Physician Loans vs. Conventional Loans: What to Know
6 minute read
·
May 2, 2023

Share

When it comes to financing a medical education, physician loans are becoming an increasingly popular option. 

Physician loans offer special terms and conditions designed specifically for medical professionals who are just starting their careers. 

They can provide added flexibility that conventional loans can’t achieve such as deferment options or reduced down payment requirements. 

However, it’s important for prospective medical professionals to understand the differences between physician loans and conventional loans in order to make the best possible decision.

In this article, we’ll look at the differences between physician loans and conventional loans, what to consider when deciding between them, and how to find the best loan for your needs.

Is a physician loan the same as a conventional loan?

The most important difference between a physician loan and a conventional loan is that physicians are often eligible for special terms. 

These terms can include reduced down payment requirements, deferred payments, and other benefits that may not be available to other borrowers.

Another key difference between a physician loan and a conventional loan is the type of lender. 

Physician loans are usually offered by banks or other lenders who specialize in providing financing for medical professionals. These lenders understand the special needs of medical professionals and may be able to offer better terms than a conventional lender.

Physician loans usually require a smaller down payment than conventional mortgages, which may be as low as 5% or even 0%. 

This can be helpful when you’re just starting out and don’t have much saved up for a down payment. 

Additionally, physician loans may offer more flexible repayment options, such as deferment and forbearance options, that can help you manage your student loan debt while you’re in the midst of starting your career. 

On the other hand, conventional loans may have lower interest rates than physician loans. Furthermore, they may have more restrictive repayment options and may require a larger down payment.

Check your mortgage options

What other differences should I be aware of?

It’s important to remember that both physician loans and conventional loans carry some risks. 

Physician loans may have higher interest rates than conventional loans, which means you could end up paying more in the long run. Physician loans may also require a larger commitment of time and energy to secure. Lenders will want to verify your credentials and income before approving the loan. 

Additionally, physician loans may have more complex terms and conditions than conventional loans, so be sure to read the fine print carefully before signing on the dotted line. 

For example,  some physician loans may require you to live in a certain area, keep your job as a medical professional, or make additional payments if you’re unable to find a job. 

Finally, physician loans are typically short-term loans, with terms ranging from 5-15 years. This makes them a great option if you plan on moving or selling the home within that time frame. 

Be sure to understand all of the terms and conditions before signing any documents.

How do the two loans compare?

The biggest difference between physician loans and conventional mortgages is that physician loans are specifically designed for medical professionals. 

Physician loans are only open for buyers who fit into these general categories: 

  • Medical resident
  • Fellow or attending physician (7-10 years out from medical school)
  • Dentist
  • Veterinarian

Generally, physician loans: 

  • Require little to no down payment
  • Offer competitive interest rates
  • Come with fewer fees or no closing costs

Conventional loans can require anywhere from 3-20% down, depending on your credit. These loans can also have higher interest rates.  

Furthermore, mortgage lenders tend to consider factors such as credit score and employment history when determining eligibility and these can vastly influence whether a buyer is approved or not for a mortgage.

Physician loans were created with the thought that while applicants may have significant student debt, they’re entering a high-paying field and can likely pay everything off in a short amount of time. 

As you can see, physician loans and conventional mortgages have several differences, and it’s important to consider all of them when deciding which type of loan is best for you. 

You should also compare different lenders and loan offers to ensure you’re getting the best terms available. 

Benefits of a physician loan

Physician mortgage loans are designed to help medical professionals purchase or refinance a home without the hassle or hurdles of conventional mortgages.  

They provide physician and physician family members with specialized lending options, including: 

  • Assistance with closing costs
  • No required private mortgage insurance (PMI) payments
  • Flexible loan terms

Physicians and future physicians can access:

  • Jumbo loans 
  • Adjustable-rate mortgages
  • FHA loans 
  • VA loans  

All these options provide significant advantages to the borrower.

Physician loans can also be used more than once. They’re a great option if a buyer is looking to purchase short-term because many loans are adjustable-rate mortgages, with the rate locked in for the first few years.

Additionally, physician mortgage loans are used to help reduce the burden of student debt for medical professionals by allowing them to use some or all of their medical school tuition as part of the down payment on a home. 

Doctor loans provide many areas of flexibility for medical professionals looking to purchase a home.

Is a physician mortgage loan a good idea?

Yes, physician mortgage loans can be a great option for medical professionals who are looking to purchase or refinance a home.  

Physician mortgage loans offer many benefits that make purchasing a home more affordable. 

Additionally, physician loan lenders are typically more lenient when it comes to credit score requirements and employment history, making them a great option for medical professionals who may not qualify for more traditional mortgages. 

Physician loans provide location flexibility, lower financial stress for home buying, and loan flexibility for qualifying options.

GO Mortgage can help with your physician loan

Ultimately, physician mortgage loans can be an excellent option for medical professionals looking to purchase or refinance a home and should certainly be considered when making a decision about which type of loan is best for you.

GO Mortgage can help you get started with your loan today!

Photo by Karolina Grabowska

Share
Array
Share on LinkedIn
Email this Article
Print this Article