Defining the Physician Mortgage Loan
You can use physician mortgage loans that count residency income, future contracts, and signing bonuses, often lowering cash-reserve needs and waiving private mortgage insurance to fit your medical career timing.
Specialized underwriting for medical professionals
Underwriting teams review your residency or fellowship contracts, projected attending salary, and student-loan status so you qualify based on medical income trajectory rather than standard salaried benchmarks.
Eliminating the 20% down payment barrier
Many physician programs let you buy with little or no down payment, reducing the upfront cash you must gather during training or early practice.
Reduced down-payment options mean you keep liquidity for relocation, loan payments, or practice startup, but you should weigh potential higher rates, lender fees, and long-term interest against immediate affordability.
Conventional Mortgages: The Standard Benchmark
Conventional mortgages follow standard underwriting: expect lower interest if you have strong credit, a sizable down payment to avoid extra fees, and fewer doctor-specific flexibilities compared with physician loans.
Requirements for Private Mortgage Insurance (PMI)
When your down payment is under 20%, you’ll typically pay PMI, which increases monthly costs until you reach sufficient equity or refinance; you should factor that into affordability comparisons.
Standard debt-to-income (DTI) ratio limitations
Typical DTI limits hover around 43%, though strong credit or compensating factors can push allowances higher; you must calculate all recurring obligations when assessing eligibility.
Lenders evaluate both front-end (housing) and back-end (total) ratios: front-end commonly targets 28-31% of your gross income, while back-end typically caps around 36-43%. They include estimated mortgage principal, interest, taxes, insurance, HOA dues, and all recurring debts; deferred or income-driven student loans may be counted at a calculated monthly obligation rather than current payment, affecting your qualifying capacity.
Impact of Medical Student Loan Debt
High medical school debt raises your debt-to-income ratio, reducing conventional mortgage capacity while physician loans often account for deferred or income-driven payments, improving qualification and monthly affordability.
Favorable treatment of deferred loans in physician programs
Physician loan programs may exclude deferred student loan balances from your debt-to-income calculation or use a reduced payment factor, allowing you to qualify for larger loans and lower monthly obligations during residency or fellowship.
Challenges of high debt loads in traditional underwriting
Conventional lenders typically count full student loan balances and standard payment calculations against your DTI, which can shrink approved loan amounts and force higher down payments when you have substantial medical school debt.
Underwriters often use payment assumptions-either 1% of your student balance or the actual monthly obligation-raising your DTI and limiting loan size; you can mitigate impact by documenting income-driven repayments, securing a physician loan, or showing large reserves to improve approval odds.
Employment and Income Verification
Lenders assess employment and income differently for physician loans versus conventional mortgages; you’ll often submit residency letters, future employment contracts, or recent pay stubs rather than long W-2 histories.
Closing on a home using future employment contracts
If you’re allowed to close using a signed future employment contract, you must provide the offer, start date, and proof of any licensure; lenders will verify terms before funding.
Traditional requirements for established income history
Conventional loans typically require two years of consistent W-2 income or tax returns; you’ll need steady employment history and documentation to qualify.
Underwriters will scrutinize your two-year income history, including tax returns, 1099s, and W-2s, to validate earning stability and calculate qualifying income; if you’re a new attending with only a contract, conventional lenders may ask for additional documentation, larger cash reserves, or documented bonuses and housing stipends to offset limited employment history before approving your file.
Conclusion
Considering all points, you should favor a physician loan if you lack a large down payment, carry heavy student debt, or expect relocation; you should prefer a conventional mortgage if you can make 20% down, have a stable income history, and want lower long-term costs.
