The Right Prescription

A prime example of this trend is in the area surrounding The Villages, a sprawling retirement community just north of Orlando.

“You have all of these medical practices that have kind of been built around The Villages because of the aging population and the need. Before it was desolate farmland, and now it’s like a whole new area.”

Banks and brokers offer different financing options to MDs, DOs, OMSs, and DPMs, depending on the remaining length of their training, how much of a down payment they are willing to put forth, also factoring in their credit score and income.

“The banks that are larger, they say, either you fit the box or you don’t. And if they don’t, the clients are going and searching elsewhere,” Krebs says.

“I only know a couple bankers that really focus on this on a full-time basis. Most just kind of chase the next deal rather than focusing their book of business on a specific niche.”

Many of the prospective borrowers who come to him have been turned down by another firm, for various reasons.

“We typically get deals that are people shot by risk, looking for the best terms. So if you go to a bank and the bank’s saying they’ll give you a 4% interest rate, but you don’t have any real money saved up, you’re probably not going to get that 4% interest rate," Krebs said.

Krebs has built strong partnerships with lenders and bankers in this footprint, so he is able to mirror the right clients with the loan that fits their needs.

I think getting the first couple through and learning the ins and the outs of what they look for just smooths out the process for the fourth, the fifth, the sixth, and so forth.”

The Match

The National Resident Matching Program (NRMP), also known colloquially as The Match, uses a mathematical algorithm to place qualified applicants into residency and fellowship positions. Each year’s new class of students anxiously awaits their placements on the third Friday of March, also known as Match Day.

“We see a big increase in physician mortgage inquiries and applications in the following weeks,” says Carlos Carvajal, vice president and senior mortgage loan originator at First Horizon Bank in Miami-Dade County.

Florida has the second-largest population of elderly people and more teaching hospitals than the national average. To ensure more of these new residents stay long-term, the state legislature expanded funding for graduate medical education by 48% in the 2023-24 fiscal year.

Carvajal works with medical recruiters and institutes of higher education to get referrals for physician loans, which he estimates to be between 80–85% of his residential loan portfolio.

“It’s definitely worthwhile pursuing here in Southwest Florida, where the typical physician loan tends to be about $900,000 to $1 million,” he says.

The Products

There are no reserve requirements, a perk that Carvajal calls “huge” since jumbo loans typically require a borrower to carry anywhere from three to 18 months’ worth of cash reserves.

Physician loan programs can afford them 100% financing up to $1.5 million and no PMI.

First Horizon is also changing its guidelines in regard to student loan debt.

“Now we’re looking at half a percent of the principal balance versus one percent,” Carvajal explains. “That’s going to hopefully raise the ceiling for some of our borrowers.”

What makes this particular loan unique, he adds, is the leverage it affords.

“In this day and age, you’re not going to find another product that offers 100% financing unless it’s in the low- to moderate-income space or you’re getting a community second or some type of grant to fill the gap above and beyond what FHA or conventional conforming can offer.”

On some occasions, the loan can also be used the same way a bridge loan might, affording the buyer the ability to leave their current residence and purchase a new home with little out-of-pocket costs. Then once they sell their old house, individuals can apply the sale proceeds to the principal balance to their new mortgage.

“Then we can perform a recast and calculate your new payment based on your reduced principal balance,” Carvajal says. “So with that, you can kind of use it as a bridge loan without the headaches or the cost of a bridge loan.”

These products are geared towards individuals earning at least $100,000 annually, so they can also be utilized by postgraduate healthcare professionals, attorneys, or other high-income earners. It’s the idea of “less risk, more reward” that lenders in this space are banking on.

“Most doctors just don’t know that these types of products are even available or that they’re able to qualify,” Krebs says. “But if I tell them there’s special ways to calculate your debt that maybe will help ease the situation, it opens up doors.”

Terms are still in line with other bank products, from 30-year amortization to variable Adjustable-Rate Mortgages (ARMs) and interest-only options.

“I think there’s different layers of risk and different layers of appetite,” Krebs says. “So it’s just knowing the borrower’s profile as well as possible, from a credit, income, and historical sense. Then also knowing, this bank has an appetite for this. They don’t have an appetite for that. And just really placing it with the right institution.”

