5 Best Physician Mortgage Loans in Alabama

Physician mortgage loans in Alabama are available to medical doctors, dentists and other professionals depending on the specific loan program of the lender.

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Key Terms

  • An Alabama physician mortgage loan comes with high loan limits and options for up to 100% financing. Interest rates can vary.
  • Student loan payments typically receive favorable treatment with a doctor loan, making it easier to qualify for a mortgage.
  • Physician mortgages don’t require private mortgage insurance (PMI) even with a 0% down payment.

Nicknamed the Yellowhammer State after its state bird, Alabama is home to a diverse collection of wildlife as well as over 5 million Americans. In addition to being emblematic of the South, it has also been the scene of some of the country’s most pivotal historical moments, such as the Selma march for civil rights in 1965.

Alabama is also growing in popularity as a residence for many professionals, including medical doctors. The latest numbers from the American Association of Medical Colleges indicate that Alabama is home to 10,614 active physicians. Those physicians are spread across the state from Huntsville to Dothan.

For many, Alabama is a great place to settle down and purchase a home. With median prices around $318,000, according to the Alabama Association of Realtors, many professionals in the Yellowhammer state may find themselves well positioned to afford a home. 

Doctors and dentists who practice in Alabama (and certain other high-earning professionals) can take advantage of physician mortgage loan programs, allowing them to purchase a home without a down payment to get their start in healthcare and homeownership. Like other home financing, you’ll need to review terms for loan repayment and interest rates, but your job reference is also very important considering it’s the proof that you have the future income to make monthly payments later.

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Pros/Cons of Alabama physician mortgage loans

While physician mortgage loans provide many professionals with the help they need to purchase a home, it is always worth it to weigh the pros and cons when making such a serious financial commitment.

The pros that come with Alabama physician loans, include:

  • No down payment
  • Higher mortgage limits
  • No PMI
  • Student debt does not impact eligibility

What are some of the cons involved? Those considering applying for an Alabama physician loan should consider that they can involve:

  • Additional debt / possibility of buying too much house
  • Potentially higher rates
  • Bank expects you to become a customer (e.g. open a checking account, possibly moving direct deposit).

In some scenarios, applicants could also purchase more house and incur more debt than they should, tempted by the higher limits on these financial products. 

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5 Top Alabama physician home loan lenders

If you’re ready to check out the top physician mortgage lenders in Alabama, here are the best options we’ve found through our research.

1. First Horizon Bank

First Horizon Bank is a full-service bank located in Memphis, Tennessee. They recently completed a merger with Iberia Bank and are scheduled to be merged into TD Bank in 2023, making this an active bank. They also happen to have a competitive doctor mortgage program.

We spoke with a loan officer at First Horizon Bank to get some inside information on its doctor mortgage program for you. Here’s what you need to know:

  • 0% down up to $1,500,000
  • 30 Year Fixed Rate
  • ARMs available
  • Primary residences only
  • Student loan debt is not included in calculating debt-to-income ratio when deferred for more than 12 months.
  • Maximum financing amount is $2 million
  • No PMI
  • No pre-payment penalty

When you’re ready to connect with a loan officer experienced in doctor mortgages, use our form to quickly match with eligible loan programs based on your specific circumstances. Unlike a refinance or a traditional mortgage loan, your physician home loan is based on the offer you’ve received from an employer. Physicians of all types may be able to take out this loan.

2. Flagstar Bank

Flagstar Bank was chartered in 1987 and holds around $23 billion in assets, making it a medium-sized bank. However, they punch well above their weight when it comes to mortgages and operate as the sixth largest bank mortgage originator nationally. Not surprisingly, a big part of their success has been a doctor mortgage program.

We contacted Flagstar Bank to learn more details about their physician loan. Here are the key terms that you need to know?

