Physicians, doctors, and other medical professionals sacrifice years of their lives going to school and perfecting the skills necessary to be a great healthcare provider.
This can put them years behind the curve in things like saving for retirement, starting families, and buying homes. Thankfully, on the home buying front, the presence of physician mortgages can help you get into your dream home earlier in life.
Today, I'm focusing on physicians in Colorado and sharing 5 signs that a doctor home loan is for you.
Pros of physician mortgages
There is no shortage of pros to physician mortgages. Some of the biggest are:
Low or no down payment: Many doctor loans offer 95% to 100% financing on a home, meaning that you may be able to buy a home without any down payment whatsoever.
No private mortgage insurance (PMI): Typically, when homebuyers buy a home with less than a 20% down payment, they'll need to pay a monthly surcharge, private mortgage insurance. But most all doctor loan programs waive that requirement.
High debt-to-income thresholds: Those using a doctor home loan to buy a home won't be subject to the same DTI ratio requirements as those using traditional mortgages. This is because lenders understand that doctors tend to carry high student loan balances as a result of financing their education.
Below market interest rates: Finally, physician mortgages offer the opportunity for borrowers to buy homes with (slightly) below market rate financing. But every little bit helps. In fact, over the term of a 30-year loan, even a 0.25% difference in your interest rate may add up to $10,000 - or more in savings!
Consider checking out our physician mortgage guide too to learn more.
5 signs a CO physician mortgage is for you
Here are some tips and things to think through to help determine if this special home financing is right for you.
1. You want to buy a house and preserve cash
Obviously, buying a home is expensive. You'll have 15-30 years of monthly mortgage payments in front of you, but buying your home is also a cash intensive endeavor in the present.
For one, you'll likely need a down payment between 10-20% of the purchase price of the home.
But if you're looking to get into a home without a large down payment (or any at all), physician mortgages are the way to go. There is a plethora of lenders in the market offering home loans with down payments as low as 0-5%. This is valuable, especially for young doctors with outstanding student loan debt.
Even if your debt is manageable, you can use this extra cash to invest, conduct home renovations, or otherwise use for another priority. Whether or not you decide to buy a home without a down payment is up to you, of course, but the flexibility can be a game changer for physicians across Colorado and the rest of the country.
2. You don't want to buy a starter home
One knack commonly used against doctor mortgages is that it encourages physicians to buy more home than they need. I'm going to throw this narrative out the window. Here's why.
Since doctors tend to be among the most highly compensated individuals in our society, the higher loan limits on physician mortgages provide them a great opportunity to buy a house that their income will easily be able to support, without that pesky down payment I just mentioned.
Avoiding a starter home is really advantageous for a couple of reasons.
First, there is less risk of crazy interest fluctuations. You don't want to buy your first home in a low interest rate environment, only to buy more house at a much higher rate. Even if interest rates are high when you take your physician mortgage loan, you'll be eligible to refinance in the future in most all instances.
The other reason why avoiding a starter home is great is because you'll only have to pay for closing costs one time.
This can be really valuable in a state like Colorado, where the average home buyer paid nearly $3,900 in closing costs in 2021, a figure that has only risen in the two years since.
Of course, those buying homes above the statewide average or median can expect to pay even more.
3. You're relocating to Colorado
Are you new or going to be new to The Centennial State, potentially to start your career? If so, a physician mortgage can be an excellent option, since you may be able to get financing to buy your home before you even start working.
It is common for lenders to extend financing to qualifying physicians up to 90 days before they start employment, so long as they can prove an accepted job offer.
This flexibility is nearly impossible to find with Conventional loans and could make the difference between renting and buying your dream home.
Furthermore, many doctor loan programs also offer relocation flexible services to help you put you in a home more quickly.
4. You value location in real estate
Much of the healthcare activity in Colorado is centered around cities like Denver, Colorado Springs, and Boulder. Not surprisingly, much of the real estate in and around these communities is among the most expensive in the entire state.
But thanks to physician home loans, homes in these communities are now available to you.
This means you won't have to sacrifice on things like:
Your commute
Access to interstates
Natural beauty and views
Safety and crime rates
Other features that are important to you
In these programs, most lenders will extend Jumbo financing, meaning that you may be able to buy a home for up to $1 million, or maybe more, depending on the lender.
5. Your credit score is in the 700s
Many homebuyers are able to take a traditional mortgage with credit scores as low as 620. But that doesn't mean that you should.
Generally, if your credit score is below the 700-720 range, at a minimum, your quoted interest rate will be well above prevailing financing rates at the time, to compensate lenders for the additional risk that you pose as a borrower.
This is where physician loans come into play, as you'll likely be able to borrow more money at a lower interest rate.
Colorado physician loans
There are a number of mortgage lenders offering physician loans to interested providers in Colorado. Among them are:
First National Bank of Omaha (FNBO)
Huntington Bank
U.S. Bank
1. FNBO
FNBO physician mortgages are available for qualifying professionals to borrow up to $3 million to buy a home. Available to practicing MDs, DOs, DDSs, DMDs, or DPMs, including fellows or residents, eligible individuals may secure the following financing if approved:
Maximum of 100% financing for loan amounts not to exceed $850,000
Maximum of 95% financing for loan amounts not to exceed $1,250,000
Maximum of 90% financing for loan amounts not to exceed $1,500,000
Maximum of 80% financing for loan amounts not to exceed $2,000,000
Maximum of 75% financing for loan amounts not to exceed $3,000,000
To qualify, you'll need:
A minimum FICO score of at least 720
To purchase a primary residence only
To be a United States citizen or legal and permanent resident
A maximum 45% DTI ratio
Additionally, student loans must be deferred for at least 12 months or on an income-based repayment plan in order to be excluded from your DTI ratio calculation.
You'll be able to pick from 30-year fixed, as well as 7/10/15-year ARM options.
2. Huntington Bank
Huntington Bank is another great option for MDs, DOs, DDSs, DMDs, DPMs, and DVMs looking to buy a primary residence, so long as it isn't new construction financing.
Huntington offers the following financing options:
100% financing up to $1 million
95% financing up to $1.25 million
90% financing up to $2 million
But if you're looking to take a loan over $1.25 million, you'll need to have been an attending physician for at least one year. Additionally, Huntington Bank does not assess PMI and will not take into account your student loans when assessing your debt-to-income ratio.
Huntington Bank also has options for graduating medical students and residents.
3. U.S. Bank
Another favorite lender that offers physician loans in Colorado is U.S. Bank. Open to MDs and DOs, including residents and fellows, U.S. Bank doesn't offer a 100% financing option, but they do offer:
95% financing up to $1 million
90% financing up to $1.5 million
85% financing up to $2 million
Borrowers will also need a down payment of at least 710 to qualify.
Conclusion
Physician mortgage loans can be an excellent way for doctors and other qualifying healthcare professionals in Colorado and across the country to buy homes at attractive rates, without much of the hassle that traditional home loans oftentimes carry.
Are you interested in physician home loans? Tell me why or why not in the comments below!
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