Physician Mortgage Loans: Home Ownership Option for Doctors 

New doctors and medical professionals typically graduate with significant debt and low income in the early years of their careers. This would make it difficult to get a mortgage to purchase a home. But lenders look at doctors’ long-term earning potential and historically low levels of default on loans to offer this special mortgage. Read on to learn more about physician mortgage loans.

What Are Physician Mortgage Loans?

A physician mortgage loan is a specialized mortgage product for doctors. It generally allows a higher debt-to-income ratio because of the high student debt of recent graduates in the medical profession. Physicians’ mortgage loans make some special allowances for the unique circumstances of a medical career.

Physician loans are primarily intended for new medical professionals just entering the field. After so many years of medical school and high student debt after medical school, new physicians can be at a disadvantage. In addition to a large debt-to-income ratio (DTI) after medical school, many new doctors who just graduated or just started their residency might not have proof of employment. A physician’s mortgage can make buying a home easier for new doctors. 

How Do Physician Mortgage Loans Work?

Physician mortgage loans work similarly to conventional loans. However, they differ from traditional mortgage loans in several ways. First, physician loans may not require private mortgage insurance (PMI). PMI typically costs 0.1% to 2% of the loan amount, which can help you save significantly. 

The key characteristics of a physician's mortgage are:

• 0% to 10% down payment
• No PMI 
• Flexibility with employment 
• More lenient DTI 
• Variable interest rate

Who Is Eligible for a Physician Mortgage Loan?

Physician loan programs are available to doctors with doctor of osteopathic (D.O.) degrees. Some lenders also offer programs for professionals with veterinary science, osteopathy or dentistry degrees. 

In addition, you’ll need to show income and proof of employment, if possible. You can also show a contract for an internship, residency or fellowship if you don’t have pay stubs or W-2s in your position.

While requirements are more lenient, lenders will still look at the borrower’s debt-to-income ratio and, in some cases, may require private mortgage insurance (PMI). For a traditional loan, a DTI of 30% or lower is preferred, meaning that your total monthly debt obligation is 30% or less of your total income. But for new doctors, lenders will often accept a significantly higher DTI. 

You can only use a physician loan to purchase or refinance a primary residence. You need to live in the home. Using a physician’s mortgage on a second home or investment property is not allowed. Lenders often won’t allow you to use a physician loan to purchase a condo.

Pros of Mortgage Loans

There are significant advantages to physician’s mortgages, from lower monthly costs to increased accessibility of home ownership. Here’s why you should consider this mortgage:

1. Increased Accessibility to Home Ownership

Physician mortgage loans are designed specifically for medical professionals. This loan can help you overcome obstacles such as high student loan debt or lower credit scores. A physician’s loan makes owning a home more attainable for newly graduated doctors and medical professionals.

2. No Mortgage Insurance Requirement

Physician mortgage loans do not require private mortgage insurance (PMI). This can save physicians a significant amount of money over time. 

For example, if you purchase a $300,000 property with a 2% PMI, you’ll pay $6,000 per year in PMI. Even a PMI of 1% would mean an extra $3,000 a year you could use to pay off student debt. Usually, you’ll only need to pay PMI until you reach 22% in equity, but for many borrowers, that’s 10 years. 

3. Flexible Underwriting Criteria

Physician mortgage loans often have more lenient underwriting criteria, especially about income requirements or debt-to-income ratio, because lenders understand the unique situation of early-career doctors. This flexibility can make it easier for physicians to qualify for a loan, as lenders understand their long-term earning potential. 

Cons of Mortgage Loans

You should consider some disadvantages to physicians’ mortgages before going ahead with this loan. Here’s what you need to know:

1. Potential for Higher Interest Rates

While mortgage lenders don’t require PMI and offer more lenient qualification criteria on physicians’ mortgages, they make up for this additional risk in interest rates. Most physician mortgage loans may have higher interest rates than traditional mortgage loans. In addition, as variable rate mortgages, you could pay more over the loan’s lifetime if interest rates increase.  

2. Larger Monthly Payments

Physician mortgage loans may offer advantages like lower down payment requirements but can result in larger monthly mortgage payments, as you’ll start with little or no equity and have to build it over time. 

3. Limited Options and Availability

Physician mortgage loans may not be as widely available as traditional mortgage loans, and the options for loan terms and lenders may be more limited. You can still shop around for the best available interest rates and total fees, but your options may be limited. 

Alternatives to Mortgage Loans

Is a physician’s mortgage right for you? Here are three other mortgage options to consider. 

1. Conventional Mortgage Loans

Conventional mortgage loans are the most popular traditional mortgage option for home buyers. If you have proof of income and qualify for a conventional mortgage, you might secure lower interest rates, fewer fees or better terms. If you can’t pay 20% down on the mortgage, you’ll need to pay for private mortgage insurance on the conventional loan. 

In some cases, getting a conventional loan with PMI allows you to get a mortgage with lower interest and faster qualification than a physician’s mortgage. You could also get a fixed-rate mortgage, so you don’t need to worry about future rate increases. 

2. FHA Loans 

FHA loans are insured by the Federal Housing Administration. The mortgage requirements for FHA loans are less stringent than conventional loans. You could qualify for an FHA loan with a credit score as low as 500. 

You can’t always get an FHA loan. Whether you’ll qualify depends on the property you’re planning to buy. There are lending limits with FHA loans. In most places, the average property range for an FHA loan is from $420,680 to $970,800.  

FHA loans, if the property you want to buy qualifies, can be a good choice for a low down payment, less stringent qualification requirements and a fixed interest rate. 

3. VA Loans

VA loans, backed by the Department of Veterans Affairs, are available for qualified veterans, active service members and spouses. If you meet the requirements, a VA loan qualifies you for more favorable interest and mortgage terms, even with a lower credit score. 

VA loans don’t require a down payment or PMI. VA loans have a lower lending limit than physician loans, but they also tend to have lower interest rates, helping you save more long term.

Best Lenders for Physician Mortgage Loans

Find the best lenders for physicians’ mortgage loans here.

Buying Your First Home

If you’re a recent medical school graduate, you could still be a new homeowner. Physician mortgage loans offer more flexible requirements to purchase a new property. You can also consider FHA or VA loans if you meet the requirements. With several loan options available, student debt or residency shouldn’t stop you from buying your first home or refinancing your existing home. Find the best loans for health professionals here. 

Frequently Asked Questions