Physician Mortgage vs Conventional Loans

The Complete Comparison

When buying a home, physicians have access to specialized loan programs that conventional borrowers don't. But having more options means more decisions. This guide breaks down every meaningful difference between physician mortgages and conventional loans so you can make an informed choice.

When to Choose a Physician Mortgage

You Have High Student Debt

If you're carrying $200,000 or more in medical school loans, the student loan treatment alone justifies choosing a physician mortgage. Conventional lenders will count 0.5% to 1% of your total balance as a monthly debt obligation, turning $300,000 in loans into $3,000 per month of DTI impact. Physician programs use your actual payment (or exclude deferred loans entirely for residents), which can mean the difference between qualifying for your home and being denied outright.

You Have Limited Savings

Early-career physicians often have minimal savings after years of training at modest salaries. With physician mortgages offering 0% down and no PMI, you can buy a home without the $100,000 or more in down payment that conventional loans effectively require to avoid the PMI penalty on a $500,000 home.

You're in Career Transition

Moving from residency to your first attending position? Physician mortgages accept offer letters as income documentation. You can qualify based on your future $300,000 salary, not your current $65,000 resident pay. Conventional loans simply cannot do this — they require 2 years of verified income history.

You're a Resident Buying Your First Home

The combination of offer letter qualification, student loan exclusion (for residents qualifying on training income), and 0% down makes physician mortgages uniquely powerful for residents. No other loan product provides all three of these advantages simultaneously.

When to Choose a Conventional Loan

You Have 20% or More for a Down Payment

If you've been practicing for several years and have accumulated significant savings, a conventional loan with 20% down eliminates PMI, typically offers a lower interest rate than physician programs, and gives you access to investment properties and second homes that physician mortgages don't cover.

It's worth noting that physician mortgage programs actually require a minimum LTV of 90.01% — they are designed specifically for high-LTV borrowers. If you have 10% or more for a down payment, conventional loans become increasingly competitive.

You Need an Investment Property

Physician mortgages are strictly primary residence only. If you're buying rental property, a vacation home, or a multi-unit property, conventional or portfolio loans are your only option.

You're Rate-Sensitive with Low Debt

If your student loans are manageable and you have strong savings, the conventional loan's lower interest rate (typically 0.125% to 0.375% less) may save more money over time than the physician mortgage's PMI and down payment advantages provide.

Real Cost Comparison — $500K Home

Let's look at a concrete scenario to understand the actual financial difference between these options.

At first glance, the conventional loan saves $780 per month ($9,360 per year). But this analysis is incomplete without considering the opportunity cost of the $100,000 down payment:

• Monthly savings with conventional: $780/month ($9,360/year)
• Opportunity cost of $100K at 7% return: $7,000/year
• Net conventional advantage: $9,360 - $7,000 = $2,360/year
• Years to recoup $100K down payment: ~42 years at this marginal advantage

Now consider the 5% down conventional scenario:

• Down payment: $25,000 | Loan: $475,000 at 6.25%
• Monthly P&I: $2,925 | PMI: $237/month (0.5% annually)
• Monthly PITIA: $3,812
• The physician mortgage at $3,893 costs only $81 more per month but requires $25,000 less at closing and carries no PMI

When you account for the opportunity cost of down payment capital and PMI savings, physician mortgages are remarkably competitive — and often the better financial choice for early-career physicians.

The Resident's Advantage

Residents occupy a unique position where physician mortgages provide the most dramatic advantages over conventional lending:

• Qualify on offer letter salary: Use your future attending income, not current trainee pay
• Exclude deferred student loans (when qualifying on training income): $200K-$400K in debt literally counts as $0 in your DTI
• Buy during training: Get into the housing market before competing as a well-paid attending in a seller's market
• Build equity early: Every month of mortgage payments during remaining training builds equity instead of paying rent
• Lock in current prices: Home prices in most markets appreciate 3-5% annually — waiting costs real money

Example: Dr. Chen is a PGY-4 with a signed contract to start as an attending in 6 months at $350,000 per year. She has $280,000 in deferred student loans. Under conventional lending, she would not qualify for any mortgage — her $65,000 resident salary and $2,800/month imputed student loan payment destroy her DTI. Under a physician mortgage, she qualifies for a $600,000+ home with $0 down, because her qualification uses $350,000 attending salary and $0 student loan payment.

The Hybrid Strategy

Many physicians find the optimal approach combines both loan types across their career:

1. Phase 1 — Buy with physician mortgage: Use 0% down and student loan exclusion (available to residents qualifying on training income) to purchase your first home with minimal cash outlay during training or early career.
2. Phase 2 — Build equity: Over 3 to 5 years, attending salary allows aggressive principal payments. Market appreciation adds additional equity.
3. Phase 3 — Refinance to conventional: Once you have 20% or more equity and 2 years of attending income history, refinance to a conventional loan for a potentially lower rate. Your financial profile is now conventional-friendly: high income, moderate LTV, strong savings.

This strategy captures the physician mortgage's accessibility when you need it most and transitions to conventional terms when they become more favorable.