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Why Doctors Shouldn’t Have To Worry About Private Mortgage Insurance (PMI)

Published October 19, 2022

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Though they have high earning potential, physicians and dentists who want to own a home early in their careers often have difficulty saving enough for a down payment. A high debt-to-income ratio (DTI) from medical school debt and the fact that they won’t reach their full earning potential until later in their career can make it complicated for physicians and dentists to get a mortgage for the home they want.

What is Private Mortgage Insurance (PMI)?

In most cases where your down payment is less than 20%, lenders will typically require you to pay for private mortgage insurance, or PMI, to protect themselves in case you’re unable to make your payments.

How Does PMI Work?

PMI is typically added to your monthly mortgage payment and typically costs between 0.6% to 1.9% of your loan amount annually, although a high credit score and/or rising property values in your area could help keep that cost on the lower end. Once you’ve built up 20% equity in your home value, PMI is dropped. Watch our quick PMI video to learn more.

Doctors and DTI

In 2022, the average medical school debt for doctors and other medical school graduates is over $200,000. With that level of debt, it can be difficult early in a doctor’s career to address two key aspects of getting a mortgage – lowering DTI and saving for a 20% down payment. Fortunately, doctors can take a few key steps to understand and get their credit score in shape in preparation for home ownership.

Reasons doctors don’t need mortgage insurance

For most people, not having the funds available for a 20% down payment and having a high DTI generally makes it challenging to qualify for a mortgage, especially one without PMI. However, doctors have other mitigating factors which lenders take into consideration.

High earning potential

Despite not reaching full earning potential as a resident and often carrying six-figure medical school debt, lenders recognize that doctors have the potential to earn significantly higher salaries during their career trajectories. A high earning potential can signal to lenders that doctors are lower risk borrowers.

High employability means lower risk

Lenders also recognize physicians and dentists are essential workers with high employability and rapidly growing demand. According to a report by Association of American Medical Colleges (AAMC), the U.S. faces a projected shortage of between 37,800 and 124,000 physicians by 2034. Due to this demand and their strong employment opportunities, lenders recognize that doctors are likely at low risk of defaulting on their mortgage.

Balancing a Higher DTI

For physicians or dentists with sizable medical school debt, a higher DTI doesn’t need to prevent you from affording a monthly mortgage payment. Some lenders offer specific mortgage options for doctors that account for the unique financial needs of doctors at various career stages. Following the five basics of financial success for physicians can help doctors create and stick to a manageable, sustainable budget while working towards major financial milestones, including home ownership.

Laurel Road’s Physician Mortgage

One option available to qualifying doctors is Laurel Road’s Physician Mortgage which has fewer restrictions than conventional mortgages and recognizes the lender’s trust in medical professionals’ creditworthiness and earning potential.

Specifically tailored to meet the financial needs of physicians and dentists, a Laurel Road Physician Mortgage offers up to 100% financing for loans of $1 million or less with no PMI required,1 as well as special financing options for loan amounts up to $3.5 million.

Laurel Road’s special benefits for physicians and dentists, include:

No PMI necessary

With a Laurel Road Physician Mortgage, the added expense of private mortgage insurance (PMI) is eliminated for loans up to $1 million.

0% down payment options available

0% down payment options are available for loans up to $1 million.1 That means if you don’t have enough money saved for a down payment, you can still apply!

Low fixed rates

Laurel Road offers competitive, low rates and variable APRs.

With Laurel Road’s Physician Mortgage, qualifying physicians and dentists1 no longer have to worry about saving for a down payment or the added cost of PMI.

A Laurel Road Physician Mortgage is available to interns, residents, fellows, physicians, dentists, clinical professors, researchers or managing physicians with a current license that hold one of these degree types: MD, DO, DMD, DDS or DPM.

For physicians and dentists requiring a mortgage greater than $1 million, Laurel Road offers competitive options with high loan-to-value (LTV) ratio. LTV ratio is calculated by dividing the amount being borrowed by the appraised property value. It’s used in mortgage lending to determine the amount necessary to put in a down payment and whether a lender will extend credit to a borrower. Laurel Road offers physician mortgages up to $3.5 million with up to 95% loan-to-value (LTV) to $1.5 million and 85% loan-to-value (LTV) to $2 million.

To check your rate and start your application, click here.

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Disclaimers

NOTICE: This is not a commitment to lend or extend credit. Conditions and restrictions may apply. All mortgage products are subject to credit and collateral approval. Mortgage products are available in all 50 U.S. states and Washington, D.C. Hazard insurance and, if applicable, flood insurance are required on collateral property. Actual rates, fees, and terms are based on those offered as of the date of application and are subject to change without notice.

  1. Up to 100% financing and no private mortgage insurance (PMI) is only available to interns, residents, fellows, doctors, dentists, clinical professors, researchers, or managing physicians with a current license and a degree of Doctor of Medicine (MD), Doctor of Osteopathic Medicine (DO), Doctor of Podiatric Medicine (DPM), Doctor of Dental Surgery (DDS), or Doctor of Dental Medicine (DMD). Up to 100% financing is available when purchasing or refinancing with no cash out on a primary residence and loan amount does not exceed $1,000,000. Retired doctors are not eligible. Additional conditions and restrictions may apply.

The Annual Percentage Rate (APR) is the cost of credit over the term of the loan expressed as an annual rate. The APR shown is based on interest rate, points and certain estimated finance charges. APR is for informational purposes only and is subject to change without notice and may be subject to pricing add-ons related to property type, loan amount, credit score, loan to value, refinance with cash out, state specific fees, and other variables.

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