A doctor loan program is a fantastic option that most of the time can provide up to 100% financing (with no mortgage insurance) for a primary residence purchase or a rate/term refinance. The 100% financing is available for loan amounts up to $1.25 Million, 95% up to $1.5 Million, and 90% Financing up to 2 Million. Fixed and adjustable rates are available. Please note that some scenarios could require additional funds down, and cash-out refinances have lower loan-to-value limits.
When would I need additional funds down?
In most cases, you can borrow up to the limits above. You may need to put additional down payment if you have less than a 700-point credit score or if the appraisal on the home returns with a value below the purchase price. With the lender’s consent, a common source of help when needed can be found in “gift funds” which allows for monetary assistance from an immediate family member.
What else do I need?
The two most important requirements: credit and assets. Most lenders usually require a credit score of 700 and look for decent credit history. Additionally, you will need enough cash on hand to cover both the closing costs and any reserves. Reserves are typically calculated based on the monthly cost of the property. If your payment with taxes and insurance is $1,000, you will need up to $6,000 in reserves if you have been practicing for at least 6 months. Residents and Fellows are typically NOT required to have any reserves, but this is up to the lender. Gift funds from immediate family may be considered in most cases to meet your asset and reserve requirement.
When should I start the process?
There is no time like the present! It is best to get pre-qualified first once you decide to purchase a home. You may close on the purchase of your home up to 90 days before starting your new position. For example, if you begin July 1st, you can close on the sale of your home as early as April 2nd.
What loan terms are available with the Doctor Loan Program?
Some lenders provide options of fixed rates and adjustable rates. The 7/1, 10/1, 15/1 ARM, and the 30-year fixed are the most popular among them. The 30-year fixed is an excellent choice for buyers planning to reside in the home for the long term, as the rate remains guaranteed throughout the loan’s duration. However, if you anticipate moving within the next few years, the 7/1 ARM functions similarly to a 30-year loan in terms of principal payments, but with a lower initial rate that remains fixed only for the first 7 years. From years 8-30 (if you continue to occupy the property), on the anniversary of your loan closing, the rate will adjust based on market rates and may increase or decrease. It cannot exceed 5% higher than the initial rate. Selling the property before the 7-year mark eliminates the need to be concerned about rate adjustments. Other ARM terms, as well as a 15-year fixed, might also be available.
Self-Employment and 1099 Employment
Legislation in the mortgage industry dictates specific guidelines for income verification. Please be sure to discuss your employment type with your loan officer to confirm eligibility. Industry requirements typically mandate a two-year history of non-guaranteed income. However, the lender may consider new or recent non-guaranteed or non-salary employment on a case-by-case basis. Please ask for details.
Documentation Needed for the Doctor Loan Program
Similar to any mortgage loan, the lender will require you to provide proof of your income, assets, and creditworthiness. Have the following items handy when you apply: A copy of your med school diploma and your medical license or other professional equivalent licenses, executed employment contract, most recent paystubs (if you are in the position already), and 2 months’ bank statements (all pages you can pull online).
Eligibility for the Doctor Loan Program
100% financing is available as long as you have been practicing for less than 10 years. (This would be after you have completed a residency or fellowship.) After 10 years of practicing, the maximum financing typically available would be up to 89.99% LTV. However, 100% financing can be applicable in certain circumstances to those who have been practicing for more than 10 years. If this applies to you, please ask me for the qualifications.
Below is a list of what types of certifications are eligible for the doctor loan program:
- Medical Doctors M.D.
- Osteopathic Medicine D.O.
- Dentistry D.D.S. / D.M.D.
- Podiatric Medicine D.P.M
- Veterinary Medicine D.V.M.