How ‘Physician Mortgage Loans’ Work for Doctors With Debt

Tell someone you’re a doctor, and the reaction is often: “You must be rich.” But physicians who are just finishing medical school or are in their early careers might feel far from it. The average medical school debt is more than $200,000, with total debts including undergrad climbing well north of $250,000.

That leaves house-hunting physicians in a predicament. A key factor for lending institutions is the “debt to income” ratio, a calculation which indicates if you already have too much debt to pay your mortgage. That single equation could eliminate you from lenders’ mortgage requirements.

But young doctors are also in a unique situation. Yes, they carry above-average levels of debt, but they are on a path to substantial income in future years. That’s where the physician mortgage loan (PML) becomes a useful option. 

What Is a Physician Mortgage Loan?

A PML is designed to help physicians access mortgages despite large amounts of debt. They are also sometimes available to dentists, veterinarians, podiatrists, and others, according to Stephen Chang, MD, a radiologist, and a managing director at Acts Financial Advisors in McLean, Virginia.

Dr Stephen Chang

The key features, according to James M. Dahle, MD, an emergency physician and founder of The White Coat Investor, include:

No required down payment, which is typically 20% with a conventional loan.No private mortgage insurance (PMI). This is often a requirement of traditional loans, designed to protect the lender if the buyer misses payments. PMLs don’t involve PMI even if you don’t put down 20%.No paystubs. With a conventional loan, paystubs are often required to prove income level and reliability. PMLs will often allow an employment contract in place of those. Different consideration of the student loan burden.Dr James M. Dahle

Those are the upsides, of course, but there may be downsides. Dahle says a PML might involve slightly higher rates and fees than a conventional mortgage does but not always.

Who Is Best Suited for a Physician Mortgage Loan?

Dr Cobin Soelberg

Financial advisors caution that everyone should first consider their full financial picture before applying for a mortgage, PML or otherwise. “If you don’t have the money saved for a down payment, one can ask if you are financially prepared to purchase a home,” says Cobin Soelberg, MD, an anesthesiologist and owner of Greeley Wealth Management, a financial planning firm serving physician families in Bend, Oregon. 

If your savings are slim, you might need to build those accounts further before pursuing home ownership and the expenses that come along with it. 

Dr Mark P. Eid

Your credit score can contribute to the equation. “With any loan product, we always recommend working to optimize your personal credit score as soon as possible before applying for a loan,” says Mark P. Eid, MD, a dermatologist and co–managing director (with Chang) at Act Financial Advisors. “Once you get into the high 700s, you’ve typically qualified for the best interest rates, so while that perfect 850 is nice to achieve, it’s by no means necessary.”

Also, assess your reasons for purchasing a home and whether it will fit your lifestyle in the coming years. “The main reason that [my wife and I] wanted to buy a home was for stability,” says Jordan Frey, MD, founder of The Prudent Plastic Surgeon. “After living in apartments for years, we wanted a place that was truly our own. We definitely felt disappointed and frustrated when worrying that our student debt may limit our ability to do this.”

Dr Jordan Frey

Like many physicians, Frey had taken on a huge amount of debt, to the tune of half a million dollars in student loans and credit card debt when he finished training in 2020. The question Frey and his wife wrestled with was: “How much debt should we take on in addition to what we already have?”

What Are the Risks? What’s in the Fine Print?

The eased limitations of PMLs come with potential pitfalls, and physicians should not imagine that they have unlimited buying power.

“Many physicians buy more expensive or bigger houses than they need simply because banks are willing to lend physicians money,” Soelberg warns. “So, the doctor gets locked into a large mortgage and cannot build wealth, save for retirement, and repay their student loans.” 

As you shop around, beware of omissions and scams. When meeting with lenders, Frey recalls that some didn’t even present PMLs as an option, and others presented them with unfavorable terms. He was careful to look for disadvantages hidden in the fine print, such as a potential “big hike in the rate a year later.” 

But sometimes, a scam is not outright deception but is more like temptation. So it’s important to have your own best interests in mind without relying on lenders’ advice. 

“When we were shopping around, some mortgage lenders would [offer] $1.5 million, and we thought ‘that makes no sense,'” says Frey. “[Physicians] have big future income, which makes us attractive to these lenders. No one in their right mind would give a mortgage like this to anyone else. They aren’t worried about whether it’s a smart decision for you or not.” 

What Other Red Flags Should You Look Out for?

Frey recommends medical professionals beware of these red flags when shopping for PMLs:

A request for any type of collateral, including your medical practiceA rate that is much higher than othersA lender is pushing you to borrow a higher amount than you’re comfortable with A lender attempts to influence your decision about the size of your down payment

Remember, if you are choosing an adjustable-rate mortgage (ARM), your rate will recalibrate on the basis of the market’s rates — for better or worse. This means that your payment might be higher or lower, taking current interest rates into account, based on the market.

Looking back, Frey says he might reconsider his decision to use a 10-year ARM. He and his wife chose it because the rate was low at the time, and they planned to pay off the mortgage quickly or move before it went up. But the uncertainty added an element of pressure. 

How Can PMLs Contribute to Overall Financial Health?

Frey says his physician mortgage was “a huge advantage,” allowing him and his wife to put 0% down on their home without PMI. But most importantly, it fit within their overall financial plan, which included investing. “The money that we would have potentially used for a down payment, we used to buy a rental property, which then got us more income,” he says. 

Of course, buying a rental property is not the only path to financial health and freedom. Many people approach a home as an investment that will eventually become fully their own. Others might put that down payment toward building a safety net of savings accounts. 

Used strategically and intentionally, PMLs can put you on a more predictable financial path. And with less money stress, homebuying can be an exciting milestone as you plan your future and put down roots in a community. 

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