It’s called, quite simply, a medical loan – and it’s a welcome relief for many physicians, given that newly graduated physicians have an average medical debt of $ 180,000, according to a report by 2016 from the Association of American Medical Colleges.

Play the sad violin! But really, it’s a problem.

“It costs a lot of money to attend medical school, which puts mountains of student loan debt on these graduates,” says Heather mcrae, Senior Loan Officer at Chicago Financial Services. “Which causes [doctors] not be able to qualify to buy or refinance using a traditional loan program.

The good news? Physician loans have less stringent credit and debt-to-income ratio requirements than other loan products. But as Veterans Affairs Loans and Loans from the Federal Housing Administration, medical loans have unique qualities.

Therefore, if you are a doctor who is considering buying a home (especially following March ‘Game Day’ where you are matched with the residence of your choice), knowing these eight facts will help you determine if a medical loan is right for you.

Only certain doctors are eligible

Physician loans are only available to a select group of physicians, including Physicians (MDs), Doctors of Osteopathy (DO), Dentists (DDS / DMD), and Veterinarians (DVMM), McRae explains. Some lenders also offer medical loans to podiatrists (DPM) and optometrists (OD). Therefore, health care providers such as chiropractors, dietitians, and respiratory therapists are not eligible for medical loans.

Additionally, physician loans are often reserved for people who graduated from medical school within the past three years.

These loans are not available everywhere

Only a small number of lenders offer this type of loan product, says McRae. In turn, borrowers will likely have to compare the prices to find a lender who offers medical loans.

They require little or no money

A medical loan can be a good option for doctors who are struggling to raise money for a down payment, as they typically require down payments of only 10% or less, says Sylvie Gutierrez, South Florida loan officer and author of “Mortgage Matters: Demystifying the Loan Approval Maze”.

They also do not require the borrower to pay private mortgage insurance. (By comparison, homebuyers who get a conventional mortgage have to put down a 20% down payment to avoid paying the PMI.) Therefore, “the product makes home ownership easier,” says Gutierrez.

The maximum loan amount may vary depending on the lender

Most loans to doctors are capped at $ 1 million, says Gutierrez; however, some lenders offer larger loans. Chicago Financial Services, for example, offers doctors mortgages of up to $ 2 million, McRae says. Nevertheless, the loan amount will depend on what the non-compliance jumbo loan the limit is in your county.

Physician loans can be fixed or adjustable rate mortgages

Like traditional home loans, doctor loans are offered fixed rate or adjustable rate loans. Deciding which type of loan is best for you will depend on your tolerance for risk, says McRae.

“Those who need safety and security can opt for the 30-year fixed at a higher interest rate. Those who are willing to take more risk with an adjustable rate mortgage can take advantage of a lower interest rate, ”she says.

Deferred student loan payments do not hinder borrowing authority

Another important selling point for physician loans is that student loan payments that are deferred for a year or more are not taken into account in determining whether the borrower may qualify for the mortgage. But whether you have the option to defer your loan payments, it will depend on the type of student debt you have. (The Association of American Medical Colleges provides a graph that shows which loans allow deferrals.)

If you cannot defer tuition loan payments, your manager may offer you a forbearance, a period of up to 12 months during which you can either make lower payments than previously scheduled or delay. completely payments. However, interest accrues during forbearance, which means you’ll pay more money over the life of the loan. However, abstention can allow you to get mortgage approval to which you would not be entitled otherwise.

Borrowers must provide proof of employment

Physician loans generally only require an employment contract to prove income, unlike conventional loans, which require pay stubs. Thus, physicians who are in the process of entering residency can use their future salary to qualify for a physician loan. (Note: Conventional, FHA, and VA loans do not allow borrowers to do this.)

A minimum credit score of 680 is required

While a perfect credit rating is 850, most medical loans require a credit score of 680 or higher. You can use a website such as Credit.com, Credit Sesame, or Credit Karma to get a free estimate of your score; you can also check with your credit card company, as some (like Discover and Capital One) offer customers free credit scores. If your score is below 680, there are some steps you can take to increase your score, but be aware that it may take several months to increase your score.