Qualify for a mortgage before starting your residency.
Doctors are considered low-risk borrowers and can often qualify for a mortgage with a small or no down payment — but that deal may come with a high interest rate.
Lenders that offer physician mortgages
What is a physician mortgage?
A physician mortgage is a home loan tailored to doctors and recent medical school graduates. Special features that differentiate it from a traditional mortgage include:
- No PMI. You can avoid having to take out private mortgage insurance (PMI) if your down payment is less than 20% of the home’s value. See how much you could save.
- Low down payment. Qualify for a home loan with a small down payment — some lenders will even offer mortgages with no down payment.
- Qualify with student loans. Lenders understand that doctors have high student loan balances, and it won’t count against you when applying for a physician mortgage — though lenders will factor in your monthly student loan payments when deciding how much you can afford.
- Contract-based income requirements. If you’re just out of medical school, you can get a physician mortgage with a contract that states how much you’ll be making — even if you haven’t started working yet.
Example: Dr. Dave Smith’s mortgage
Dave just graduated medical school last month. He’s been accepted into a surgical residency program at Johns Hopkins and wants to buy a $200,000 house in Baltimore, but he doesn’t have any pay stubs yet because he won’t start for another two months.
Dave approaches a lender who offers a physician mortgage. He brings a copy of his work contract, his medical degree and his student loan paperwork and is approved to buy the house with a $10,000 down payment. The physician mortgage gives him time to close on the house and move in before his residency starts.
Are there any downsides?
Yes, physician mortgages often come with higher interest rates than conventional mortgages. While they’re a useful option for young doctors who won’t qualify for a conventional mortgage, it’s a good idea to compare rates against other mortgages before applying.
- Not offered by all lenders. If you want a physician mortgage, you may not have as wide of a selection.
- Higher interest rates. Some lenders may take advantage of the fact that you can’t get approved for a conventional mortgage by charging a higher interest rate.
How to compare home loans for doctors
Consider the following features when comparing mortgages:
- Interest rates. Compare the rates offered by different providers and check them against conventional mortgage rates.
- Fees. Ensure you understand all the fees associated with the mortgage before you sign on the dotted line.
- Down payment. How much of the value of the property are you allowed to purchase? This varies between lenders, though physician mortgages often allow you to purchase a home without a large down payment.
- Timeline. If you’re starting a new job, look into how long before you start work you can get approved by the lender. Some will require your contract to state that you’re starting within 30 days, while others will give you months to get settled.
- Private mortgage insurance (PMI). Check if your mortgage will require you to take out PMI, and look into how much it costs in your area. Physician mortgages often don’t require it, but in some cases you might be better off paying for PMI on a conventional mortgage if it means a lower interest rate.
How much could I save on PMI?
The cost of PMI varies depending on your creditworthiness, home’s value and down payment about, but it can range from 0.5% to 1% of the home’s value each year. So for a $250,000 home, it could cost about $1,250 to $2,500 a year — or more if you have a poor credit score.
A physician mortgage can be a useful option for young doctors looking to buy their first home, but if you have a hefty deposit saved up you may be better off with a conventional mortgage. To make sure you’re getting the best deal, compare a range of mortgage lenders before applying.
Frequently asked questions