Physician Loan Question

12 Replies

I have a quick question for you regarding physician loans.

My girlfriend is an MD at Texas Children's in Houston in her 2nd year of residency.

She is considering buying a house (400k-500k). We are also considering putting both our names on the house as I have the better credit score and much larger income (presently).

Questions:

  • 1. Roughly how much higher are the interest rates on a 30-year fixed mortgage (physician vs regular)?... I've read it could be about 0.5%? (e.g. 2.75% vs 3.25% in today's environment)
  • 2.Would we still be able to take advantage of a Physician Loan if we were jointly on the deed/note? Any complications?
  • 3. What is the maximum debt/income ratio allowed for Physician Loans (I've read a normal loan is 0.43 but I'm not certain if this is different for physician loans)

@Joshua Alexander Every lender is different, so there is not one set spread on interest rates. What I have seen is 1/2 to 1% over normal conventional interest rates.

I would think it would be better for you to be on the note/deed, but your loan officer can help you work through that.

DTI is often kind of thrown out the door for physician loans....that's kind of the idea. Not unusual for docs to have $400,000-$500,000 in student loans or practice startup costs and $50,000 or so in income during residency. That's kind of the idea behind physician loans. To most lenders they look at the income and the debt and would never do the loan. Some lenders decided, maybe it is worth the risk vs the change in income after residency....$50,000 jumps to $200,000 or more, so makes a lot more sense.

Because these loans are just outside the normal lending guidelines, every lender will be a little different. BBVA was doing them for a long while so you might check with them. Fairway Mortgage and PNC Bank also used to do them. Some things have changed with Covid, so they may not even do them any more.

Has your girlfriend 100% decided where she will practice when she is done with residency? To me that sounds like a lot of house to bite off in today's world. You guys probably know a lot better than me and every specialty is different, but there were a lot of delays this year for many. Some starting pay was cut, some hirings were delayed, etc. To me in this environment you might want to keep your options open until she has a permanent job offer.

@Bruce Lynn , thank you for the information. We are fairly confident that her fellowship and future job will be in the Houston area. Houston is not only the capital for oil and gas, but also for it's medical center. That said, you bring up a good point.

We are hoping that we can both be on the note/deed equally. In your experience, have you seen physician loans where two people were on the note/deed where one of them (me) is not a doctor... (I'm only an engineer). 

@Alexander Tesfamicael You are making the right moves and asking the right questions. 

I will suggest contacting a local experienced mortgage lender within the Houston market.

I can recommend my top 2 lenders if you will like to give them a shot.

Goodluck.

@Alexander Tiberlake There will be other factors which impact the rates not only type of loan. Both of you can come on loan. Mostly 43% DTI in physician loan which can go up to 45% depend on lender requirement. Physician loan doesn't have PMI and 100% LTV.

As others have said- go to the WCI forum. Create an account, post the question. It's anonymous, so you can post numbers- net worth, debt, etc.

Re: physician loans- COVID has made lending criteria stricter. I don't know if she would qualify on a resident salary for a $400-500k home.

You should be able to both be on the title if she qualifies. Your income will be helpful, but your credit score won't (they take the middle score of the person with the worse score).

Just a heads up- if you do pose this question on the WCI site, they will all invariably say this is a bad idea (buying a home, especially an expensive one, during residency). There are many there who can comment on physician loans. 

If you want to avoid the lashings- here is the blog post they have on the topic of physician loans

https://www.whitecoatinvestor....

(admin- feel free to remove the link. I have no financial relationship with that blog or forum, just trying to help the OP).