What is a physician mortgage loan?

How do physician mortgage loans work?

Mortgage industry veteran Casey Fleming, author of “Buying and Financing Your New Home,” says physician mortgage loans are mostly geared toward doctors just out of residency who haven't had enough time to establish salary history or save up a substantial down payment. These loans let eligible borrowers purchase a home right after they graduate school and finish their residencies without having to meet the strict requirements of other types of home loans.

In fact, doctor loans may come with:

• No down payment requirement
• No private mortgage insurance (PMI)
• Higher thresholds for debt (to accommodate for medical or dental school debt)
• Less stringent employment requirements (a job offer may suffice)

These home loans for eligible medical professionals are typically for primary residences only, and may be offered in amounts up to $1 million with zero money down. For larger home loans of $1.5 million or $2 million, applicants may need a down payment of 5% to 10%, depending on the lender.

» MORE: How to choose a mortgage lender

Physician loan borrower’s qualifications

The type of medical professionals that can qualify for a physician loan can vary from lender to lender. However, these loans are often available for doctors and dentists who have the following credentials:

• Doctor of Dental Medicine (D.M.D.)
• Doctor of Dental Surgery (D.D.S.)
• Doctor of Osteopathic Medicine (D.O.)
• Doctor of Podiatric Medicine (D.P.M.)
• Doctor of Science (D.S.)
• Doctor of Veterinary Medicine (D.V.M.)
• Medical Doctor (M.D.)

Existing doctors and dentists who are already working in their field are eligible for these loans. For those who aren't working yet, Fleming pointed out that borrowers may need to have completed a residency and accepted a position related to their degree and specialty before they can qualify. Some lenders also offer physician loans to eligible medical professionals who are currently in residency or completing fellowship training.

Credit score requirements are often higher for physician loans than for conventional home loans. In fact, borrowers may need a credit score of 660 or higher depending on the lender.

Property qualifications

Physician loan uses are fairly broad, although the borrower must be purchasing a home to use as a primary residence. Loan limits can also apply and cap how much medical professionals can spend on a property. For example, some lenders only offer physician loans in amounts up to $1 million with no money down. Others may loan up to $2 million for a home with a down payment of 10% or more.

Pros and cons of physician mortgage loans

Physician mortgage loans let medical professionals purchase a property they wouldn't otherwise qualify for. They do this by basing approvals on future income potential instead of how much they're earning today.

That said, these loans still come with their share of advantages and disadvantages:

Physician mortgage alternatives

If you're considering a physician loan but you're not sure if it's the best option, consider these alternatives.

Conventional mortgage

If you are already working as a medical professional and you have a minimum credit score of 620, you may be able to qualify for a conventional mortgage. These loans require private mortgage insurance (PMI) if you put down less than 20%, but interest rates are typically lower than you'll find with physician loans.

You can also have PMI removed from the home loan when the amount you owe is scheduled to fall to 80% of the original value of your home.

One downside of this type of mortgage for medical professionals is maximum debt-to-income (DTI) requirements. Conventional mortgages often require applicants to have a DTI of 45% or less, which can be a problem for new doctors and dentists with substantial student debt.

FHA home loan

FHA home loans let borrowers put down as little as 3.5% with a credit score as low as 580, and they come with competitive interest rates. Debt-to-income (DTI) requirements may also be more flexible than you find with conventional mortgages.

However, FHA loan limits set a cap on borrowing that may not work for medical professionals who want to purchase an expensive property.

In 2024, FHA loan limits are set at $498,257 across most of the U.S. and $1,149,825 in certain areas with a high cost of living

VA loan

Medical professionals who are active duty military members or veterans can also consider VA home loans. These loans come with flexible credit requirements and the option to put down $0, as well as competitive interest rates. VA loans also come without a requirement for mortgage insurance, although a VA funding fee must be paid at closing.

» LEARN: How does a mortgage work?

Bottom line

Physician loans make it possible for eligible medical professionals to purchase a home sooner with terms that are suitable for their future financial picture. For example, doctors and dentists may be able to use a job offer to get funding of up to $1 million for a home with no money down and no requirement for PMI.

However, because these loans are typically offered as adjustable-rate mortgages (ARMs) and tend to come with higher interest rates, they may not be ideal for the long term. Fortunately, it's possible to refinance physician loans in the future to lock in a lower rate or better loan terms.