With unique income trajectories and substantial student debt, physician loans can offer higher borrowing limits, lower down payments, and underwriting tailored to your training stage; traditional mortgages may provide more lender competition, predictable terms, and better rates if you have established income and credit, so assess your residency status, repayment plans, and long-term goals to choose the right option.
Understanding Physician Loans
These programs let you leverage expected future earnings: many offer 0-5% down, waive PMI, and permit up to 100% LTV for residents, fellows, and early-career attendings. Underwriting emphasizes your employment contract and specialty-an expected $250k-$400k attending salary can outweigh six-figure student debt-while rates and terms (15- or 30-year fixed, ARMs available) remain broadly comparable to conventional options.
Definition and Features
You receive mortgage features tailored to medical careers: low or no down payment, PMI elimination, and conventional loan structures with 15- or 30-year fixed options or ARMs. Lenders often allow higher LTVs and flexible DTI calculations, and some will consider deferred student loans using a percentage-of-balance method; exact pricing and eligibility vary by lender and specialty risk profile.
Eligibility Criteria
To qualify you typically must be a licensed or soon-to-be licensed medical provider (resident, fellow, or attending) and present a signed employment contract or offer within 90-180 days of closing. Lenders usually expect credit scores around 680-740, acceptable DTI up to roughly 43-50%, and will treat student loans either by actual payment, IDR payment, or a calculated percentage of the balance.
For example, if you have $250,000 in student loans in deferment, some lenders may use a 0.5% balance calculation ($1,250/month) or your IDR payment (possibly $0), which can swing your qualifying DTI dramatically; with favorable treatment you might qualify for a $500k-$700k mortgage based on an anticipated $300k attending salary, whereas stricter payment treatment could reduce that by 20-30%.
Overview of Traditional Mortgages
Most buyers choose traditional mortgages for stability and predictability: you get fixed-rate and adjustable-rate options, common 15- and 30-year terms, and down payments usually between 3% and 20%. Lenders typically require PMI if you put under 20%, conforming loan limits vary by county, and your interest rate will hinge on credit score, DTI, and loan type.
Definition and Features
Conventional loans follow Fannie Mae/Freddie Mac guidelines, FHA allows 3.5% down with a 580 minimum, VA offers 0% down to eligible veterans, and USDA provides rural, income-capped zero-down options. You should compare mortgage insurance (FHA MIP, conventional PMI), appraisal and property standards, and whether the loan is fixed or adjustable when choosing a product.
Eligibility Criteria
Lenders evaluate your credit score (conventional often 620+), debt-to-income ratio-commonly capped near 43%-50%-employment history, and reserves. Income verification typically requires W-2s or two years of tax returns; self-employed borrowers need profit-and-loss statements and bank records. Property appraisal and condition also factor into final approval.
Student loans affect your DTI either by actual payment or a standardized percentage (many lenders use 1% of the outstanding balance), so a $150,000 loan can add roughly $1,500/month for qualifying purposes under that method. You can improve approval odds with a larger down payment, documented cash reserves, or steady bonus income; past bankruptcies usually require two-to-four years of seasoning depending on the loan type.
Key Differences Between Physician Loans and Traditional Mortgages
Underwriting and borrower profile diverge sharply: physician loans prioritize future earning potential and often accommodate high student debt, while traditional mortgages emphasize current income, strict DTI limits, and asset reserves. You benefit from features like waived PMI, lower or no down payments, and interest-only options during training; conventional products generally demand larger down payments, standard amortization, and tighter documentation to qualify.
Interest Rates and Terms
Physician loan rates frequently track conventional mortgage rates but can include specialty terms-interest-only periods of 1-5 years, ARMs with lower initial caps, or lender credits tied to your employment contract. You’ll typically see spreads within 0.25-0.5% of comparable conventional offerings, so comparing APRs, potential prepayment flexibility, and the long-term cost of interest-only versus immediate principal reduction matters.
Down Payment Requirements
Physician programs often permit 0%-5% down and waive private mortgage insurance, letting you purchase sooner; conventional conforming loans usually require 3%-20% down with PMI under 20%. For example, on a $600,000 home a 0% physician loan eliminates a $120,000 down payment but may require documented employment start dates or larger reserves to qualify.
During residency lenders commonly request a residency contract or letter of intent and might require a modest down payment or a co-signer if your stipend is low; once you’re an attending, 0% down offers become more accessible. Note many physician lenders cap zero-down programs-typical purchase-price limits are $1M-$1.5M-so verify caps, reserve requirements, and whether savings come from waived PMI or slightly higher interest.
Loan Limits and Repayment Options
Loan size and repayment flexibility differ: conforming limits vary by county and year (generally in the $700k-$800k band), while physician lenders commonly underwrite jumbo loans to $2M+ with flexible DTI rules. You’ll see standard 15- and 30-year fixed terms, ARMs, and interest-only options during training, so weigh short-term affordability against long-term amortization costs when choosing a product.
