What I Know About Physician Mortgages

Maybe you already know these things but as a physician buying our first home 1.5 years ago I was completely in the dark about what options were available to me. Our savings was virtually nil since my wife’s income had paid for our years in med school, we had a new baby, and moved to a big city with a high cost of living for my 6 year residency. So yeah I was definitely on the hunt for the mortgage loan that gave me the most short-term gains so that we could get our family established in our new city. 

Some considerations before I list out the pros of a physician mortgage:

• Our situation was that we had virtually no savings, and my wife was working as an independent contractor and the primary caretaker for our daughter. The costs of childcare and waitlists to get into daycares in our area were prohibitive so we had to get very creative with our income. If you ask Lauren, this is more the norm than the exception for medical families that already have children in residency.
• My residency is six years so we really weren’t having the rent vs buy conversation, but it’s definitely something to consider for shorter residency programs or if you know you aren’t interested in staying in your new location long term. For us we knew we could rent the first year, learn where to buy, buy and own for at least 5 years and then either sell or convert to a rental property after residency.
• Like any homebuyer, we had a very specific budget and safety requirements. But we weren’t worried about school districts which would have made things more complicated if we had older children. And we were not buying our dream home, we were buying the home that was comparable or slightly better than rental options.

So talk with your partner and nail down your requirements and think through these considerations in your situation. 

Now the pros of physician mortgages are pretty great in my opinion so let’s list them out:

• $0 down: One of the largest draws is they do not require any down payment. So for those of us who haven’t been saving for 4 years, you don’t need to wait any longer to buy.
• No PMI: In addition to not having a down payment, they don’t tack on private mortgage insurance which is usually added for down payments of less than 20%. 
• Student Loan exclusion: For physician loans your student loans are excluded from your debt-income ratio. Yes let me say that again. They pretend that the gray cloud over your head is in fact not there at all. All other consumer debt, personal loans etc are considered but this is a huge differentiator.
• Potential for bigger loans: Because you’re going to be a big fancy attending someday, lenders expect you to have great job stability and high earning potential, so you could walk away with a bigger loan than you might have thought you could get. In Philly, that could be the difference of a better neighborhood, a garage or a rooftop deck. 
• No landlords: Yep, stop paying other people and start paying yourself (I mean the bank back). Renting is sometimes the right choice but if you're at the stage in life where you’re thinking about buying a house, it's hard to not constantly think about how much money you’re giving away to a landlord instead.
• Benefit available to you: It is a benefit available to you now that you are a physician so why not take advantage of it. 

Do your due diligence in comparing traditional mortgage offerings, if you have savings to put down see how that changes the equation, and obviously evaluate the terms that work best for you and what your long term goals are. For us, the physician loan was the best choice.

These are all my opinions, I am not a broker or professional in physician loans, these are just the things I learned from our experience. If you have recommendations or questions, leave me a comment and I’ll work to get some knowledgeable partners in to answer for you.