some (only advertisers) but not all banks available by region here.

 

Downsides to physician loans

The biggest downside is that you are likely buying a bigger house then you need. If you are relying on a physician loan then you have not saved your requisite 20% and are going to have a big mortgage payment at the end of the day. Another downside is that your rate will likely be slightly higher than a conventional loan. Finally, you will be limited to banks that provide physician loans.

 

So should you use one?

A physician loan is a good idea if you want to buy a home. I have owned 3 homes and used a physician loan each time. In an ideal world, I would have waited to have 20% down payment and I recommend you do the same. However, if you want that house and are a doctor of some sort, then it may be worth the effort.

 

 

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DadsDollarsDebts

I am a Dad and Doctor trying to find financial freedom by owning my dollars and debts. Helping dads with their finances so they can focus on the family.

6 thoughts on “Physician home loans

  • July 23, 2017 at 10:23 pm
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    Nice tips. It’s really a nice and helpful piece of info. I would definitely try to follow these tips. Keep posting and keep sharing like this.

    Reply
  • July 16, 2017 at 1:39 pm
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    Thanks for the tip about being eligible for a Suntrust Mortgage with an account if I live out of state. Our local banks never had competitive rates and I usually end up looking around for the best rate. Suntrust was usually in the mix depending on the product.

    I’ll keep them in mind the next time I need to refinance or if we decide to downsize.

    Reply
    • July 16, 2017 at 3:11 pm
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      Cool. Glad it may help you. If you have had an account for a few years they can work with you out of state.

      Reply
  • June 4, 2017 at 6:05 am
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    SunTrust Mortgage is 100% financing up to $750k for the physicians loan (I know because I just got one of them).

    Reply

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