Physician Loan vs Conventional Mortgage — Honest Comparison

By Mike Certo, Cornerstone First Mortgage · NMLS #260555 · Updated May 24, 2026

The 60-second answer

A physician loan beats a conventional mortgage when any of these apply to you:

You have less than 20% to put down (physician loan eliminates PMI; conventional doesn't above 80% LTV)
You have substantial student loans on IBR/PAYE (physician loan uses actual payment; conventional uses 1% of balance)
You're a resident, fellow, or new attending without 2 years of attending W-2s (physician loan accepts signed contract; conventional doesn't)
You need to borrow above the conforming limit ($832,750 in Arizona 2026 — physician loan goes to $2M; conventional jumbo requires higher down + stricter underwriting)
Your DTI is between 43% and 50% (physician loan ceiling is higher than conventional)

A conventional mortgage beats a physician loan when:

You have 20%+ to put down and can afford conventional terms (80% LTV conventional often has slightly lower rate than physician loan, and no rate premium for the no-PMI benefit you don't need)
You want a second home or investment property (physician loan is primary residence only)
You want a multi-unit property (2-4 units; physician loan is 1-unit only)
You want the simplest underwriting path (conventional automated underwriting is faster than physician loan's manual underwrite)

This page works through the math across 4 realistic Arizona physician scenarios.

Scenario 1: New attending with $50K savings + heavy student loans

Profile: - PGY-3 IM at Mayo Clinic Phoenix - Signed attending contract with HonorHealth for $295K, starting July 1 - $50,000 liquid savings - $310,000 student loans on IBR ($310/mo payment) - 740 FICO - Wants $750,000 home in Arcadia

Conventional loan math (would they even qualify?)

Conventional underwriting: - Income: Lenders use PGY-3 salary ($72K = $6,000/mo), NOT the future attending contract - Student loan: 1% of balance = $3,100/mo phantom payment (conventional rule) - Down payment: $50K savings = 6.7% down on $750K → conventional 95% LTV with monthly PMI - New PITI: $4,800/mo (loan + tax + insurance + PMI on $712,500 loan) - DTI: ($3,100 student + $480 other + $4,800 PITI) / $6,000 income = 138% → DECLINED

Conventional loan doesn't work. Period.

Physician loan math

Redwood Sequoia Medical Professionals: - Income: Uses signed attending contract = $295K = $24,583/mo - Student loan: Uses actual IBR payment = $310/mo - Down payment: $0 (100% LTV at 740 FICO up to $2M) - New PITI: ~$5,200/mo (loan + tax + insurance + NO PMI on $750K loan) - DTI: ($310 student + $480 other + $5,200 PITI) / $24,583 = 24% → EASY APPROVAL

Plus the buyer keeps $40K of savings (only $10K used for closing costs).

Winner: Physician loan. Conventional simply doesn't exist for this borrower.

Scenario 2: Mid-career attending with $200K savings + minimal student loans

Profile: - Mayo Phoenix anesthesiologist, 8 years attending - $480K W-2 base + bonus - $200,000 liquid savings - Student loans paid off - 760 FICO - Wants $1,200,000 home in Paradise Valley

Conventional 80% LTV (with 20% down)

Down payment: $240,000 (oops, only have $200K) → would need to put 16.7% down OR finance differently
If 20% down: $240K, loan = $960K (would be high-balance conforming if above limit; $832,750 is the cap; so this would actually be jumbo)
Conventional jumbo at 80% LTV: ~$960K loan, no PMI, at the same illustrative planning rate
Monthly P&I: $6,070
Total PITI: ~$7,150

Physician loan 5% down

Down payment: $60K (5%)
Loan: $1,140,000
Pricing: quoted same-day for both structures
Monthly P&I: $7,395
Total PITI: ~$8,475
No PMI

Trade-off analysis

Conventional jumbo saves ~$1,325/mo BUT requires $240K down (vs $60K)
Capital preservation: Physician loan keeps $180K of savings free
Over 5 years: Conventional saves ~$79,500 in monthly payments BUT physician loan kept $180K invested
If $180K invested at 7% annualized return for 5 years: $252K → $72K of investment gains

The math is close — depends on what the borrower does with the cash they don't put down. Aggressive investors come out ahead with physician loan + invested savings. Conservative buyers come out ahead with conventional jumbo + lower monthly payment.

Winner: Depends on borrower preference. This is the scenario where conventional + 20% down is a legitimate competitor.

Scenario 3: Dentist building practice + buying $850K home

Profile: - DDS, 4 years out of dental school, just bought into practice partnership - Income variable: $280K-$420K over recent years (K-1 distributions vary) - $85K savings (recently used some for practice buy-in) - $95K dental school loans on Standard 10-year repayment ($1,100/mo payment) - 720 FICO - Wants $850K home in Gilbert

Conventional path

Income calculation: 2-year average K-1 = ~$340K = $28,333/mo
Student loan: $1,100/mo (actual payment) vs $950/mo (1% of $95K — actual is higher, so uses actual)
DTI calc: ($1,100 student + $400 other + $5,500 projected PITI) / $28,333 = 25% → qualifies
Down payment: $85K = 10% down → would have PMI
Total monthly includes conventional PMI
OR put 5% down to leave more cash for practice: Even higher PMI

Physician loan path

Same income calculation
Same DTI math
0% down option (no PMI ever) — uses 100% LTV at 720+ FICO
Total monthly: $5,810/mo (no PMI)
Avoids monthly PMI immediately
Keeps $85K savings entirely for practice / emergency

Winner: Physician loan, clearly. The no-PMI benefit + capital preservation match the dentist's situation (just bought into practice, needs cash flexibility).

