HOW TO QUALIFY FOR A PHYSICIAN LOAN AS A MEDICAL RESIDENT

QUICK ANSWER

Medical residents can qualify for physician loans even before finishing residency, provided you have a signed employment contract with a start date typically within 60-120 days of your home closing. Lenders approve you based on your future attending salary (not your current resident stipend), and they exclude or defer student loan debt from debt-to-income calculations. Most programs require a 700+ credit score and proof of medical credentials (MD/DO degree and license verification).

INTRODUCTION

The Resident Physician Home Buying Challenge

You're in your final year of residency, counting down to your attending position. You've found the perfect city, accepted an incredible job offer, and you're ready to put down roots, but there's one problem: your current resident salary of $60,000-$70,000 paired with $300,000 in student loans makes traditional mortgage qualification nearly impossible.

This is the frustration thousands of resident physicians face every year. Standard mortgage programs see low income, high debt, and no employment history at attending-level pay. They close the door before you even start the application.

Physician loans solve this problem by allowing residents to qualify based on signed employment contracts rather than current income. If you're a resident with an accepted attending position, you can purchase a home months before your first day of work by using your future salary for loan approval.

WHO QUALIFIES AS A RESIDENT PHYSICIAN?

Medical Training Stages Eligible for Physician Loans

Physician loan programs recognize the following training stages:

• Medical Residents (PGY-1 through PGY-7+, depending on specialty)

• Fellows (subspecialty training after residency)

• Chief Residents (final-year leadership roles)

You qualify as long as you:

1. Hold an MD or DO degree

2. Have a signed employment contract for an attending position

3. Can provide proof of medical licensure (current or pending)

4. Meet credit score minimums (typically 700+)

Contract-Based Approval: The Key to Resident Qualification

The defining feature of physician loans for residents is contract-based income approval. Unlike conventional mortgages that require two years of W-2 income history, physician loans accept a signed employment contract as proof of future income.

What Lenders Look For in Your Employment Contract:

• Official letterhead from hiring institution

• Your name, position title, and specialty

• Annual salary or compensation structure

• Start date (must be within 60-120 days of loan closing)

• Signature from authorized hiring authority (department chair, HR director, etc.)

Lenders use the contract salary (not your current resident stipend) to calculate your debt-to-income ratio and maximum loan approval.

ELIGIBILITY REQUIREMENTS FOR RESIDENT PHYSICIAN LOANS

Credit Score Minimums

Most physician loan programs require a minimum credit score of 700. Some lenders accept scores as low as 680, but rates and terms improve significantly at 720+.

If your credit score is below 700:

• Pay down credit card balances to below 30% utilization

• Dispute any errors on your credit report (you're entitled to one free report annually from AnnualCreditReport.com)

• Avoid opening new credit accounts in the 6 months before applying

• Ensure all payments are current (medical school loans can be deferred, but payment history must be clean)

Down Payment Requirements

Physician loans for residents typically require:

• 0-5% down payment (varies by lender and loan amount)

• No private mortgage insurance (PMI), even with minimal down payment

• Higher loan limits than conventional mortgages ($1M-$2M+ depending on lender)

Example:

$400,000 home purchase

5% down payment = $20,000

Loan amount = $380,000

Monthly payment ~$2,500 (no PMI)

With a conventional loan requiring PMI, the same purchase would cost ~$2,700/month. That's a difference of $200/month or $2,400 annually.

Student Loan Treatment

Standard mortgage programs count student loans aggressively in debt-to-income (DTI) calculations:

• If loans are deferred: Lenders calculate 1% of the total balance as monthly debt

• If on income-driven repayment: Lenders may still use 1% of balance instead of actual payment

Example:

$300,000 in student loans

Standard mortgage DTI calculation: $3,000/month debt

Even if your actual payment is $0 due to deferment or income-driven repayment

Physician loans handle student debt differently:

• Deferred loans: Excluded entirely from DTI, or calculated at actual $0 payment

• Income-driven repayment: Lenders use your actual monthly payment amount

• Future loan forgiveness programs (PSLF): Recognized and accommodated

Employment Contract Timeline

Your employment contract must show a start date within 60-120 days of your anticipated home closing date (exact window varies by lender).

Timeline Example:

• March 1: Sign employment contract (start date: July 1)

• March 15: Apply for physician loan pre-approval

• April 1: Begin house hunting

• April 15: Make offer and enter contract

• May 15: Close on home

• July 1: Start attending position

This timeline allows you to secure housing 2-3 months before relocating, avoiding rushed decisions or extended temporary housing.

