As a medical professional, whether you’re just starting your residency or you’re an attending physician, you face unique financial challenges—especially when it comes to homeownership. Physician home loans, also known as doctor or physician loans, are designed specifically to meet the needs of doctors like you. These specialized mortgage products are ideal for new residents and physicians who may have significant student loan debt and are entering the workforce with entry-level salaries.
However, every borrower’s situation is unique, and while a physician home loan offers many benefits, it’s not always the best solution. In some cases, applying for a conventional loan might be more advantageous. Thankfully, as a doctor, you have multiple options to consider when pursuing homeownership.
What Are Physician Home Loans?
Physician home loans were introduced about two decades ago when a few forward-thinking banks recognized that physicians tend to have low default rates and significant earning potential. Today, many financial institutions offer these loans, actively seeking to serve medical professionals.
Physician mortgages are available to residents, physicians, and doctors (MD, DC,DO, DPM,DVM,OD). These loans typically require little to no money down (0-5%), do not require private mortgage insurance (PMI), and can be either fixed-rate or variable-rate loans.
One of the key advantages of physician loans is that most lenders will accept an employment contract as proof of income. This allows you to purchase a home and get settled before you even start working. Additionally, many lenders offering physician loans will not include your student loan debt in your debt-to-income ratio, making these loans easier to obtain compared to conventional loans.
What Are Conventional Loans?
Conventional loans are available through banks, private lenders, and credit unions. Unlike FHA or VA loans, they are not insured by the federal government, meaning the lender assumes all the risk. Because of this, conventional loans are typically more difficult to qualify for, but they also offer some of the most favorable terms on the market.
A conventional loan with a 20% down payment often comes with the lowest interest rates and fees. However, to qualify, lenders typically require a strong credit score, a favorable debt-to-income ratio, and thorough income verification, often through W-2 forms, paycheck stubs, and prior tax returns. If you choose to put down less than 20%, PMI will be added to your monthly mortgage payment.
Conventional loans might be a good fit if you’ve saved up for a sizable down payment and want to minimize your long-term mortgage costs. This option is particularly well-suited for established physicians who are prepared to make a significant down payment and want to take advantage of the lower interest rates that conventional loans typically offer. However, it’s important to weigh this against the potential cost of PMI if you’re unable to put down 20%.
Why Should I Consider a Physician Home Loan?
While conventional loans can be a solid choice, physician home loans often provide a better deal for medical professionals, especially those who are newer to their careers. Physician loans are designed to help cash-strapped residents and physicians achieve homeownership, even when they’re managing large amounts of student debt.
Many physician loans also come with higher borrowing limits than conventional loans, and the absence of PMI can result in lower monthly payments. Importantly, physician loans typically exclude student loan debt from your debt-to-income ratio, removing a significant barrier to homeownership for many doctors.
Ultimately, physician mortgages offer the most flexible terms for doctors, making them an attractive option if you’re just starting out. However, if you’re in a position to make a substantial down payment, a conventional loan with its lower interest rates might be worth considering.
To make the best decision, compare the features and benefits of both mortgage options. We will connect you with a vetted lender who can help with this decision. And if you’re still unsure, check out our extensive Physician Mortgage Loans FAQ for more information on how these loans can help you achieve your homeownership goals.
