After the 2008 financial crisis, the government placed strict underwriting restrictions on mortgage lenders.
To qualify for a traditional mortgage today, you typically need to show two years of steady income. You’ll also need a 20% down payment to avoid paying private mortgage insurance (PMI). And for 2021, your mortgage loan amount can’t exceed $548,250.
These rules are intended to protect the average American. But, for some professionals, like doctors and attorneys, they can cause problems.
Medical and law school graduates often have very little savings to put toward a down payment due to their high student loan debt. Individuals in these fields may also have high debt-to-income ratios, especially if they’re in residency. And, due to their projected future income, they might want to buy a home that exceeds the conforming loan limits.
The good news is that many lenders offer home loans that are specifically designed to meet the needs of doctors, lawyers and other high-debt, high-income-potential professionals. Let’s take a look at how these loans work and a few of the top lenders that offer them.
Why do lenders offer professional mortgage loans?
After traditional mortgages close, most lenders end up selling the mortgage to a government-sponsored lender like Fannie Mae or Freddie Mac. This is why traditional mortgages must conform to the standards that these lenders set.
Lenders keep professional mortgage loans in-house, however, allowing them to set their own underwriting standards. Lenders have a few reasons for going through all the trouble of creating and servicing professional mortgage loan products.
First, lenders target these loans to people in professions that have a reputation for high incomes. Banks know that while doctors, veterinarians and attorneys might not be making a lot of money now, each of these professions has a high average income and strong job security. And this reduces their risk.
Second, lenders offer professional mortgage loans because they want to develop a long-term relationship with high-value customers and market banking products to them. Finally, banks can charge higher interest rates on nonconforming mortgages to offset their risk.
What are the pros and cons of professional mortgage loans?
The first major benefit of professional mortgage loans is that they often come with low down payment requirements. Some don’t require any down payment at all. For cash-strapped new graduates or medical residents, that’s a huge advantage.
With conventional loans, borrowers must pay for private mortgage insurance if their down payment is less than 20% of the purchase price. Yet professional mortgage loans, like physician mortgage loans, don’t require PMI. That can save borrowers thousands of dollars per year.
Special mortgages for lawyers, doctors and other professionals can also help borrowers buy homes that are above the loan limits for conforming mortgages. This can help avoid the need for a jumbo loan with a higher interest rate.
What mortgage product would you like a quote for?
What is Your Occupation Status Currently?
Are you currently working with a realtor?
Are you a veteran?
What most closely represents the price range of the house you’re searching for?
What is your preferred down payment?
What stage are you at in the home buying process?
How soon do you hope to secure a mortgage approval?
How many banks would you like quotes from?
Have you experienced any bankruptcies or short sales?
State where you want to purchase your home
Metro area where you would like to purchase your home
Would you like to add any additional details?
If there’s a downside to professional mortgage loans, it’s that borrowers may be tempted to overextend themselves and buy more house than they can afford. Even with strong income potential, buying a $500,000 piece of real estate with no down payment might not be the best financial decision, for example. Also, borrowers are often charged higher interest rates for nonconforming loans.
8 Lenders that offer professional mortgage loans
Currently, physician mortgage programs are most popular with lenders.
But there are several banks that offer mortgages to nonmedical professionals like attorneys, certified public accountants (CPAs), architects, engineers and more. Below are six professional home financing lenders worth checking out.
1. U.S. Bank
The professional mortgage options at U.S. Bank are available for medical physicians, including residents, fellows or doctors of osteopathy (DO) — dentists and nurses aren’t eligible. You can borrow up to $2.5 million, but you’ll need a minimum down payment:
- 5% down for $548,250 (5% for $822,375 in select counties)
- 10% down for $1.25 million
- 15% down for $1.5 million
- 20% down for $2 million
- 25% down for $2.5 million
2. George Mason Mortgage
George Mason Mortgage is a subsidiary of United Bank, and it has a Doctor’s Mortgage program that includes veterinarians and psychiatrists (who are licensed as MDs). This program offers up to 100% financing with no PMI. Here are the three main loan options:
- 100% financing of up to $750,000
- 95% financing up to $800,000
- 89.99% financing up to $1 million
Financing for condos may be available in addition to single-family homes. Adjustable-rate loans (5/1, 7/1, and 10/1) are available as well.
