Buying a home is truly the ‘pinnacle’ of the American dream.
And honestly—healthcare workers fit brilliantly into this picture.
Healthcare workers work hard to put themselves through college, often incurring high levels of debt while they strive to get an education that’ll empower them to practice medicine to make their community, country, and world a better place.
But they can also face unique home-buying challenges. And that’s what we’re going to talk about in this blog post.
If you’re a physician who’s looking to purchase a home, then you may be looking very closely at physician mortgages.
A physician mortgage is a special type of home financing solution that caters to the unique financial situations of America’s healthcare workers.
(Some people call these ‘Doctor home loan programs.’)
Now, with that being said, there’s been a lot of talk recently about physician mortgage interest rates.
Some people are concerned that these rates are going to increase with inflation.
But perhaps more accurately, a lot of people just don’t understand what’s going on with them.
Admittedly, this is a complex issue—especially for first-time homebuyers who have recently received their doctorate and are only now entering the workforce (and looking for a home loan program that they qualify for).
So let’s just back up, rewind a little bit, and discuss the basics of physician home loans—so that you can understand this issue of physician home loan interest rates a little bit better.
What Is A Physician Mortgage Loan?
A physician mortgage loan, which is sometimes called a doctor mortgage loan, is a type of loan that was created by banks due to the distinct challenges that physicians face when borrowing for a home loan—due to the incredible amount of debt they incurred through medical school, along with their rather unique debt to income ratio.
Due to the unique debt-to-income ratio experienced by new physicians, some doctors struggle to find conventional mortgage loans that actually meet their needs and empower them to buy homes that they can legitimately afford.
Oftentimes, newer physicians will start with a lower salary—and this can make it really difficult for them to qualify for a home loan, especially in the early days of their practice (after they’ve had to build up hefty student loans just to get through medical school).
This is really where physician mortgage loans came from.
And today, they represent a very utilitarian approach to helping healthcare workers get access to loans that work for their unique financial situations.
All right. With that being said, let’s take a moment to talk about interest rates.
Physician Mortgage Interest Rates
There are a lot of upsides to a physician mortgage loan.
For example, they typically don’t require a down payment.
They allow doctors and other healthcare workers to get a loan despite their uniquely bad-looking debt-to-income ratio.
Plus, loan limits tend to be forgiving.
However, where interest rates are concerned, it’s true that physician mortgage loans tend to face a bit of a drawback.
See, interest rates on physician mortgages tend to be higher than those offered by conventional mortgages.
For example, if typical conventional mortgages are sitting with an interest rate of 4.5% or lower, you’ll typically find that physician mortgages will sit at an interest rate that’s closer to 4.75% or higher, depending upon the financial situation of the individual and the inflation that’s going on in the economy.
This means that physicians need to do just a little bit of homework to figure out whether or not getting a home loan at a slightly higher interest rate is worth it in the long term.
For example, some doctors may opt to rent a residence while they work on their debt-to-income ratio and get better equipped to walk into the bank to get a more conventional home loan at some point down the road.
One of the best ways to figure out whether or not this may be a good solution for you is to talk to a financial advisor.
These physician mortgage loans can admittedly be difficult to understand at first.
But don’t let the fancy terminology fool you.
If you have a good lender whom you trust to tell you the truth and explain things clearly, it’s pretty easy to understand the differences.
And honestly, a physician’s mortgage loan—even with the higher interest rate—can often be a good deal for doctors who are looking ahead to a very financially lucrative future in their field.