Physician Loans in Austin: How Doctors Buy With Little Down
Medical residencies in Austin routinely pay $60,000 to $75,000 a year. The median home price in Travis County in 2026 sits around $550,000. On paper, a new resident shouldn’t be able to buy a home in Austin right now. In practice, many do, and the product that makes it possible is the physician loan.
Physician loans are portfolio mortgage products offered by specific banks and credit unions to MDs, DOs, dentists, and other eligible medical professionals. They work around the two things that can make conventional loan qualification difficult for doctors: large student loan balances and income that doesn’t fit the standard W-2 timeline. They also typically carry a higher interest rate than a comparable conventional loan, and that premium lasts for the life of the loan. Before you sign one, the doctor loan deserves a side-by-side comparison against a conventional quote. This post explains both halves honestly.
Key points:
- 0-10% down payment options, with no PMI required
- Student loan debt counted differently, or excluded from DTI entirely
- Employment contracts accepted in place of pay stubs
- Loan amounts from $500,000 to $2 million at most lenders
- Subject to credit, income, and property qualification
Where Conventional Loans Struggle for Doctors (and Where They Don’t)
A conventional mortgage uses your debt-to-income ratio (DTI) to determine how much you can borrow. DTI divides your total monthly debt payments by your gross monthly income. The maximum DTI for a conventional loan is typically 45 to 50 percent. The old story is that student loans get counted at 1 percent of the outstanding balance per month, which on $300,000 of debt means $3,000 of phantom payment. Current conventional guidelines are friendlier than that: in many cases the documented income-driven repayment amount can be used instead. An attending in active repayment paying $600 a month on an income-driven plan may clear conventional DTI without any special program at all.
The real squeeze is during residency. A resident with deferred loans or a $0 income-driven payment, earning $6,000 a month, often cannot make conventional DTI math work no matter how the student debt is counted.
Physician loans address that squeeze directly. Most programs exclude deferred student loans from the DTI calculation entirely and accept a signed employment contract in place of pay stubs. For a resident buying before the attending paycheck starts, this is the scenario where the product earns its keep.
The PMI piece is where the marketing outruns the math. Physician loan programs advertise no PMI at 0 to 10 percent down, and conventional loans do charge PMI below 20 percent equity. But a conventional loan does not require 20 percent down: 5 percent down is routine, and for doctors with the strong credit scores lenders expect (often 740 and up), PMI can be modest. More importantly, conventional PMI cancels once you reach 20 percent equity, while the physician loan’s higher rate never cancels. You keep paying the premium until you refinance or sell.
Who Qualifies for a Physician Loan in Austin?
Eligibility rules vary by lender, but most physician loan programs accept:
- MDs and DOs, including current residents and fellows
- Dentists (DDS and DMD) and oral surgeons
- Physicians within 5 to 10 years of completing residency
- In some programs: optometrists, podiatrists, veterinarians, and pharmacists
Residents and fellows often qualify before their first paycheck arrives, as long as they have a signed employment contract with a start date within 60 to 90 days. This matters in Austin, where Dell Medical School residents and physicians joining local health systems frequently want to buy during the transition between training and their first attending position.
Credit requirements typically start at 680 to 700, though lenders offering the most favorable terms want to see 720 or higher. Physician loans are a debt-structure workaround for doctors with strong earning trajectories and unconventional financial profiles. They are not a low-credit-score shortcut.
Loan Limits: How Much Can You Borrow?
Physician loans are portfolio products, meaning the lender holds them on its own books rather than selling them to Fannie Mae or Freddie Mac. This gives lenders flexibility to set their own limits. Most programs allow loan amounts between $750,000 and $1.5 million with 5 to 10 percent down, and some go to $2 million with a larger down payment.
In Austin’s market, where homes in neighborhoods like Circle C Ranch, West Lake Hills, or Mueller run $700,000 to $1.2 million, the higher limits matter. For purchases above the 2026 conforming limit of $806,500, you would normally be looking at a jumbo loan with stricter reserve and down payment requirements. A physician loan covering that same price range often has more forgiving qualification criteria for the right borrower profile.
The Down Payment Tiers
Here is how down payment options typically break down across physician loan programs:
- 0% down: Available at some lenders for residents and fellows, usually capped at $750,000 to $1 million
- 5% down: Available at most programs up to $1 million, sometimes up to $1.25 million
- 10% down: Generally required for loan amounts above $1.25 million
Saving 0 to 10 percent down is far more realistic for a medical resident than saving the 20 percent that would eliminate PMI on a conventional loan. On a $600,000 purchase, 20 percent is $120,000. Ten percent is $60,000. The PMI savings is a secondary benefit; the down payment reduction is the primary one.
Assets still matter, even when the down payment is small. Lenders want to see cash reserves after closing, typically 3 to 6 months of the proposed mortgage payment in verifiable accounts. This is separate from the down payment itself. If your savings are thin relative to the loan size, understanding how reserves factor into mortgage approval is a useful read before you apply.
What Lenders Actually Look At
Physician loans are not automatic approvals. Underwriters examine:
- Employment contract or offer letter. A start date within 90 days is the standard. Part-time arrangements or locum tenens contracts can complicate underwriting.
- Credit history. A clean payment record on credit cards, car loans, or previous debts is expected. Collections, recent late payments, or thin credit files require explanation.