Underwriting treats student loans inconsistently-some lenders use your actual income-driven repayment amount; others apply a percentage (0.5-1%) of the outstanding balance as a notional monthly payment-impacting your DTI and maximum loan size. You can often refinance into conventional terms after 2-5 years once income stabilizes, reducing rate or shortening term as your financial picture strengthens.
Advantages of Physician Loans
You benefit from lower upfront costs: many physician loan programs offer 0-5% down and waive private mortgage insurance on loans often up to $1-2 million, so you can preserve cash for relocation or loan repayment. Underwriting commonly factors in future attending income and allows higher debt-to-income ratios-often up to about 45-50%-so heavy student debt won’t automatically disqualify you. This speeds purchase and keeps monthly strain manageable during residency and early practice.
Benefits for Recent Graduates
If you’re newly graduated, lenders will often accept a signed employment contract or offer letter as qualifying income, enabling you to buy during residency or fellowship. For example, a final-year resident with $300,000 in student loans and a $250,000 attending contract could qualify for a low- or no-down-payment physician loan because the contract drives income qualification. Lenders typically require minimal cash reserves compared with conventional options.
Flexibility in Income Verification
Lenders accept varied documentation-signed contracts, offer letters, recent pay stubs, 1099s, or bank statements-to verify your income and earning potential. That flexibility means you can use an attending offer, documented moonlighting, or anticipated bonus structures rather than relying solely on residency pay to meet debt-to-income thresholds. Different lenders weight these sources differently, so compare underwriting rules before you apply.
Underwriting nuances affect how your income and student loans are treated: some lenders require a start date within six months of closing, others within twelve, and many will use the contracted attending salary to calculate qualifying income. Some underwriters apply the actual student loan payment, an income-driven plan payment if documented, or a standard percentage of the balance (for example, 0.5%) when assessing DTI. Ask each lender how they handle deferred payments, bonuses, and sign-on guarantees so you can choose the best fit.
Disadvantages of Physician Loans
Despite low down payments and waived PMI, you may pay more overall: physician loans commonly carry 0.25-0.75 percentage points higher rates and occasional fee add-ons. For example, a 0.5% premium on a $400,000, 30-year loan increases your monthly payment by roughly $110-$130 and raises lifetime interest by tens of thousands, so weigh immediate savings against long-term costs.
Higher Interest Rates Compared to Traditional Mortgages
Higher rate snapshot
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You often face a 0.25-0.75% rate premium versus conventional loans because lenders price in low/no down payment risk and flexible debt-to-income assumptions. |
That gap can boost monthly payments by about $100-$250 on $300K-$700K loans and add tens of thousands in interest over 30 years, so compare APRs, not just nominal rates. |
Potential for Higher Fees
You can encounter higher upfront fees: origination or lender fees commonly range from 0.5-1.5% (so a $500,000 loan could incur $2,500-$7,500), plus processing, underwriting, and third-party charges that some physician programs pass through instead of waiving.
For example, a 1% origination fee on $400,000 plus a 0.5% rate premium might cost you $4,000 upfront and an extra $60-$90 monthly, adding thousands over time; you should request an itemized Good Faith Estimate and negotiate or compare lenders to limit these added costs.
Factors to Consider When Choosing
Compare down payment, PMI, interest rate, DTI treatment, loan limits, and prepayment terms when deciding.
- Down payment: physician loans often allow 0-10% vs. conventional 3-20%;
- PMI: frequently waived or reduced on physician programs with low down;
- Underwriting: many lenders factor future attending salary or offer student-loan DTI adjustments;
Recognizing the net effect on upfront cash, monthly payment, and resale timeline helps you choose wisely.
Financial Situation and Goals
Your available cash, student loan balance, and investment objectives determine whether physician loan features pay off. For example, with $180,000 in student debt and $40,000 cash, a physician loan with 0-5% down can lower your initial outlay by $10k-$30k versus a conventional mortgage. Run scenarios comparing expected market returns (6-8%) against mortgage savings to decide if preserving liquidity serves your long-term goals.
Long-term Plans and Stability
Your expected tenure and career moves change the math: moving in 2-4 years favors lower closing costs and quicker breakeven, while staying 7+ years magnifies the value of a lower long-term rate or avoiding PMI. A 0.25% rate premium on a $500,000 loan raises payment roughly $75/month and about $900/year, so align loan choice with your likely time horizon and relocation risk.
You can also plan to refinance: many physicians take a 0-10% down physician loan during training, then refinance to a conventional mortgage after board certification; refinancing $400,000 from 5.25% to 4.5% can lower your payment by roughly $250/month. Verify any prepayment penalties, assumption rules, and lender portability, and run five- and ten-year cost comparisons to see if short-term flexibility outweighs long-term rate savings.
Final Words
Now weigh how long you plan to stay, your student debt, down payment capacity, and tolerance for slightly higher rates or fees against benefits like no PMI and flexible underwriting; physician loans can speed purchase and lower upfront costs, while traditional mortgages often offer lower rates and broader options. Choose the path aligned with your cash flow, career plans, and future refinancing ability, and consult a specialist to finalize.