Medical or dental students who haven’t finished their training can be eligible for 100% financing up to $1 million with certain programs, as long as they have documents verifying their education and income. This is a welcome reprieve from housing worries as they mount a large amount of debt from school.

“It’s kind of a niche product that not a lot of people are talking about,” Krebs says.

High Earners, Steep Inclines

Carvajal has been originating residential loans since 2016 and he started working at First Horizon ­— formerly Capital Bank — shortly after it had introduced a physician loan offering.

“The residential space is really noisy on the conventional, conforming and agency side; you have to find something that helps you stand above your competition and this is one of those programs,” he says. “Our particular program is one of the more aggressive in the region that I’m aware of. Just by trial and error or repetition, organically it’s become that much of my business and it’s all through referrals from physicians I’ve helped in the past, hospitals or medical recruiters. Here in South Florida, we have the University of Miami or UHealth, Jackson and Baptist Hospitals — heavy recruiters for talent across the country. We partner with recruiters and use this MD loan as a recruitment tool.”

A doctor in Oklahoma, Texas or any other state has an incentive to relocate to Florida for a new job with the ability to purchase a primary residence with 100% financing.

The company has a team of professionals to service their physician clients, who tend to be more limited by time constraints than the average borrower.

“One of the reasons we target the physician community is that they are high-income earners,” Carvajal explains. “But typically they need a lot of hand-holding, so we have private client groups dedicated to servicing our MDs. They can help not only with the mortgages but also on the business side with asset and estate planning, equipment financing, etc.”

Much of Krebs’ time is spent educating consumers who are not familiar with this loan.

“Whenever I tell a medical doctor this is available, they’re like, what did you say? Because they just didn’t know. Rates are a little bit high, inflation is a little bit out of whack, values may be a little crazy, but you need a place to live, right? So if you’re paying rent currently, here’s an opportunity for you to basically get 100% financing, just pay out-of-pocket costs for closing and such. And now you’ve earned a little piece of America, like the dream.”

Krebs often encounters people who just finished medical school and have a high starting income on a steep incline.

“They want to buy the most house that they can technically afford, but also are trying to tackle their student loans at the same time,” he says. “I want to knock out my student loans as quickly as possible because I want to get rid of that burden, but also I want to live in a nice house because I just finished four years of medical school, maybe another four years of residency, and I don’t want to pay rent anymore. I want to get all of that excess debt out from underneath me. And so, for those individuals who just don’t have a ton of cash, it works out perfectly for them. They can buy as much of a house as they can get through underwriting.”

This is in contrast to a typical borrower, who doesn’t have the same privileges by using a conventional loan.

“If you’re using all of your down payment money towards closing costs, reserves, things of that nature, then there’s not enough money for you to get approved through underwriting. Whereas the medical doctors are given little exclusions that you and I would not qualify for.”

The 100% financing option is also available to other types of professionals who work in or are studying for high-income professions.

He worked with a law student who hoped to purchase the unit he had been renting, but was denied by his bank.

“We were able to use a simple contract in lieu of his tax returns and more of your traditional type underwriting procedures to get him the financing that he needed,” Krebs says. “It was like the perfect deal — all the pieces of the puzzle kind of lined up and now he’s a homeowner and doesn’t have to worry about being evicted because the landlord was cool enough to give him first right of refusal rather than just sell it out from underneath him.”

LOs looking to get into this space must be aware of a few things first.

“It’s no secret that medical doctors don’t have the best track record as far as timely payments go, because they’re too busy working,” Krebs says. “So when you have those types of situations, there’s little scratches here and there on the credit and you have to counsel them.”

However, he adds, the niche is a potentially strong source of income for an LO.

“Most medical doctors have a lot of medical doctor friends, so once you did good for one medical doctor, then you get referred to the rest of the practice and so forth, which I’ve experienced in the past. They’re humble, they’re very thankful for you helping them. It makes everything worthwhile.”

Carvajal encourages LOs to prepare to be flexible.

“Physicians’ hours are very sporadic; their time is extremely valuable; they tend to be very short,” he says. “You need to be very much to the point and receptive to communicating with them in the early morning, the evening, on weekends, whenever their time allows. These individuals, most of the time, require a lot of hand-holding. Their mind is focused elsewhere so they rely on a lot of third parties to assist them. You need to be very basic and very straightforward with how you convey information to them.”