What Is A Physician Loan, And How Can It Help You?

Lenders face unique circumstances when it comes to doctor loans. New doctors don't have any work experience and often have significant student loan debt. These doctors will not be approved for conforming to traditional products. Many banks have created special portfolio products to service and originate these types of loans. There is also a reward for taking on these borrowers.

Why Do Banks Offer Physician Loans?

• Cross-Selling:

  Doctors will most likely become future "high-earning borrowers" who will soon require a place to bank and invest.

• Low default Rates: 

  These loans have default rates that are significantly lower than normal.

• Referrals:

  A group of professionals that would typically recommend their bank to their peers.

Unique Criteria For Physician Loans

Because these loans are lender portfolio products, they do not have the same qualifying criteria or characteristics. As a result, you will find many of these unique options:

1. Only for their intended audience (doctors and dentists, veterinarians).

2. Requires very little downpayment (0-5%)

3. Private Mortgage Insurance (PMI) is not required, even though there may be a lower down payment.

4. Many times, student loan payments are not included in the debt-to-income ratio.

5. Accept a contract to prove future earnings in lieu of W-2s or pay stubs.

6. The interest rate will be slightly higher than the conventional rates, but it would normally not be a difference even if the loan amount exceeds $417,000 in size.

These loans are sought after by banks due to the borrower's high earning potential and the possibility of cross-selling other bank products. In addition, these loans are rare in default and encourage goodwill within a profession banks consider to be extremely profitable.