One problem you may run into with George Mason Mortgage is availability. Currently, its professional mortgage loans are only available to residents of the following areas:
- District of Columbia
- North Carolina
- South Carolina
- West Virginia
Additionally, for homebuyers in Kentucky, Ohio and Pennsylvania, the property you want to buy must be located within 90 miles of a United Bank local branch. The good news, though, is that this program is available to residents and fellows in addition to practicing doctors.
These Medical Profession Loans can have a loan-to-value ratio of up to 100%. In other words, you may be able to qualify for a zero-down mortgage. As is typical for professional mortgages, KeyBank doesn’t require PMI on these loans. Eligible properties include owner-occupied homes as well as second homes.
4. Cadence Bank
Cadence Bank has more than 400 branch locations across the South, Midwest and Texas. With Cadence Bank’s Early Professionals Loan program, professionals in the following fields can qualify for mortgage amounts of up to $1.5 million:
- Nurse anesthetists
- PhD-level professors (who graduated or obtained their license within the past five years)
If you belong to one of the qualifying professions listed above, Cadence Bank may allow you to borrow up to 100% of your home’s value with no down payment. There’s no PMI requirement and 5/1 adjustable-rate mortgages are available in addition to fixed-rate loans.
To qualify for the Early Professionals Loan program, you must plan to occupy the property yourself. Rental or investment properties are not eligible.
PNC provides medical professional mortage loans to interns, residents, fellows or doctors who completed residency in the previous five years. The maximum amount that can be borrowed through this program is $1 million.
It has a unique grant program that awards up to $5,000 that can be used for closing costs or to cover prepaid costs, such as escrow account funds. It can also be applied toward a down payment. However, you must meet certain income requirements or reside in a qualified community.
6. First Merchants Bank (formerly Level One Bank)
First Merchant’s Bank’s Community One Professional Loan is available to various professionals, including police, fire, teachers, RNs, RTs and any hospital employee. It offers loans for up to $350,000 with 3% down and no required PMI.
There are no age restrictions and most visa holders are accepted
You can close with an employment contract in place 60 days prior to a job start date.
This loan offers 30 year fixed-rate, 10/6 ARM, 7/6 ARM, and 5/6 ARM options.
States Available: IN, MI, OH
7. City National Bank
City National Bank’s Doctor Home Loan program is available to MDs, DOs, dentists, oral surgeons, lawyers, and CPAs. This program provides a variety of fixed- and adjustable-rate mortgages, with low down payment options, including 3% down for loan amounts up to $650,000.
An employment contract is required to be accepted.
They offer 30 year fixed-rate, 15 year fixed-rate, 5/1 year ARM, 7/1 ARM, and 10 year ARM options.
This program also offers a construction-to-permanent loan program and a lot loan program.
This loan program is available in all 48 continental states, except Florida and Texas.
Contact: Email David Hager.
8. Flagstar Bank
Flagstar Bank offers doctor mortgage loans for home purchases and refinancing in all 50 states for up to 100% financing with no PMI. They serve H-1B visas and/or green card holders.
Financing choices include:
- 0% down for up to $1 million
- 5% down for up to $1.5 million
Flagstar Bank allows anyone with the following degrees to apply: medical residents, MD, DDS, DMD, OD, Doctor of Pharmacy, DPM, DO, RN, physician assistants, nurse practitioners, clinical nurse specialists, ATP pilots, CPA, attorneys, and veterinarians. To be eligible, one must be 10 years or less from starting one’s career. There is no 30 year fixed-rate option.
Is a professional mortgage loan right for you?
If you work in a profession that requires a lot of expensive education, you’ve already had to wait longer than the average person to start your career. So, if you’ve recently graduated or earned your professional license, you may be eager to buy a home.
With conforming mortgages, you’ll need to wait until you get a couple of years of work under your belt. If you’re just entering residency, you may need to wait even longer to qualify for a traditional mortgage. A professional mortgage can help make homeownership a reality much sooner if you’d rather not wait.
You’ll probably pay a higher interest rate for a professional mortgage loan, however. If you decide to go through with a professional mortgage loan, consider refinancing to a lower interest rate conforming loan after you’ve established a few years of income history.