Scenario 4: Veterinarian with steady income, modest home target

Profile: - DVM, 6 years post-graduation - Banfield veterinarian, $148K W-2 base - $45K savings - $185K vet school loans on PAYE ($310/mo payment) - 715 FICO - Wants $415K home in Mesa or Chandler

Conventional 95% LTV (with 5% down)

Income: $148K = $12,333/mo
Student loan: $310/mo PAYE actual (PAYE counts actual, including under conventional now per recent updates)
Down payment: $21K (5%)
Loan: $394K
Pricing: quoted same-day for both structures
PMI: applies on conventional (none on a physician loan)
Total PITI: $3,180/mo
DTI: ($310 + $250 other + $3,180) / $12,333 = 30% → qualifies

Physician loan 0% down

Same income, same DTI math
Down payment: $0 (100% LTV at 715 FICO up to $1.5M)
Loan: $415K
Pricing: quoted same-day for both structures (slight premium)
PMI: $0
Total PITI: $3,250/mo
Total DTI: 30% → qualifies easily

Trade-off

Conventional saves ~$70/mo in payment (lower rate)
BUT physician loan keeps $21K in savings (preserves cash)
Over 5 years: Conventional saves ~$4,200 in monthly payments
$21K invested at 7% annualized for 5 years: $29.5K → $8.5K of investment gains

For this vet, physician loan slightly wins on long-term math due to capital preservation. If she's not an aggressive investor, conventional 95% with PMI is a reasonable choice.

Winner: Physician loan, narrowly. Either product works for this scenario.

The decision framework

Use this checklist to decide:

Pick physician loan when: - ✅ You don't have 20% down - ✅ You have substantial student loans on IBR/PAYE - ✅ You're a resident/fellow with a signed attending contract - ✅ You want to preserve capital for investments / practice / emergency reserves - ✅ Your loan amount would be above conforming ($832,750 in AZ) - ✅ You qualify for 100% LTV (720+ FICO) — biggest spread vs conventional

Pick conventional when: - ✅ You have 20%+ to put down comfortably - ✅ You're buying a second home, investment property, or multi-unit - ✅ Your specific scenario has a clear rate advantage that beats the no-PMI benefit - ✅ You want the simplest, fastest underwriting path

Always: - Run the math both ways with a real lender - Bring your actual numbers, not estimates - Compare 5-year and 10-year total cost, not just monthly payment

Frequently asked questions

Is the physician loan rate really higher than conventional?

Sometimes slightly higher than conventional 80% LTV pricing — it's file-specific. The premium exists because the lender accepts higher LTV, no PMI, and more flexible underwriting. The "rate cost" is usually less than the "PMI savings" — the no-PMI benefit usually wins on total cost when you'd otherwise be in PMI territory.

Will conventional ever underwrite my future attending income?

No. Conventional underwriting requires 2 years of W-2 income at the salary level supporting the loan. New attendings don't have this by definition. This is the single biggest underwriting difference between physician loans and conventional.

What if I refinance from physician loan to conventional once I have equity?

You can. Once you reach 20% equity (through paying down + appreciation), refinancing to conventional 80% LTV captures any rate savings. Many physician loan borrowers do this 5-10 years into their loan. The trade-off: refi costs (~$5K-$10K) and a fresh underwrite.

Can I have BOTH a physician loan AND a conventional loan?

Yes — on different properties. The physician loan is primary residence only; conventional can finance a second home or investment property simultaneously. Common pattern: physician loan on primary residence, conventional or DSCR on investment properties later.

Does the no-PMI math change if I plan to pay extra principal?

Slightly. Extra principal payments accelerate equity-building, which would normally trigger PMI removal on conventional. With physician loan + no PMI, you save the PMI but lose the "PMI removal milestone." The math comparison depends on how aggressively you pay extra. For most physicians, the no-PMI benefit still wins.

What about VA loans for physicians who are also veterans?

Eligible! Use the VA loans Arizona site (azvaloanexperts.com) for VA-specific content. VA loans for veteran physicians have similar 0%-down benefits + no PMI + funding fee (waived for 10%+ disability). The choice between VA and physician loan depends on your specific situation.

How much can my closing costs be reduced?

Seller concessions can cover up to 6% of purchase price on most physician loans (varies by program). For a $750K home, that's up to $45K in seller-paid closing costs — often more than your actual closing costs. The buyer's market may or may not support negotiating this.

Talk to Mike about your specific math

Run YOUR numbers, not the illustrations above. Bring your actual income, savings, student loans, target home, and Mike will show you the side-by-side that matters for your decision.

(480) 296-6513 · Mike Certo, NMLS #260555 · Cornerstone First Mortgage NMLS #173855

Sources

Redwood Residential Acquisition Corporation — Sequoia Medical Professionals Program Eligibility Guide v1.1 (effective March 2, 2026)
Fannie Mae Selling Guide B7-1-02 — Mortgage Insurance Coverage
FHFA — 2026 Conforming Loan Limits

Mike Certo NMLS #260555 · Cornerstone First Mortgage NMLS #173855 · Equal Housing Lender. Educational content, not a loan commitment. Comparisons illustrative; your specific outcomes depend on individual qualifying. Loans subject to buyer and property qualification.