What Credit Score Do You Need for a Physician Mortgage Loan?

As a doctor (or other healthcare professional), you might have access to special mortgage lender programs designed with less stringent underwriting requirements. 

Medical school is so long and can result in a lot of student loan debt. Special physician mortgage loans can help you buy a home when you might otherwise have trouble qualifying for a conventional mortgage.

In some cases, other medical professionals, such as dentists, veterinarians, podiatrists, nurses and nurse practitioners, might also have access to doctor loans. Here’s to know about qualifying for homeownership with these financing options as a medical doctor or another type of medical professional.

Importance of credit scores in applying for a physician loan

Even if you might qualify for less stringent underwriting — like excluding student loan payments from your debt-to-income ratio (DTI) or opting out of private mortgage insurance (PMI) — you still need to meet certain criteria. One of the most important items to consider is how a physician loan impacts your credit score.

As with other home purchases, even doctor loans require that you meet certain credit score requirements. You might qualify for a bigger loan — maybe even a jumbo mortgage — with a low down payment. In this scenario, you won’t have the same qualifying requirements as a traditional mortgage, but your credit score might be especially important.

It makes sense to check your FICO score ahead of time or review your credit report to spot errors that might drag down your credit score. If you’re a new resident who’s taken on a new job and doesn’t have an income history, having a good credit score can improve your approval odds at the best possible mortgage rates. This is especially true if your DTI is high due to medical student loans.

Minimum physician loan credit score to qualify

The minimum credit score to qualify for different types of mortgages offered in doctor loan programs depends on the lender. Each lender has its own criteria. However, it’s not uncommon to see a minimum credit score of 700. 

If you don’t have that credit score, though, it doesn’t mean you won’t qualify. In some cases, you might be able to qualify with a credit score of between 650 and 700.

Check with the specific physician loan program to find out their minimum credit score requirements to get an idea of what to expect.

Impact of bankruptcy on physician loan eligibility

Going through bankruptcy can be frustrating and also impact your ability to get a physician loan. In many cases, new doctors and other professionals aren’t likely to qualify for a mortgage loan program if they are going through bankruptcy. 

If a program allows for it, there might be more restrictive requirements, and you could potentially end up with a higher interest rate due to bankruptcy.

Can you get a mortgage while in bankruptcy?

In many cases, it’s difficult to find loan options that qualify you while you’re in bankruptcy proceedings. You might still be able to get approved for a loan after bankruptcy. However, you might need to settle for a lower purchase price.

Be prepared for higher down payment requirements and understand that you might have a higher interest rate as a result.

How long after bankruptcy can you apply for a mortgage?

The length of time you need to wait to apply for a doctor loan or other type of mortgage after bankruptcy depends on the type of loan. Additionally, the type of bankruptcy also matters. Some lenders might have different requirements depending on whether it’s Chapter 7, 11 or 13 bankruptcy.

For example, with a conventional mortgage, you might need to wait two years from your discharge date for Chapter 13 but four years from the discharge date for Chapter 7. Some government loans, like FHA loans, might have no waiting period following Chapter 11 but require two years from the discharge date for Chapter 7 and Chapter 13.

A loan officer can give you a better idea of what to expect, depending on your situation.

Factors that affect your credit score

Whether you’re a medical resident, a new doctor, or just starting your practice with another degree, such as a DVM or DDS, understanding what impacts your credit score can help you prepare for a doctor mortgage loan. 

Here are some of the factors that impact your credit score:

• Payment history. Whether you make on-time payments with your other debt has one of the biggest impacts on your credit score. For example, if you miss payments or pay student loans late regularly, you could see a big drop in your score.
• Amount of credit in revolving accounts. Sometimes called your credit utilization, it can pull down your credit score if you have high debt amounts on credit cards and other revolving accounts. Generally, any time more than 30% of your available credit is being used, you’ll see a bigger impact.
• Length of credit history. How long you’ve had credit and managed debt also matters when it comes to your credit score. The longer you’ve had credit, and the older your first account, the better your score. If you’re a first-time borrower, it might be harder to establish credit.
• Types of accounts. Your score also accounts for the type of accounts you have. A mix of installment loans (like monthly mortgage payments, student loans or car loans) and revolving loans (like credit cards and lines of credit) can help your credit score.
• Number of inquiries. Finally, recent inquiries into your credit and frequent inquiries in a short period of time can affect your credit score.

Steps to improve your credit score

Whether you’re buying real estate for the first time or whether this is a second home or investment property, improving your credit score can be a big help toward your new home. Here are some things you can do to improve your credit and home-buying experience.

• Make your payments on time. All of your obligations should be paid by the due date and with the full required amount. Even if you just pay the minimum amount on your credit cards, making on-time payments can help.
• Pay down current debt. Reducing your debt, especially on revolving credit lines, can help you boost your credit score. If you have enough equity in a current home, refinancing and paying down some of your debt might help. Even if you don’t pay off some of your debt, simply making a plan to reduce your balances can help your credit score.
• Keep older accounts active. If you have older credit cards, try to avoid closing them. Instead, consider making one or two purchases on them each month and paying them off. A longer credit history can be useful to your score.

Alternative mortgages for physicians with lower credit scores

If your credit score doesn’t allow you to qualify for a physician home loan, there are other types of loans that you might be able to get.

FHA loans

With an FHA loan, you can get a home with a credit score as low as 500. If you have a score of at least 580, you can qualify for 3.5% down. However, your loan amount might be smaller than with a doctor program since there are loan limits for FHA loans.

Conventional mortgage

Some conventional loans will allow you to qualify with a credit score of at least 620. In this case, you might have to make a bigger down payment and pay PMI if you don’t put 20% down, but if you have savings, it might be a good option if your credit score is too low for a doctor loan.

VA loan

For borrowers who have military service that qualifies them, a VA loan can be a good option. Credit scores aren’t as important with this type of loan, and there is no down payment requirement. You do need to pay a funding fee, but you won’t have to worry about PMI.

USDA loan

Finally, if you plan to buy a home in a rural area, you might be able to qualify for a USDA loan even with fair credit. You’ll need to meet income requirements, but medical residents and new doctors might have an easier time meeting those criteria.

Your next steps

Review your finances to make sure you’re truly ready for the home-buying process. Get your finances in order and review your credit history to make sure it’s accurate. Address any errors and get an idea of your credit score.

Next, add your credit score in the comment section of the form below so the lender will know if you’re likely to qualify for their doctor loan program.