By Kim Porter
Edited by Samuel MountjoyWhat Is a Physician Loan?
Quick Answer
A physician loan, also sometimes called a "doctor mortgage," is a special type of mortgage designed for medical professionals. These loans offer low down payments, no PMI and high loan limits. Lenders also set flexible requirements for DTI ratios and proof of income.
Buying a home can be challenging for new doctors and other medical professionals, especially those who are juggling student loan debt, lower residency income and limited savings for a down payment. Physician loans are designed to ease some of those pressures. If you're in the medical field and thinking about homeownership, understanding how these specialized mortgages work can help you decide whether they're a good fit for you.
What Is a Physician Loan?
A physician loan is a type of mortgage created for licensed medical professionals. They're designed to make financing easier and less expensive by offering low (or no) down payments, removing private mortgage insurance (PMI) and using more flexible rules when calculating student debt.
Borrowers can usually use physician loans to purchase or refinance a primary residence. Many of these programs offer adjustable-rate mortgages, and interest rates may be slightly higher compared to conventional loans to offset the lower upfront costs and added flexibility.
Learn more: What Type of Mortgage Loan is Best?
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How Do Physician Loans Work?
Physician loans work similarly to traditional mortgages but with a few key differences that can make qualifying easier for medical professionals.
- Down payment: Physician loans come with low or no minimum down payments, typically ranging from 0% to 10% depending on the loan amount.
- Private mortgage insurance: Borrowers won't have to pay for PMI, even if their down payments are under 20%.
- Loan limits: These loans tend to come with high borrowing limits, typically $1 million or more. Larger loans may require a down payment.
- Debt-to-income ratio (DTI): Physician loans may allow a DTI of up to 50% and typically don't count medical school debt if the payments are deferred or in forbearance for a certain period.
- Credit score: Borrowers must have strong credit—often with a credit score of around 660 or higher—to qualify for a physician loan.
- Employment: Lenders may accept a signed employment contract as proof of income, as long as the start date is within a certain time frame, such as 90 days from loan closing.
Learn more: Current Mortgage Rates: What Will You Pay?
Who Qualifies for Physician Mortgage Loans?
It's usually possible to get a physician mortgage loan if you are currently a resident, participate in a fellowship or have earned a specific type of degree. Qualifying degree programs typically include:
- Medical doctors (M.D.)
- Doctors of osteopathic medicine (D.O.)
- Doctors of optometry (O.D.)
- Doctors of dental medicine (D.M.D.)
- Doctors of dental surgery (D.D.S.)
- Doctors of podiatric medicine (D.P.M.)
- Doctors of veterinary medicine (D.V.M.)
Tip: Similar loan programs may also be available to other medical professionals such as physicians assistants (P.A.) and nurse practitioners (N.P.).
Pros and Cons of Physician Home Loans
Physician loans make homeownership more accessible to medical professionals, but they're not always the best fit. Consider these pros and cons before applying for one:
Pros
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Low or no down payments: You typically won't have to save for a down payment on a physician loan, which can help you buy a home sooner instead of waiting to come up with a large upfront lump sum.
-
No mortgage insurance: PMI on a conventional loan can add several hundred dollars to a monthly payment. Without it, you can free up cash for a more expensive home or put those savings toward other priorities.
-
Higher DTI ratio standards: Physician loans often allow borrowers to qualify with higher DTI ratios, provided they meet other eligibility requirements. This can be especially helpful if you have medical school debt.
-
Flexible proof of income: Lenders typically accept signed job offers as proof of income, so you can buy a home before officially starting your job.
Cons
-
Loan use restrictions: You can typically use a physician mortgage loan only to buy a primary residence, not a second or vacation home.
-
Higher interest rates: Physician loans may come with higher interest rates to compensate lenders for the risk of accepting lower down payments, waiving PMI and allowing higher DTI ratios. Higher rates will increase your monthly payments.
-
Larger loan balance: Borrowing a large amount with no down payment increases both your monthly mortgage bill and the interest you pay over the life of the loan.
Learn more: How to Shop for a Mortgage
Are Physician Loans a Good Idea?
Physician loans could be a good idea for medical professionals with strong earning potential but limited savings. Features like no down payment, no private mortgage insurance and higher DTI ratio limits can make it easier to buy a home while you're still paying off medical school loans. But that convenience may come with slightly higher rates, so if you can qualify for a conventional mortgage and avoid PMI anyway, you might pay less overall.
A physician loan may make sense if you:
- Are just starting your medical career
- Haven't saved much for a down payment
- Carry significant student debt
- Want to buy sooner and preserve cash flow
But these mortgages may not be worth it if you:
- Have already saved a down payment of around 10% to 20%
- Can avoid PMI with a conventional loan
- Want the lowest possible rate or overall cost
How to Get a Physician Loan
Getting a physician loan is similar to applying for a conventional mortgage. The key differences are how lenders verify your income and evaluate your debt. Here are the basic steps involved:
- Research lenders. Search for lenders that offer physician mortgages, and review their basic eligibility requirements. Most physician loans are limited to licensed medical professionals such as doctors, dentists and veterinarians.
- Check other loan requirements. Lenders also set criteria for minimum credit scores, maximum DTI, loan limits, down payments and other features of a physician loan. Ask whether the lender uses an adjusted DTI formula, so your full medical school balance isn't counted against you.
- Gather documents. The mortgage documents you'll need to submit may vary slightly with a physician loan. For instance, you may be able to provide a signed employment contract or offer letter as proof of income, and you'll likely need to confirm your degree, license or residency/fellowship status.
- Get prequalified. Once you narrow your options, ask at least three lenders for a rate quote. Lenders typically use a soft credit pull to check your interest rate.
- Ask for a preapproval letter. After running a hard credit check and reviewing your financial documents, a lender can issue a preapproval with your estimated borrowing limit and interest rate. The letter shows sellers you're a serious buyer with a lender who's already on board.
- Submit an application. Once you find a home you want to buy, submit a loan application with the lender of your choice.
Learn more: How to Compare Mortgage Loan Offers
Frequently Asked Questions
The Bottom Line
Physician loans can make it easier to buy a home early in your career by lowering upfront costs and offering more flexibility around how lenders treat debt and income. But those perks may come with trade-offs, such as higher interest rates or larger loan balances over time. Before applying, compare offers with conventional mortgages and weigh the total costs carefully.
These special mortgages often require strong credit, so it's a good idea to monitor your credit and consider taking steps to improve your credit score before applying.
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About the author
Kim Porter
Kim Porter began her career as a writer and an editor focusing on personal finance in 2010 and has since been published everywhere from Yahoo! Finance to U.S. News & World Report, Credit Karma, USA Today, Fortune and more.
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