  • 5, 7 & 10 year ARM  products
  • 0% down up to $1,000,000 (first time homebuyer – have not owned in last 3 years)
  • 5% down up to $1,500,000 (first time homebuyer – have not owned in last 3 years)
  • If not a first-time home buyer
  • 10% down up to $1,000,000
  • 15% down up to $1,500,000
  • 20% down up to $2,000,000
  • 25% down up to $2,500,000
  • Fixed products
  • 10% down on the jumbo fixed to a max loan amount of $1,000,000 with no PMI
  • 20% down on the jumbo 30 year fixed with a max loan amount of $3,000,000
  • For first time home buyer (have not owned within last 3 years):
  • 3% down up to $647,200
  • If not a first time home buyer:
  • 5% down up to county limit (with and without PMI)
  • Medical doctors and lawyers are eligible. We weren’t able to confirm that the program is available to dentists and other (non-doctor) medical professionals, but encourage you to contact them to confirm.

The total reported lender fees as of the date of this article were $1,395 ($550 processing and $845 for underwriting).

Another benefit of Flagstar is that they can submit a full file to underwriting for an actual loan approval (not pre-approval) without having a purchase contract signed, which makes your competitive with all cash offers and the process less stressful for you. There is no application fee or prepayment penalties. They also offer a float down, buy down, and recast option.

When you’re ready to connect with a loan officer experienced in doctor mortgages, use our form to quickly match with eligible loan programs based on your specific circumstances.

3. Citizens Bank

Citizens Bank is one of the largest banks in the Untied States. I bet you didn’t know that it’s headquartered in the smallest state: Rhode Island. With over $160 billion in assets, it’s no surprise that Citizens offers a full range of financial products, including a physician loan.

We contacted a loan officer at Citizens Bank to learn more about their doctor mortgage loan program specifically. Here are details you won’t find anywhere else:

  • 5% down up to $850,000
  • 10% down up to $1,000,000
  • Practicing licensed medical doctors (MD and DO), dentists (DDS and DMD), residents and research physicians are eligible
  • Licensed residents, fellows and interns can borrow a maximum of $600,00 (or $400,000 if unlicensed)
  • No more than 10 years out of residency
  • Self-employed professionals are eligible with a two-year history of self-employment income
  • New medical professional graduates who are under contract for residency within 60 days of closing and have not yet obtained a license are eligible
  • No private mortgage insurance
  • 40% max debt-to-income ratio
  • Student loan debt that’s deferred for more than 12 months from the date of closing can be excluded from DTI calculations
  • Construction-to-permanent loans available with a maximum of 89% financing
  • Fixed rate or adjustable-rate mortgage options
  • Interest-only option on certain adjustable-rate mortgage options (max financing at 89%)

When you’re ready to connect with a loan officer experienced in doctor mortgages, use our form to quickly match with eligible loan programs based on your specific circumstances.

4. City National Bank of Florida

City National Bank of Florida is a medium-sized bank with over $22 billion in assets. Although they are headquartered in Florida, they offer a physician loan in all 48 contiguous states and are eager to find physicians and other professionals as new customers.

We spoke with a loan officer at City National Bank of Florida to gather details on the doctor mortgage program. Here is what we learned:

  • Physicians, Dentists, Attorneys and CPAs are eligible
  • 3% down up to $650,000
  • 5% down up to $850,000
  • 10% down up to $1,250,000
  • 10.51% down up to $2,500,000
  • 15.51% down up to $3,000,000
  • Primary residence and vacation homes are available (higher down payments required for secondary houses)
  • Can finance condos but only with a 20% down payment
  • Minimum credit score required is 660 but better rates/options require 720 credit score
  • Self-employed individuals need to provide 2 years of income verification

When you’re ready to connect with a loan officer experienced in doctor mortgages, use our form to quickly match with eligible loan programs based on your specific circumstances.

5. Alerus Mortgage

Alerus Financial Corporation is a publicly traded chain of financial institutions headquartered in North Dakota. They offer banking, mortgage, wealth management and retirement services, including a physician loan for those doctors looking to buy a house.

