Doctor Loan Programs

We sat down with James Sole, Mortgage Loan Officer, at First Horizon Bank to learn more about their unique loan options for physicians.

A physician or “doctor” mortgage is a special loan program that a lender puts in place to attract highly educated, highly compensated income earners by allowing doctors to secure a mortgage with fewer restrictions than a traditional conventional mortgage. 

Physician loans often resolve common obstacles that many in the profession face such as no savings for down payment (common for doctors entering residency, fellowship, or their first contract for employment). 

One of the main benefits of this type of loan is that a doctor can put down less than 20% toward the mortgage and avoid paying Private Mortgage Insurance (PMI). PMI is insurance that you pay for to protect the lender against you defaulting and generally kicks in when the down payment on the loan is less than 20%. With this special loan program, this expense is waived, which could be a significant cost. 

Physician mortgages also generally only look at the total required student loan payment, not the total amount owed, and will generally accept a signed employment contract as proof of income, rather than requiring tax returns and pay stubs.

First Horizon’s physician loan product differs from other banks in the following ways, says James Sole:

• 100% financing up to $1.5 million, 95% financing up to $2 million, and 90% financing up to $2.5 million loan amounts, all with no PMI. 
• Most other lenders restrict 100% financing to around $750,000 or less.
• The physician loan program can be used for clients in residency, fellowship or practicing physicians with the following designations: MD, DO, OMS, and DPM.
• No time restrictions out of residency. You can have practiced as a doctor for 10 or more years and still utilize this program. Many other lenders restrict the program to only help new doctors.
• No reserve requirements for loans under $2 million. First Horizon understands new physicians have focused on education and paying down student loans and may not have reserves that many lenders require.
• Minimum credit score of 670. We have found many lenders require a credit score of 700 or even higher.
• Can close up to 6 months prior to employment start date with reserves. This is helpful to many, particularly families relocating and working around school dates.
  

Mr. Sole summarized this loan program as having two primary benefits:

1. Up to 100% financing, giving physicians and doctors the ability to become homeowners earlier by not having to wait to save for a down payment. 
2. Avoiding monthly PMI. This can help in two different ways depending what you are looking to accomplish. If you are looking to keep your payment as low as possible, not having PMI reduces the overall mortgage payment, saving a lot of money over time. Also, if you know your income is only going up and you want to buy more house, not having monthly PMI will allow you to qualify for more. This is because you will not have that monthly PMI factored in when running debt to income ratios allowing you to qualify for larger loan amounts thus a higher price point.

We’d love to work with you to find your new home. If you’d like to learn more about this doctor loan program, we’d be happy to make an introduction to James Sole at First Horizon Bank.