On top of little to no down payment and a more forgiving debt-to-income ratio calculation, physician mortgages don’t require private mortgage insurance, which can amount to a few hundred dollars a month.
Such perks are appealing for physicians who are ready to settle down after grueling years in medical school and in residency, companies marketing their services to doctors say.
“When you’re in training for so long, there’s a delayed gratification,” said Dr. Peter Kim, an anesthesiologist in Los Angeles and founder of Curbside Real Estate, a broker that connects physicians with real estate agents and lenders. “Getting a home is something you dream of — the American dream.”
But physician mortgages also come with interest rates that are 0.25 to 1 point higher than mortgages for nonphysician homebuyers, said financial planner Daniel Wrenne, founder of Lexington, Kentucky-based Wrenne Financial Planning, which specializes in serving doctors.
And just because you can take out a $400,000 loan as a medical resident making $50,000 a year doesn’t mean you should, Wrenne said, especially when that means delaying paying student loans.
“You’ll be house poor,” he said. “You’ll probably be able to feed yourself and live in your house and that’s it.”
Ngo, who had trouble getting a mortgage in 2016, acknowledges that those who can afford higher down payments are better off going with a conventional loan.
He says he wanted to buy a home because the area near the hospital where he works didn’t offer many rental options, and the available properties were older. Ngo now owns a three-bedroom house in Knoxville, Tennessee.
“I think ultimately a physician loan is definitely a good tool for people in certain situations,” he said, adding that the loan “was able to get me where I wanted to go.”