What Is a Doctor Mortgage Loan?
A doctor’s loan is a loan specifically intended for doctors -- most of the time, young doctors who are still only a few years into or out of their residency. Banks and other lending institutions began offering these loans when they realized that young doctors were a lucrative, untapped market -- and they weren’t being served by traditional loan products due to the fact that they often have huge amounts of debt and relatively small amounts of income.
Despite that, most doctors have a lot of future earning potential -- and very little chance of defaulting when compared to the average borrower. Therefore, it makes sense for banks to offer them incredibly lenient terms; that’s why these loans usually require very small down payments, often between 0-10%. They also don’t require PMI, and will accept a legal contract regarding future earnings instead of earnings documentation that the borrower does not yet have.
Doctor mortgages help medical professionals save
While many of these loans are limited to younger doctors, other types of doctor loans may be geared toward optometrists, podiatrists, dentists, or veterinarians. Some loans may even be available to doctors later in their careers, or other high-earning professionals, like attorneys. Unlike most other kinds of loans, doctor loans usually have the same interest rates whether they’re above or below the jumbo loan limit.
Despite having very low down payment requirements, these loans still do require that borrowers have cash reserves available to pay at least a few months of their mortgage payments (and associated costs), as well as good loan payment to income ratio, often between 38% and 40%.