Should Physicians Put 20% Down on a Home?
TLDR:
Physicians often hear they must put 20% down on a home to avoid PMI and qualify for a good mortgage. But with specialized physician mortgage programs, doctors can often purchase a home with little or no down payment—and still enjoy great terms. Learn when 20% down makes sense and when other options might be a smarter financial move.
The 20% Down Rule – Where Did It Come From?
The 20% rule is common advice passed down from older generations or personal finance experts. Traditionally, putting 20% down helps borrowers:
- Avoid private mortgage insurance (PMI)
- Qualify for better rates
- Borrow less and reduce monthly payments
But for physicians—who often finish training in their early 30s with substantial student debt—this rule doesn’t always make financial sense.
The average medical student graduates with over $200,000 in debt. After years of residency and fellowship, many early-career doctors are short on liquid savings. Yet their high future earning potential puts them in a unique financial position—one that physician mortgage lenders understand.
The Financial Profile of a Physician Buyer
Physicians are considered “low risk, high debt” borrowers. They often have:
- High, stable income after training
- High student loan balances
- Excellent credit histories
- Lower savings early in their careers
- A need for flexibility during relocation or practice setup
Because of this, specialized physician mortgage programs help doctors buy homes without requiring 20% down—and without sacrificing strong loan terms.
Understanding Physician Mortgage Programs
Physician mortgage loans are designed specifically for medical professionals. Their goal is to make homeownership accessible without forcing borrowers to wait years to save up a large down payment.
Key benefits include:
- 0–10% down payment options
- No PMI, regardless of down payment
- Acceptance of signed employment contracts
- Flexible debt-to-income (DTI) allowances
- Specialized underwriting that accounts for student debt
These programs are available through banks such as Fifth Third Bank, UMB, Fairway Mortgage, and more.
Does 20% Down Ever Make Sense?
Yes—there are scenarios where putting 20% down is the right choice. Here are a few:
1. You Want to Minimize Monthly Payments
A larger down payment means borrowing less. This lowers your monthly mortgage bill and reduces long-term interest costs.
2. You’re Buying a Jumbo Home
Some high-value properties fall outside the scope of physician loan programs. In that case, you may need to go conventional—and that means 20% or more down.
3. You’re Financially Comfortable
If you’ve been working for several years and built strong savings, putting 20% down could reduce your interest rate and keep your total mortgage smaller.
Why Many Doctors Avoid 20% Down
For many physicians, especially early in their career, putting 20% down is a financial stretch. Here’s why many opt not to:
🔹 It Depletes Liquid Assets
Saving $100K+ for a down payment might leave you without reserves for emergencies, relocation costs, or professional expenses.
🔹 Better Uses for Your Money
Instead of tying up cash in equity, you could:
- Pay off high-interest debt
- Invest in retirement accounts
- Build a practice
- Fund continuing education
🔹 Doctor mortgage loans don’t require PMI, even with a small down payment. That removes one of the biggest downsides of less-than-20% loans.
DTI and Why It Matters
Your debt-to-income ratio is a key part of the mortgage equation. Even if you can afford a 20% down payment, lenders want to know how your debt compares to your income.
Physician mortgage lenders understand that student loans inflate DTI unfairly for doctors. That’s why they allow higher ratios or use income-driven repayment amounts instead of full balances.
Real-World Comparison: Dr. Lee vs. Dr. Morgan
Dr. Lee, a newly matched resident in Charlotte, NC, uses a physician mortgage to buy her first home with 0% down. She avoids PMI, uses her signed employment contract for approval, and keeps her cash for relocation and living expenses.
Dr. Morgan, a hospitalist with 7 years of experience, chooses to put 20% down on a $900,000 home in Dallas. He lowers his monthly payment significantly and reduces the interest he’ll pay over 30 years.
Both doctors made the right choice—for their unique financial stage and goals.
Should You Save or Buy Sooner?
Let’s break down the trade-offs:
| Wait and Save 20% | Use Physician Loan Now |
| Smaller mortgage | Keep cash on hand |
| Lower interest | Buy sooner while rates are low |
| No PMI (on conventional) | Avoid PMI anyway with doctor loan |
| May miss market opportunities | Build equity right away |
Timing matters. If rates or home prices are climbing, waiting to save 20% may cost more in the long run.
Addressing Common Misconceptions
“You’ll be underwater without 20% down.”
In a stable or growing market, your equity builds over time. Many physician loans are structured to help borrowers grow into their homes financially.
“It’s financially irresponsible to buy with no money down.”
Doctors are different. They often have high job stability and access to programs others don’t. That’s not irresponsibility—it’s strategic leverage.
What If You’re Buying During Residency?
If you’re relocating for training, many lenders accept your contract as proof of income—even before your first paycheck. That means you don’t have to wait until you’re employed to get approved.
You can close on a home up to 90 days before your start date, making your move far less stressful.
FAQs: Physician Mortgages vs. 20% Down
Do I need perfect credit to qualify for 0% down?
No, many programs accept scores as low as 700. Better credit improves your rate, but 720+ isn’t always required.
What if I want to refinance later?
You can refinance into a conventional mortgage later if you decide to lock in a lower rate or pay off your loan faster.
Can I use a gift for the down payment?
Yes—most physician mortgage programs allow gift funds or grants toward your down payment or closing costs.
What if I move within a few years?
That’s okay. Just be sure you understand how long you must live in the home to meet any lender requirements.
Final Thoughts
So, should physicians put 20% down on a home?
Only if it aligns with your financial strategy. Physician mortgage loans remove the need to follow outdated advice. Whether you put 0%, 10%, or 20% down depends on your cash flow, timeline, and future goals.
If you want to learn how to maximize your buying power and minimize risk, connect with a lender who understands doctors.
For additional guidance, check out our article on how big of a house a doctor can afford and learn how your income, loan terms, and DTI all work together.
