Fifth Third Bank explains how physician mortgages can help doctors and other medical professionals purchase a new home.
New and established physicians face unique circumstances when buying a home. Those who’ve just come out of medical school often haven’t been able to earn or save all that much as they completed their education. And both established physicians and new graduates may have a significant amount of student loan debt.
Fortunately, Fifth Third offers a mortgage product designed specifically for doctors. The mortgage offers a high loan-to-value ratio, which enables physicians to purchase homes with little or nothing down. The loans also treat student loan debt differently than other mortgages and don’t require the borrowers to carry mortgage insurance.
For physicians, this mortgage option can help them buy a house as they settle into a new job, while structuring payments to their future income. “The loans are especially helpful as residents look to settle down in new towns as they begin their first jobs,” says Stan Schultz, Fifth Third's Director of Mortgage Development. Here are some commonly asked questions about the Fifth Third Physician Mortgage Loan.
Who Is Eligible for a Physician Mortgage Loan?
The mortgages are available to individuals who have an MD, DO, DPM, DDS, or DMD. “The product is for both new graduates of medical school and established physicians,” Schultz says. The loans aren’t specifically for first-time home buyers, though many new medical school graduates are purchasing their first house. Physicians can use the loans to buy a home or refinance a home they already own.
The New Physician Mortgage Loan is ideal for licensed interns, residents, or fellows who are in a medical residency or scheduled to begin one within 90 days of closing on a new home. Physicians who have just completed their residency within the last 12 months and have started working in their field are also eligible. While the New Physician Mortgage Loan is not available to dentists, the Established Physician Mortgage Loan is designed for physicians or dentists who have been employed by a hospital for more than a year or who have been self-employed as a doctor or dentist for two years.
Benefits of a Physician Mortgage
“The key feature is the high loan-to-value ratio,” Schultz says. New and established physicians can borrow up to 100% of the value of the home they want to purchase, up to $750,000. That means they can obtain a mortgage with very little or no down payment. For homes valued above $750,000, the loans require small down payments—typically much less than a traditional mortgage. New physicians can borrow up to $1 million, while established doctors can borrow up to $1.5 million.
What’s more, borrowers aren’t required to purchase mortgage insurance. Typically, lenders require that borrowers who put down less than 20% purchase insurance, which increases the monthly payment. The mortgages also provide special treatment for medical degree student loan debt for residents and new doctors. If a resident or new doctor has student loans that are in deferment or forbearance, those are excluded from their debt-to-income calculation.
How Can the Loans Help Newly Graduated Physicians?
In addition to the high LTV and special treatment for student loan debt, the New Physician Mortgage Loan allows borrowers to obtain a mortgage with an employment contract. Most mortgages require the borrower to already be working at their job. But for both New Physician and Established Physician Mortgage, the borrower just needs to begin their job within 90 days of the close of their home. Schultz notes that this is especially helpful for new graduates who tend to relocate to new cities before they begin their residency.
The Physician Mortgage program aims to reduce the stress doctors face in home buying due to their unique employment circumstances. Let your clients know about Physician Mortgages, and you can put them on a path to homeownership that much sooner.