STEP-BY-STEP: HOW RESIDENTS QUALIFY

Step 1: Secure Your Employment Contract

Before applying for a physician loan, finalize your attending position and obtain a signed offer letter or employment contract. Ensure the contract includes:

• Your full name and credentials

• Position title, department, and specialty

• Annual salary

• Start date

• Signature from hiring authority

Make multiple copies since you'll need this document throughout the mortgage process.

Step 2: Gather Required Documentation

Lenders will request the following documents:

Medical Credentials:

• Medical school diploma or official transcripts

• Current state medical license (or proof of pending licensure with expected issue date)

• Board certification (if applicable)

Employment Verification:

• Signed employment contract (as described above)

• Current pay stub from residency/fellowship program

• Letter from current program director confirming good standing

Financial Documents:

• Bank statements (last 2-3 months)

• Student loan statements showing current balance and payment status

• Credit report authorization form

• Government-issued ID (driver's license or passport)

Optional (for some lenders):

• Tax returns from last 2 years (especially if you have side income)

Step 3: Check Your Credit Score

Pull your credit report from AnnualCreditReport.com (free once per year from each bureau: Equifax, Experian, TransUnion).

Review for:

• Current credit score (aim for 700+ minimum, 720+ ideal)

• Any errors or inaccuracies (dispute immediately if found)

• Outstanding balances on credit cards (pay down to below 30% utilization)

• Late payments or delinquencies (address these before applying)

If your score is below 700, spend 3-6 months improving it before applying. Small improvements can save thousands in interest over the life of your loan.

Step 4: Calculate Your Budget

Use your contract salary (not your current resident income) to estimate your maximum home price.

General Rule:

Your total monthly housing payment (mortgage + property taxes + insurance + HOA) should not exceed 28-32% of your gross monthly income.

Example:

Contract salary: $250,000/year

Gross monthly income: $20,833

Maximum housing payment: $5,833-$6,666/month

With a 5% down payment and no PMI, this budget supports a home purchase of approximately $700,000-$800,000 (depending on interest rates and local property taxes).

Step 5: Contact a Physician-Loan-Specialized Lender

Not all physician loan programs accept residents and fellows, so verification is crucial before applying.

What to Look For:

Most resident-friendly physician loan programs offer:

- Contract-based approval (you don't need to have started yet)

- Lower income requirements

- Flexible student loan treatment

- Ability to close 60-90 days before employment starts

The Broker Advantage for Residents:

Working with a mortgage broker who specializes in physician loans gives you significant advantages as a resident:

✓ Access to multiple programs that accept residents

✓ Pre-screening for contract-based approval

✓ Knowledge of which lenders offer the best resident terms

✓ Ability to compare multiple offers

✓ Expertise in timing your home purchase around residency/fellowship transitions

Road to Home Solutions works with LoanFactory's wholesale network, which includes multiple lenders offering contract-based physician loans for residents and fellows. We can help you compare programs and determine the optimal timing for your home purchase.

Critical Questions for Residents:

When researching programs, verify:

- "Do you accept employment contracts for residents/fellows?"

- "How many days before my start date can I close?"

- "What documentation do you need from my residency program?"

- "How do you calculate income for residents?"

- "Can I qualify if I'm still in medical school but have a signed contract?"

Contact Road to Home Solutions to get started.

Step 6: Get Pre-Approved

Pre-approval typically takes 1-3 business days with complete documentation.

Your pre-approval letter will state your maximum loan amount based on:

• Your contract salary (not current resident income)

• Favorable student loan treatment

• Down payment availability

• Credit score and financial profile

Pre-approval letters strengthen your home offers by showing sellers you're a serious, qualified buyer.

Step 7: Begin House Hunting

With pre-approval in hand, start touring homes that fit your budget. Working with a real estate agent who understands physician loans ensures you only view properties that align with your financing.

Ideally, work with a dual-licensed professional who handles both mortgage and real estate services. Doing so streamlines communication and avoids misalignment between financing and property selection.

Step 8: Make Your Offer

Once you find the right home, submit a competitive offer supported by your physician loan pre-approval. Physician loan pre-approvals are particularly strong because they demonstrate:

• Stable, high-income career trajectory

• Lender confidence in your financial profile

• Serious buyer commitment

Sellers appreciate the certainty physician loans provide.

Step 9: Complete Underwriting and Close

After your offer is accepted:

• The lender orders a home appraisal

• Underwriting reviews your complete financial profile

• You may need to provide updated documents (pay stubs, bank statements, contract verification)

Stay responsive during underwriting. A quick turnaround on document requests keeps your closing on schedule.

Most physician loans close in 30-45 days from contract acceptance.

COMMON QUESTIONS FROM RESIDENT PHYSICIANS

Can I Qualify If My Start Date Is 6 Months Away?