- Specialty and employment type. Many lenders prefer W-2 physicians over 1099 independent contractors. Self-employed physicians running their own practices may need additional documentation.
- Property type. Most physician loans cover primary residences only. Condos require warrantable project status.
One thing that surprises borrowers: the interest rate on a physician loan is often slightly above the rate on a comparable conventional or jumbo loan. You pay for flexibility in how your debt and income are evaluated. On a $700,000 loan, a 0.25 percent rate premium costs roughly $145 a month, every month, for as long as you hold the loan. Whether that beats a conventional loan at 5 percent down with PMI that cancels is a math problem, not a given. The next section shows how to run it.
If you want to compare the physician loan rate against a standard jumbo and see which pencils out better for your situation, the break-even framework used in refinance math applies here too: divide the cost difference by the monthly savings and see how long it takes to recoup.
Doctor Loan or Conventional: How Should You Decide?
Run both quotes side by side and compare the total monthly cost now and after PMI would cancel. Many physicians who start with the doctor-loan quote from their bank or credit union end up closing a conventional loan instead, because the attending income and a documented income-driven payment already clear conventional guidelines, and the conventional rate is lower from day one.
| Factor | Physician loan | Conventional |
|---|---|---|
| Minimum down payment | 0-10% | 3-5% |
| Interest rate | Often 0.25-0.75% higher; the premium lasts the life of the loan | Typically the lowest pricing available for the borrower’s profile |
| Mortgage insurance | None | Required below 20% equity, then cancels; often modest at 740+ credit |
| Deferred / $0-payment student loans | Usually excluded from DTI | Hardest case; documented income-driven payments in repayment often work |
| Who holds the loan | One bank’s portfolio, one rate sheet | Sold to Fannie/Freddie; brokers can shop multiple lenders for pricing and speed |
The pattern that falls out of the table: the doctor loan tends to win for residents and fellows with deferred or $0-payment student loans and thin savings. The conventional loan tends to win for attendings in active repayment, anyone who can put 5 percent or more down, and anyone planning to hold the home past the point where PMI would cancel. If your bank handed you a doctor-loan quote without showing you the conventional alternative, you have only seen half the comparison.
Frequently Asked Questions
Is a physician loan cheaper than a conventional loan?
Usually not over the life of the loan. Physician loans typically price 0.25 to 0.75 percent above comparable conventional rates, and that premium never cancels. Conventional PMI, the cost the doctor loan avoids, cancels once you reach 20 percent equity. The doctor loan wins on upfront cash (0 percent down options) and on DTI treatment for deferred student loans; the conventional loan usually wins on rate and long-run monthly cost. Price both before choosing.
Can I use a physician loan as a medical resident in Austin?
Yes. Most physician loan programs accept residents and fellows with a signed employment contract showing a start date within 60 to 90 days, even before the first paycheck arrives. You will need a credit score of at least 680 to 700 and sufficient cash reserves, but the student loan structure that normally blocks residents from conventional loans is handled differently under a physician loan program.
Do physician loans require mortgage insurance (PMI)?
No. PMI is waived on physician loans even when the down payment is below 20 percent. This is one of the primary reasons physicians use these programs instead of conventional loans. Avoiding PMI on a $600,000 purchase typically saves $150 to $250 per month.
How are student loans counted in a physician loan application?
Most physician loan lenders exclude deferred student loans from the DTI calculation entirely, or use the actual income-based repayment (IBR) payment amount rather than 1 percent of the outstanding balance. That difference is significant for physicians carrying $200,000 to $400,000 in student debt, where the 1 percent rule alone would make conventional qualification nearly impossible.
What credit score do I need for a physician loan?
Most physician loan programs require a minimum of 680, with 720 or higher giving access to the best terms and highest loan amounts. These programs address debt structure differently but still require a solid payment history. Collections, recent late payments, or thin credit profiles will need to be explained and resolved before approval.
Can I buy a $900,000 home in Austin with a physician loan?
Yes, if you meet the income and credit criteria. Most physician loan programs allow loan amounts up to $1.25 to $1.5 million with 5 to 10 percent down. A $900,000 purchase would require $45,000 to $90,000 as a down payment depending on the program, plus 3 to 6 months of reserves. That is more accessible than the $180,000 down payment a conventional lender would require to avoid PMI at that price point.
Are physician loans available for self-employed doctors?
Some programs include self-employed physicians, but eligibility varies by lender. Doctors running their own practices or working as 1099 contractors typically need two years of self-employment history plus business and personal tax returns. A few specialty lenders offer bank statement or 12-month profit-and-loss options for physicians without a full two-year history. Ask about this before assuming you do not qualify.
One note on where we stand: Ferrando Financial originates Conventional, VA, and FHA loans only. We do not sell physician loans, which means we have no incentive to talk you into or out of one. What we do constantly is price conventional loans next to the doctor-loan quotes physicians bring us, and a good share of those doctors close conventional at a lower rate with a faster turnaround. If you have a doctor-loan quote in hand, schedule a discovery call and we will run the side-by-side. If the doctor loan wins for your situation, we will tell you that too.
Ferrando Financial LLC | NMLS# 2403080 | Licensed in Texas. This content is for educational purposes only and does not constitute a commitment to lend. Loan approval is subject to credit, income, and property qualification. Physician loan availability, eligibility criteria, and loan limits vary by lender and are subject to change.
