How to decide if a physician mortgage loan is worth it

Is a physician mortgage loan worth it before you have 20% to put down?

A physician mortgage is a home loan that may allow a low or zero down payment, often without private mortgage insurance (PMI), for MDs, DOs, and sometimes dentists. Some lenders accept a signed employment contract as income proof. Rates, loan caps, and cash reserve rules vary, so ask two lenders for Loan Estimates.

Use this test: the full payment, including principal, interest, property tax, and insurance, fits today's spending plan; your 403(b), 457(b), or 401(k) deferrals stay unchanged; and cash remains after closing. If any piece fails, wait. Your portfolio is there to pay for the life in your spending plan. It should not be quietly patching a house payment that was too large from the start.

The interest is the part easy to miss. Borrowing another $135,000 at an illustrative 6% over 30 years adds about $809 a month in principal and interest. The loan does not make the house cheaper, and it is rarely worthwhile if a fellowship or job change could move you within a few years; closing and selling costs can outrun the benefit.

In the last year of training, let one attending paycheck land first

A signed contract may let you close before your new job begins. But until one full attending paycheck passes through your spending plan, the payment rests on a guess. Wait for a complete pay stub: it shows actual withholding, retirement deferrals, and disability premiums. Then price the house against what reaches your bank account, not the salary in the offer letter.

Run Reena's numbers in order: an early attending with forgiveness ahead

For an early attending with Public Service Loan Forgiveness (PSLF) ahead, the first question is what the home does to monthly saving before forgiveness arrives. Annex Wealth Management checks the cash flow in sequence, because a projected future payment is not cash in today's account.

1. Gather two Loan Estimates, the PSLF payment count and income-driven payment from StudentAid.gov and the servicer statement, two recent pay stubs, year-end 403(b) and 457(b) statements, a bank statement showing cash, and the monthly spending plan. A lender must provide a Loan Estimate within three business days of an application.

2. Price the payment at 5% down and 20% down. 3. Find which monthly line covers the difference. 4. Mark the year the plan changes, such as the expected end of student loan payments.

Reena (hypothetical), age 38, is a hospital-employed anesthesiologist married to a public school teacher. They have two children under 6, and she still has a residency-era rollover IRA. They rent for $3,500 a month, hold $90,000 in cash, and want a $900,000 house.

At 5% down, $900,000 × 5% = $45,000. Add about $20,000 in closing costs: $45,000 + $20,000 = $65,000 paid at closing. Their cash afterward is $90,000 − $65,000 = $25,000.

For illustration, assume a 6% rate over 30 years. Principal and interest on $855,000 are about $5,126 a month. Compared with $3,500 rent, the difference is $5,126 − $3,500 = $1,626. Reena covers it from taxable saving: $3,500 − $1,626 = $1,874 a month. Her 403(b) and 457(b) deferrals remain $4,083 each month.

The $135,000 of extra borrowing compared with 20% down accounts for about $809 of the payment. A quick check: extra borrowing × rate ÷ 12 = first-year interest. So $135,000 × 6% ÷ 12 = $675 a month in interest; the full $809 also pays principal.

The answer flips at the taxable-saving row: it falls, but her retirement deferrals do not. Property tax and insurance are not included in this table and must also come from taxable saving. Home prices and the investments Reena keeps can both fall, and she could get back less than she invested.

• Two Loan Estimates
• PSLF count and servicer payment
• Two recent pay stubs
• Year-end 403(b) and 457(b) statements
• Bank statement and spending plan

Should a two-physician couple with $900,000 saved just put 20% down?

For Jun and Patrice, 20% down on a $1.6 million house is $320,000; borrowing that amount at an illustrative 6% costs about $1,600 a month in first-year interest. They should put 20% down only if cash outside retirement accounts covers $320,000 and leaves spending reserves. Keep the cash only if it can go into tax-advantaged savings room they would otherwise lose that year.

Reena faces a different choice: little cash, forgiveness four years away, and two young children. A physician loan can fit if the full payment does. Some programs cap the loan or require a down payment at Jun and Patrice's price, so they need the lender's maximum before treating zero down as an option.

At Reena's kitchen table, the teacher spouse often raises the question first, kindergarten registration date in hand. Settle three numbers together: the monthly payment, cash left after closing, and monthly retirement deferrals.

Pausing 457(b) deferrals for two years to build a 20% down payment gets the order backward. At the 2026 limit of $24,500, that gives up $49,000 of tax-deferred contribution room that cannot be recovered later. For a doctor on an income-driven plan, it can also raise the income used to set the student loan payment.

Can you get out of a physician mortgage once the student loans are forgiven?

Before closing, you can walk away; the rate-lock expiration date on the Loan Estimate is the deadline to watch. After closing, the down payment and closing costs are spent. For Reena, about $65,000 has left the bank, and selling the house would cost several percent of its price.

Later, after you reach 20% equity, you can ask about refinancing into a conventional loan, or ask the lender whether it offers a recast after a lump-sum payment. A refinance brings new closing costs; a recast may carry a fee. Neither is automatic, and neither returns the cash spent to buy the house.

Bring your Loan Estimate and PSLF count to Annex Wealth Management

Talk with Annex Wealth Management advisors once you have a Loan Estimate and before its rate lock expires. Bring both Loan Estimates, your StudentAid.gov PSLF count, two pay stubs, year-end 403(b) and 457(b) statements, and the monthly spending plan so the payment can be tested against deferrals line by line.