You're finishing residency with a high income but little saved for a down payment. The traditional 20% down requirement feels like a wall blocking you from homeownership. Fortunately, there's a powerful financial tool designed specifically for you: the Physician Mortgage Loan (Physician Loan).
This 2024 guide explains how these unique loans work, who qualifies, and how you can buy a home with little to no money down.
What Exactly is a Physician Mortgage Loan?
A physician loan is a special type of mortgage offered by banks and credit unions to medical doctors (MD, DO), dentists (DMD, DDS), and sometimes other high-debt, high-income professionals like PAs and NPs.
Its Core Benefits:
$0 Down Payment: This is the biggest draw. Most programs require 0% down, though some may require 5%.
No Private Mortgage Insurance (PMI): Typically required on conventional loans with less than 20% down, PMI can cost hundreds per month. Physician loans waive this entirely.
Flexible Debt-to-Income (DTI) Ratios: Lenders are more lenient about your high student loan debt. They may exclude your student debt from DTI calculations if it's in deferred status or use favorable income-based repayment amounts.
Flexible Employment History: They often accept a signed employment contract as proof of income, so you can buy a home before you even start your first attending job.
The 2024 Landscape: What to Expect
Interest Rates: Physician loan rates are typically slightly higher (0.125% - 0.25%) than rates on a conventional loan with 20% down. This is the trade-off for putting no money down and avoiding PMI.
Loan Limits: Limits have increased. It's now common to find loans up to $1.5 - $2 million with $0 down, depending on the lender and location.
Who Qualifies for a Physician Loan?
Profession: MDs, DOs are almost always eligible. DDS/DMDs are commonly included. Acceptance of residents, fellows, PAs, and NPs varies significantly by lender.
Credit Score: You’ll still need a good to excellent credit score (typically 700+).
Employment: A signed employment contract is usually sufficient for new attendings.
The Pros and Cons: Is It Right For You?
Pros:
Allows you to buy a home years earlier than if you had to save 20%.
Frees up cash for other goals (e.g., investing, paying off high-interest debt).
You start building home equity immediately.
Cons:
Higher Monthly Payment: A smaller (or no) down payment means a larger loan amount and higher monthly payments.
Higher Interest Rate: As mentioned, the rate is often slightly higher.
Risk of Being "Upside-Down": If the housing market dips, you could owe more on your mortgage than the house is worth.
How to Find the Best Physician Loan in 2024
Shop Around: Do NOT go with the first offer. Rates and terms vary wildly.
Check Local and National Lenders:
National Lenders: Truist, Huntington Bank, Fifth Third Bank, BMO Harris.
Local/Regional Credit Unions: Often have competitive programs.
Compare the Entire Package: Don't just look at the interest rate. Compare lender fees, origination points, and the overall APR.
Get Pre-Approved Early: This strengthens your offer when you find a home you love.
The Bottom Line: A Powerful Tool, Used Wisely
A physician mortgage loan is not automatically the "best" mortgage. It's the best tool for a specific situation: a doctor with high earning potential but limited liquid savings for a down payment.
It allows you to leverage your future income to build wealth through real estate today. Just be sure you are comfortable with the higher monthly payment and have a stable job.
Disclaimer: This information is for educational purposes only. Mortgage products and guidelines change frequently. This is not financial advice. Please consult with a qualified mortgage broker or loan officer to discuss your specific circumstances.