A physician loan is not a better conventional loan. It is a different trade, and it wins or loses depending on three things: how much cash you have, how much student debt you carry, and how big the loan is. Get those three straight and the choice usually makes itself.
Here is the honest comparison, including the cases where a conventional loan is simply the better deal.
What Each Loan Actually Is
A conventional mortgage is written to be sold. The bank funds it, then sells it to Fannie Mae or Freddie Mac, which means it has to match their rulebook exactly. Those rules are public, uniform across every lender in the country, and not negotiable.
A physician loan is written to be kept. The bank funds it and holds it on its own balance sheet, so it can write whatever rules it likes. That is the entire reason the terms are different. Nobody is doing you a favor. The bank has decided that physicians default rarely enough to justify the exception, and it prices that decision into the loan.
Everything below follows from that one structural difference.
Down Payment and Mortgage Insurance
On a conventional loan, less than 20% down means private mortgage insurance. It protects the lender, you pay for it, and it runs roughly 0.46% to 1.50% of the loan amount per year depending on your credit score and how little you put down (Urban Institute Housing Finance Policy Center).
On a $600,000 loan that is between $230 and $750 a month.
Physician loans skip it. Most publish a zero down tier up to a stated loan cap, and no mortgage insurance at any tier.
Two caveats keep this honest. PMI is not permanent: federal law requires your servicer to cancel it automatically once the balance is scheduled to hit 78% of the home’s original value, and you can usually request cancellation at 80%. So the fair comparison is a few years of PMI, not thirty. And zero down means zero equity, which is a real risk we cover in what the 0% tier actually covers.
How Student Loans Are Counted
This is the piece that decides most approvals, and it is where the two loans differ most.
If your credit report shows a real monthly payment above $0, both loans use it and there is no difference. If it shows $0, because you are deferred or on an income-driven plan, the rules split:
| Loan type | What it counts on a $300,000 balance |
|---|---|
| Conventional, Fannie Mae | 1% of the balance, so $3,000 a month |
| Conventional, Freddie Mac | 0.5% of the balance, so $1,500 a month |
| Physician loan | Usually your real payment. Some exclude a loan deferred 12 months or longer entirely. |
A resident earning $68,000 does not survive a $3,000 phantom payment in their debt-to-income ratio. That is not a close call, it is a decline. The mechanics are laid out in how your debt is counted, and you can compare the two payments side by side in our physician mortgage payment calculator.
If you carry six figures of education debt and are not paying a large monthly amount on it, this single rule is usually the whole argument.
The Loan Size Question Most People Miss
For 2026, the baseline conforming loan limit is $832,750 for a one-unit property, rising to $1,249,125 in designated high-cost areas (Federal Housing Finance Agency, announced November 25, 2025).
Below that line, a conventional loan is a commodity. Every lender in the country is selling the same product and competing mostly on price.
Above that line you are into what lenders call a jumbo loan, meaning one too large to sell to Fannie Mae or Freddie Mac, and the rules get strict fast: bigger down payments, months of cash reserves left in the bank after closing, tighter debt-to-income ceilings. Physician programs frequently lend well past the conforming limit with a fraction of the down payment and, at some lenders, no reserve requirement at all.
So the physician loan advantage tends to be smallest on a $350,000 house and largest on a $1,200,000 one. If you are buying in an expensive market, check this line before you check anything else.
Rate, and What It Really Costs
Physician loans usually carry a slightly higher rate than a comparable conventional loan. Not always, and the gap moves, but plan for it.
The arithmetic is simple. A quarter point on $600,000 is about $1,500 a year, every year, for as long as you hold the loan. PMI on the same loan might be $4,000 a year for four or five years and then stop.
Which means the rate premium can be worth paying or not, depending entirely on how long you keep the loan. A physician who sells or refinances in five years is usually ahead. One who holds a 30 year fixed to term may not be.
Ask any lender for both quotes, side by side, and compare the total cost over the years you actually expect to stay. Not over thirty.
Where FHA and VA Fit
Two other options come up often enough to address directly.
FHA allows 3.5% down with lower credit requirements, which sounds attractive. The catch is mortgage insurance: FHA charges an upfront premium plus an annual one, and on most loans written today that annual premium lasts the life of the loan rather than falling off at 80% equity. FHA also counts a $0 student loan payment at 0.5% of the balance. For a physician with strong credit and big student debt, it is rarely the right answer.
VA is different, and if you qualify it is often the best loan on this page. Zero down, no monthly mortgage insurance, competitive rates, and the most forgiving student loan rule of any program: a loan deferred more than 12 months can be excluded entirely with documentation. If you served, price a VA loan before anything else.
When a Conventional Loan Is the Better Choice
Being straight with you, because plenty of physicians are talked out of the right loan.
Conventional usually wins if you have 20% to put down, since there is no PMI to avoid and no reason to pay a rate premium. It wins if your student loans are paid off or you are making real payments that show on your credit report, because then both loans count the same number. It wins if you are borrowing well under the conforming limit, where competition is fiercest. And it wins if you plan to hold the loan a long time, because a permanent rate difference eventually outruns a temporary insurance cost.
An attending ten years out with cash in the bank and no education debt is a conventional borrower. There is no shame in that and no advantage in the alternative.
When the Physician Loan Wins
It wins when you are cash-poor and income-strong, which describes most people finishing training. It wins when your student loan balance is large and your payment is small or zero. It wins above the conforming limit. It wins when you need to close before your job starts, since physician programs routinely allow it and conventional underwriting generally does not. And it wins when you expect to move or refinance within a handful of years, because the rate premium never gets long enough to matter.
How to Decide Without Guessing
Three numbers settle it. What your student loans would be counted at under each rule. What the loan amount is relative to the conforming limit in your county. And how many years you honestly expect to keep the loan.
Get a written quote for both, with the rate, the mortgage insurance, and the student loan figure the underwriter used. Then compare the total over your real time horizon.
If you would rather skip the shopping, tell us your degree, your training stage, your state and your numbers, and we will match you with the lender whose rules fit your situation. It takes about two minutes and costs you nothing.
Last verified September 10, 2026. Conforming loan limits from the Federal Housing Finance Agency. Mortgage insurance ranges from the Urban Institute Housing Finance Policy Center. Student loan treatment from the Fannie Mae Selling Guide B3-6-05, the Freddie Mac Seller/Servicer Guide, and HUD Mortgagee Letter 2021-13. Rules change and we recheck this page regularly.