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Why a Physician Mortgage Makes Sense at Different Career Stages

Published October 11, 2022

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Mortgage Lending
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After completing medical school, new doctors face a unique set of financial challenges. The average medical school graduate in 2022 owes more than $241,000 in total student loan debt, while the average salary for a resident is only about $60,000. This high debt-to-income ratio (DTI) and large student loan payments every month can make home ownership difficult for doctors early in their careers.

Recognizing that early career doctors may have difficulty saving for a down payment on a home, some lenders such as Laurel Road offer special mortgage products for physicians and dentists1 to help them achieve home ownership. These loans have fewer restrictions than conventional mortgages and recognize the lender’s trust in medical professionals’ creditworthiness and earning potential.

Physician Mortgages

A physician mortgage, sometimes called a “doctor mortgage,” is a special type of mortgage designed specifically to help make home ownership accessible to physicians and dentists managing a large amount of medical student debt. Some of the benefits of this type of mortgage may include:

  • 0% down payment. Lenders recognize that physicians and dentists may have difficulty saving for a down payment on a home on top of managing medical school debt. To help alleviate the pressure, a physician mortgage typically requires no down payment.1
  • No PMI. Compared to traditional mortgages, which typically require borrowers to pay private mortgage insurance (PMI) if they’re unable to make a down payment of 20%, a physician and dentist mortgage requires no down payment and no PMI.2
  • Low interest rates. Competitive fixed and variable APRs for different terms are typically available.

Regular Mortgages

Unlike physician mortgages, conventional mortgages typically have more rules and restrictions. Most notably, a conventional mortgage usually requires home buyers to provide a 20% down payment.

PMI with less than a 20% down payment

With a conventional mortgage, if a buyer is unable to make a 20% down payment, lenders will typically require you to pay for private mortgage insurance, or PMI, to protect themselves in case you’re unable to make your payments. PMI is usually added to your monthly mortgage payment and typically costs between 0.6% to 1.9% of your loan amount annually, although a high credit score and/or rising property values in your area could help keep that cost on the lower end. PMI can be a significant additional monthly expense on top of a monthly mortgage payment and may not go away until your mortgage balance reaches 78% of the home’s original value or you reach the halfway point of your mortgage term. Note that there are some exceptions to PMI with some specialized mortgage products, such as with VA loans.

Market interest rates

There are two types of mortgages: a fixed rate mortgage or an adjustable rate mortgage (ARM). A fixed rate loan has an interest rate that stays the same throughout the life of the loan while in the case of an ARM, the interest rate adjusts throughout the loan term. Fixed rate loans have various term options for borrowers, while ARMs usually have a 30-year term. Most fixed rate mortgages will have a 30-year or 15-year term, though some lenders offer 20-year terms.

How does my down payment impact my mortgage?

Estimate the financial impact of your down payment using this simple calculator.

Use the percentage slider or enter a specific dollar amount above. 20% down can help you avoid private mortgage insurance (PMI).

Are you a doctor? You may be able to avoid PMI with 0% down.
Estimated Home price
$
Estimated Interest Rate
Estimated Fixed-Rate Loan Term
Down Payment Amount
$
Down Payment Percentage (%)*
20%

Your Estimated Mortgage Results

  • $0

    Monthly Payment
  • $0

    Total Loan Amount
  • $0

    Total Interest Paid
This calculator is for illustrative purposes only and does not include any taxes, fees, or private mortgage insurance.

Why a physician mortgage makes sense for doctors at different career stages

For many doctors pursuing home ownership, taking advantage of a physician mortgage can be an excellent option especially during early- and mid-stage career.

Early Career

During or right after residency or fellowship, a physician mortgage makes particular sense for doctors in their early careers. While the intensity of medical training may mean you haven’t been able to save up for a down payment, this type of mortgage is specifically designed to support the unique financial needs of doctors at this career stage. While you continue to reach your full earning potential, a physician mortgage can allow you to invest and start building equity in your home. Learn more about budgeting to reach your goals as a resident or early attending here.

Mid-Career

For doctors in the mid-career stage, a physician mortgage may still be a good option as you finish paying off medical school debt and continue to build on your earning potential as an attending physician. Depending on your other financial goals, putting $0 down,1 may give you the financial flexibility to focus on other goals. Perhaps your additional income is tied up in establishing a private practice Perhaps you’d like to purchase a vacation home?

As you start to reach your higher interning potential, doctors at this stage might also consider other mortgage products in addition to physician mortgages. It’s important to talk to your lender to understand all the options available to you and determine which mortgage option makes the most sense for you based on your financial needs.

No matter where you are in your medical career, a physician mortgage could help you get closer to home ownership with specific benefits for physicians and dentists, including no down payment or PMI1 and other financing options tailored to doctors. Learn more about Laurel Road’s Physician Mortgage options here.

Sources:

 

Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice, legal, financial, or tax advice. We cannot and do not guarantee their applicability or accuracy in regard to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues. Calculators do not include the fees and restrictions that certain products may have. This calculator does not indicate whether you would qualify for a Laurel Road loan. Please visit the applicable banking product pages on laurelroad.com for specific terms and conditions.

In providing this information, neither Laurel Road nor KeyBank nor its affiliates are acting as your agent or is offering any tax, financial, accounting, or legal advice.

Any third-party linked content is provided for informational purposes and should not be viewed as an endorsement by Laurel Road or KeyBank of any third-party product or service mentioned. Laurel Road’s Online Privacy Statement does not apply to third-party linked websites and you should consult the privacy disclosures of each site you visit for further information.

NOTICE: This is not a commitment to lend or extend credit. Conditions and restrictions may apply. All mortgage products are subject to credit and collateral approval. Mortgage products are available in all 50 U.S. states and Washington, D.C. Hazard insurance and, if applicable, flood insurance are required on collateral property. Actual rates, fees, and terms are based on those offered as of the date of application and are subject to change without notice.

  1. 100% financing is only available to interns, residents, fellows, doctors, dentists, clinical professors, researchers, or managing physicians with a current license and a degree of Doctor of Medicine (MD), Doctor of Osteopathic Medicine (DO), Doctor of Podiatric Medicine (DPM), Doctor of Dental Surgery (DDS), or Doctor of Dental Medicine (DMD). Only available when purchasing or refinancing with no cash out on a primary residence and loan amount does not exceed $1,000,000. Retired doctors are not eligible. Additional conditions and restrictions may apply.
  2. Only available to interns, residents, fellows, doctors, dentists, clinical professors, researchers, or managing physicians with a current license and a degree of Doctor of Medicine (MD), Doctor of Osteopathic Medicine (DO), Doctor of Podiatric Medicine (DPM), Doctor of Dental Surgery (DDS), or Doctor of Dental Medicine (DMD). Retired doctors are not eligible. Additional conditions and restrictions apply.

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