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?
- 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.
- There is typically little down payment (most are 0-10%) versus a conventional 20% mortgage. For instance at SunTrust bank (no affiliate relationship) you can get 100% financing up to $100,000, 95% financing up to $1 million dollars, and 90% financing up to $1.5 million.
- Typically there is no private mortgage insurance (PMI) which many banks require if there is little money down.
- 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.
- 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).
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.
The closing has been a bit of a hassle as it seems the underwriters always waiting until the last minute to give me approval, but this may be true everywhere.
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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