Most lenders require your attending position start date to be within 60-120 days of closing. If your start date is further out, you have two options:

1. Wait until you're within the eligible timeframe (typically 2-3 months before starting)

2. Ask your lender if they offer extended timelines (some programs allow up to 6 months)

What If I'm Switching Specialties or Changing States?

Lenders care about your signed employment contract and medical credentials, not whether you're staying in your residency specialty or relocating to a new state.

As long as you have:

• A valid medical license (or pending license application in the new state)

• A signed employment contract with a firm start date

• An MD or DO degree

You'll qualify for a physician loan.

Do I Need to Prove I Have Cash for a Down Payment?

Yes. Even if your down payment is only 3-5%, lenders require proof of funds (bank statements showing the cash available). Acceptable sources include:

• Personal savings

• Gifts from family members (with a gift letter stating the funds don't need to be repaid)

• Proceeds from selling another property

• Retirement account loans (though not typically recommended)

Can My Spouse Co-Borrow If They're Not a Physician?

Yes. Most physician loan programs allow co-borrowers, regardless of their profession. Your spouse's income will count toward qualification, and their debts will count toward DTI.

The primary borrower (you) must be the physician to receive physician loan benefits.

What If I'm Still Completing My Medical License Application?

Many lenders accept pending medical license applications as long as you provide:

• Proof you've submitted your license application to the state medical board

• Expected license issue date

• Confirmation from your employer that your position is contingent on licensure

Some lenders may require the license to be finalized before closing, so verify your lender's specific policy.

TIPS FOR RESIDENT PHYSICIANS APPLYING FOR HOME LOANS

Tip 1: Apply Early

Start your pre-approval process 60-90 days before you plan to house hunt. This gives you time to address any credit issues, gather documentation, and understand your true budget.

Tip 2: Don't Make Big Financial Changes

During the mortgage process:

• Don't open new credit cards or take on new debt

• Don't make large purchases (cars, furniture, etc.)

• Don't change jobs or reduce income (unless transitioning to your contracted attending position)

• Don't move large sums of money between accounts without documentation

Lenders re-verify your financial profile right before closing. Unexpected changes can delay or derail approval.

Tip 3: Keep Your Employment Contract Accessible

You'll need to provide your contract multiple times throughout the process. Keep digital and physical copies readily available.

Tip 4: Work with a Physician-Loan Specialist

General mortgage brokers may not understand resident-specific qualification. Work with a lender who specializes in physician loans and understands contract-based approval.

Tip 5: Budget for Moving and Furnishing Costs

Even with a low down payment, remember to budget for:

• Closing costs (2-5% of purchase price)

• Moving expenses

• Furniture and home essentials

• Emergency fund (3-6 months of expenses)

CONCLUSION & NEXT STEPS

As a medical resident, you don't need to wait until you're earning attending-level income to buy a home. Physician loans recognize your future earning potential, allowing you to qualify based on your signed employment contract rather than your current resident stipend.

Key Takeaways:

• Residents can qualify for physician loans with a signed employment contract (start date within 60-120 days)

• Lenders use your contract salary (not your resident income) for approval

• Student loans are deferred or excluded from DTI calculations

• Most programs require 700+ credit score and 0-5% down payment

• Pre-approval takes 1-3 days with complete documentation

CONTACT ROAD TO HOME SOLUTIONS

Amy Parsons

Dual-Licensed Mortgage Loan Officer & Real Estate Broker

Phone: (800) 591-9489

Email: amy@roadtohomesolutions.com

Web: www.roadtohomesolutions.com

Loan Officer: LoanFactory, NMLS #693001

Real Estate Broker: Lionheart Pride, CalDRE #01489819

Amy Parsons specializes in physician loans through LoanFactory's wholesale network, giving you access to multiple lender programs for comparison. California borrowers: Amy handles your loan directly from application to closing. Out-of-state borrowers: Amy works with licensed LoanFactory agents in your state to provide the same specialized service and program access nationwide.

RELATED RESOURCES

• Physician Loans: Your Complete Guide to Doctor Mortgages

• Physician Loans vs Conventional Loans: Which Is Right for You?

• 5 Mistakes Doctors Make When Buying Their First Home

• Top Lenders Offering Physician Loans

• Can Dentists and Veterinarians Qualify for Doctor Loans?

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NMLS #693001 • CalDRE #01489819

Road to Home Solutions provides mortgage and real estate services nationwide.

Licensing and roles are clearly identified for each transaction.

Written by Amy Parsons, Dual-Licensed Mortgage Loan Officer (LoanFactory, NMLS #693001) and Real Estate Broker (Lionheart Pride, CalDRE #01489819). Amy helps resident physicians, fellows, and medical professionals navigate specialized loan programs and secure homes across the country through LoanFactory's national lending network.