We contacted a loan officer at Alerus to learn more about their physician loan program and here are the key terms that you need to know:

  • Must be within your first two years of practice to qualify.
  • 0% down up to $750,000
  • 5% down up to $1,000,000
  • ARM and fixed rate financing available

Alerus also has a special $20,000 closing guarantee with all mortgages. The $20,000 guarantee is paid to the seller if the loan does not close based on the conditions and expiration date of the approval as outlined in the Alerus pre-approval letter.

In other words, this $20,000 guarantee gives you extra negotiation leverage when competing with all-cash home purchase price offers. If your mortgage doesn’t close, the seller is compensated $20,000 for their trouble.

Of course there’s some fine print on the guaranty so keep in mind that it’s not available for new construction and isn’t applicable if:

  • Borrower, seller or any third party cause the delay or elect not to close on the real estate sale.
  • Borrower fails to sign required disclosures or provide key documents by the requested due date.

The $20,000 guarantee, if applicable, is available to the seller only and not any of seller’s agents, representatives or related parties.

When you’re ready to connect with a loan officer, use our form to quickly match with eligible loan programs based on your specific circumstances.

Is an Alabama physician mortgage loan right for you?

Deciding whether or not an Alabama physician mortgage loan is right for you means asking a few questions about where you are in your life and career. 

Is it the right time to buy? This can depend on a number of factors, including where you are in your professional career. Do you foresee yourself staying in the area in the long term, or will your career take you in a new direction? Are you sure that your job is the best fit? If you are less than 2 years into a position, you may want to wait and confirm that you will stay in that job in the long term before committing to a house. When you find the right property on NMLS and are offered a great new position through a recruiter, for example, you can get that dream home on the line before you start the job.

Consider, too, that with 0% down on a home, it can be quite easy to buy too much house. As a general rule, it is advisable to keep a purchase to around 2x your salary. Only enter into an Alabama physician mortgage loan if you are confident that you will adequately scale it to your income and not get underwater with your loan. 

If getting the lowest rate possible is a priority for you, you may want to forego a doctor mortgage, save up 20 percent and take out a conventional loan. 

Finally, consider that Alabama lenders offer physician loans because they covet long-term relationships with high-income professionals. By taking out an Alabama physician mortgage loan, you are establishing a financial relationship that could very well benefit you throughout your life and career. 

Examples of doctors who take out physician loans in Alabama

It might help when making a decision about a physician loan to consider some scenarios that illustrate how these financial products benefit professionals and why certain professionals choose them. The following are some common scenarios under which a doctor might apply for a physician loan. 

Doctor who doesn’t have down payment

Shannon has just graduated from the Heersink School of Medicine at UAB. She has already secured a residency at Children’s of Alabama and she’s looking forward to establishing a base nearby. Given the size of her student debt, however, and her full-time commitment to her studies, she has not been able to save enough for even a 3.5 percent down payment on an FHA loan. 

Fortunately, she has heard about doctor mortgages and is ready to take advantage of the opportuning. The time is right for her to establish roots and she plans on building her career in the area in the long term. A doctor mortgage is a great option for her, allowing her to finance a starter home without cash in hand. 

Doctor who wants to maximize leverage

Rick has been running a successful local practice in Birmingham for several years now. He has a solid patient roster and reliable income, and he has even been able to invest money in a portfolio that is doing quite well. He and his wife recently spotted a home they love for sale down the street from his practice. 

Rick considered liquidating some of his investments to use the cash as a down payment on a conventional loan. With the investments doing so well, however, he’d prefer not to do that. Applying for a physician loan makes sense for Rick, as he can access a loan with little to no money down. 

If you’re looking to explore physician mortgage loans in other states, check out our national overview of physician loans as a starting point in your search.

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Joshua Holt

Joshua Holt is a licensed mortgage loan originator (NMLS #2306824) and founder of Biglaw Investor. His mortgage expertise lies in the areas of professional mortgage loans, particularly for lawyers, doctors and other high-income professionals. Prior to Biglaw Investor, Josh practiced private equity mergers & acquisition law for one of the largest law firms in the country.

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