Physician Loan vs Conventional Mortgage — Honest Comparison
By Mike Certo, Cornerstone First Mortgage · NMLS #260555 ·
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/REPAYE (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 PMI of ~$240/mo - 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, rate ~6.50%
- Monthly P&I: $6,070
- Total PITI: ~$7,150
Physician loan 5% down
- Down payment: $60K (5%)
- Loan: $1,140,000
- Rate: ~6.75%
- 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: $5,750/mo (with PMI of ~$250/mo)
- 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)
- Saves $250/mo 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
- Rate: ~6.40%
- PMI: ~$130/mo
- 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
- Rate: ~6.75% (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/REPAYE - ✅ 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 0.125-0.375% higher than conventional 80% LTV. The rate 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. {#faq-rate-higher}
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. {#faq-future-attending-income}
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. {#faq-refi-physician-to-conventional}
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. {#faq-both-loans}
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. {#faq-extra-principal}
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. {#faq-va-and-physician}
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. {#faq-seller-concessions}
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.
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(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.