Interest rates are rising: How to navigate the current market when buying a home

By Eileen Derks, SVP, Head of Mortgage Services at Laurel Road; A 2022 Platinum WCI Medical School Scholarship Sponsor

Since early 2022, the Federal Reserve has hiked mortgage rates multiple times to curb inflation. After staying at historic lows in 2020 and 2021, interest rates are at their highest levels since 2009 and are expected to rise further into 2023.

However, rising interest rates shouldn’t necessarily discourage you from buying a house. For doctors considering buying a home, now may be an excellent time to buy. Even though interest rates have risen significantly since 2020, they are still at historic lows compared to the last few decades. For example, the average annual interest rate stayed above 8% from 1973 to 1992, reaching 16.63% in 1981. Compared to this almost 20-year period, current interest rates are still quite low.

For doctors looking to buy their own home, now could be a good time to act as interest rates are expected to continue rising into next year. In such an environment, the earlier you act, the better, as it can help you get a lower rate. Let’s examine some aspects of obtaining a mortgage that physicians should also consider given current market conditions.

Understand Fixed vs. ARM options

The two main mortgage types are fixed rate and adjustable rate (ARM). Which one is better for you depends on your personal financial circumstances and goals.

  • With a fixed rate mortgage, the interest rate stays the same over the life of the loan, which means your monthly payment stays the same. The main benefit of this type of loan is predictability, which allows borrowers to plan their repayment. A good credit rating could help you secure a low interest rate.
  • With a adjustable rate mortgage, after the initial fixed rate period (initial fixed rate options are three, five, seven, or 10 years), the interest rate changes periodically to reflect current market conditions. When market interest rates rise, your interest rate – and with it your loan payment – increases. When prices fall, you pay less. Typically, there is a cap and a floor that limit how much the interest rate you pay can go up or down. This can be a good option for those buyers who don’t plan to stay in the home beyond the fixed rate period, or for those who prefer a lower interest rate initially and can absorb volatility later in the loan.

Some borrowers prefer the stability of a fixed rate, while others don’t mind risking a rate hike because they can save money if rates stay low or fall. Factors like whether you’re planning to move in a few years, whether you know your income will increase significantly in the future, and whether you’re happy with the refinance are all important considerations when deciding between fixed-rate and adjustable-rate mortgages — plus to see where the prices are currently.

Benefits of rate locks

When you apply for a mortgage, your lender may offer you a fixed rate mortgage — a way to lock in your interest rate between the time you sign a purchase agreement and the time you own the home. An interest rate lock protects you from market fluctuations and guarantees that a mortgage lender will maintain a specific interest rate for a specific period of time. There are usually no charges for blocking your plan. Shopping and comparing interest rates along with processing and loan fees is a tried and tested method when looking for a mortgage versus just an interest rate.

Whether you have your plan locked or not, be mindful of your credit and financial status during the application process. Any changes in these areas or your loan amount may affect your interest rate. Policies and terms vary by lender, so be sure to read the fine print when evaluating lenders.

Mortgage options for doctors

As a doctor or dentist, you have special mortgage options available to help you save money and time. When comparing doctor mortgages, it’s important to carefully consider several factors:

  • Annual Percentage Rate (APR): This is a standard calculation meant to represent the cost of borrowing and is a combination of the interest rate and many of the fees associated with the mortgage.
  • conditions: Including the term of the loan, whether the interest rate is fixed or variable, mortgage insurance requirements and any special features such as prepayment penalties. Take the time to figure out which term works best for your unique situation.
  • Loan Amount Limits: These limits are based on the mortgage itself, so a loan with a $1 million limit and a 10% down payment requirement means you can look at homes costing around $1.1 million.
  • PMI: If you have less than 20% for a down payment, you usually have to pay private mortgage insurance (PMI). However, some doctor mortgages allow you to skip the PMI (even without the 20% down payment), increasing your affordability and potentially saving you hundreds of dollars each month.
Pay off student loans quickly

Laurel Road’s Physician Mortgage is a home loan tailored specifically for doctors and dentists at up to 100% financing1 or no down payment, for loans of $1 million or less, no PMI2. In addition, these mortgages have fewer restrictions than traditional mortgages, recognizing the creditworthiness and earning potential of healthcare professionals. Laurel Road also offers rebates on lender fees with no processing or application fee—a value of $1,095—and closing cost credits of up to $650.3

Career phase considerations when buying a home

Where you are in your career will likely affect the timing of your home purchase and how much house you can afford. Resident physicians are still working to achieve their highest earning potential, often managing significant medical school debt within their budgets. Before deciding to buy a home, residents should ask themselves questions such as:

  • What motivates me to think about buying a home right now? Short term and short term financial goals? Life events, e.g. marriage, children, new job?
  • Is there a high probability that I will have to move to another area within 3-5 years?
  • What are my professional goals? Do I need to attend more school or training to specialize in an area?
  • If I don’t buy now, what are the costs if I don’t buy a house now?
  • What are my budget constraints and how would a monthly mortgage payment fit into a 50/30/20 plan? If you use this budgeting approach, your monthly mortgage payment will be included in Bucket 1 with your “essential needs,” which shouldn’t account for more than 50% of your budget.
  • How badly do I need a home? For example, if you have a growing family, you may need more space right away.

Mortgage rates rise

After considering questions like the above, it may make sense to hold off on buying a home until you’re further along in your career. Still, these factors should not deter residents from considering a home purchase before their residency is complete. With the current unusual market conditions and the likelihood that interest rates will rise over the next year, it may make sense for residents to buy sooner rather than later and start earning equity in their homes now.

To understand if buying a home is right for you at this point in your career and in these market conditions, talk to an experienced mortgage professional about your goals and budget. They can help guide you and determine the best path for your home purchase. Learn more about Laurel Road Physician Mortgage Options here.


  1. 100% financing and no Private Mortgage Insurance (PMI) is available only to interns, residents, fellows, physicians, dentists, clinical professors, researchers, or senior physicians with a current license to practice medicine and a Doctor of Medicine (MD), Doctor of Osteopathic degree Medicine (DO), Doctor of Podiatry (DPM), Doctor of Dental Surgery (DDS) or Doctor of Dentistry (DMD). 100% financing is available when purchasing or refinancing the primary residence and the loan amount does not exceed $1,000,000. Retired doctors are not eligible. Additional terms and restrictions may apply.
  2. Only available to Interns, Residents, Fellows, Physicians, Clinical Professors, Researchers, or Principal Physicians with a current license and degree in Doctor of Medicine (MD), Doctor of Osteopathic Medicine (DO), Doctor of Dental Medicine (DMD), Doctor of Dental Surgery (DDS) or Doctor of Podiatry (DPM). Retired doctors are not eligible. Additional terms and restrictions apply.
  3. No processing/application fee means a savings of $1,095. Other rental fees apply. Please see your credit estimate for any other fees that may apply. See frequently asked questions for more details. Laurel Road offers lender loans of up to $650 for the closing cost of your mortgage. The loans may not exceed the borrower’s actual closing costs. For more information, see rewards program here.

[Editor’s Note: Many thanks to Laurel Road, one of our Platinum Level (contributing $8,000+) Sponsors for the WCI Medical School Scholarship and its longtime relationship with WCI. This is the second of our five scholarship-sponsored posts for 2022. Over the years, Laurel Road has helped thousands of readers refinance their student loans and secure home mortgages with great service and rates. Thank you for supporting those who support this site and especially the scholarship. All proceeds go to the scholarship winners.]

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