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Zero Down Physician Mortgages: What No Down Payment Really Costs

Ryan Inman Ryan Inman Published Updated 6 min read

Physician finance

A 0% down physician mortgage is real. Five major lenders publish 100% financing up to $1 million with no private mortgage insurance, and a signed employment contract can count as income. What no one tells you at the open house is what the zero actually costs: a higher interest rate, interest charged on a bigger balance for 30 years, and an equity position so thin that a small price dip puts you underwater. This post puts numbers on each of those costs so you can decide with your eyes open.

The short version

On a $600,000 home, putting $0 down through a physician loan costs roughly $81 more per month than the same loan at a conventional rate, about $29,000 more in interest over 30 years, and leaves you with about $18,800 in principal paid down after three years. That is the honest price of keeping your cash. Whether it is worth it depends entirely on what you do with the cash you keep.

Cost 1: The rate premium

Physician loans typically price 0.125 to 0.25% above comparable conventional rates, according to List with Clever's 2026 physician loan comparison, the White Coat Investor, and Physicianrs.com. In practice the spread varies more than the averages suggest. List with Clever quotes mortgage banker Michael Zwiezen of Alliant Credit Union: rates can run from marginally above conventional to nearly a full percentage point higher, and the biggest drivers are whether the lender holds the loan on its own balance sheet and whether the physician program is a core offering or a niche product priced conservatively.

There is an asymmetry worth understanding. A physician loan's higher rate is permanent. It applies to every payment for the life of the loan and only goes away if you refinance. Conventional PMI, by contrast, is temporary: federal rules let you request cancellation at 80% loan to value and require automatic termination at 78% (List with Clever, citing Fannie Mae guidelines). On a $665,000 conventional loan at a 7.03% rate, the 80% date arrives after about 130 payments, and PMI paid until then totals roughly $26,000 to $61,000 (MedMoneyGuide, September 2026). After that, the conventional borrower keeps the lower rate for the remaining 19 plus years. CFP Ethan Bowling, who works with physician clients, ran a same loan size comparison and found that dropping PMI at 80% LTV while keeping the lower conventional rate wins over the full term (List with Clever).

Translation: if you have 20% down, a strong credit score, and you plan to hold the loan a long time, conventional usually wins. The physician loan's edge is for buyers who do not have 20% down, not for buyers who do.

Cost 2: Interest on a bigger balance

The rate premium gets the attention, but the bigger cost is the bigger balance. Compare four ways to buy the same $600,000 home, using the 30 year fixed average of 7.03% Freddie Mac reported for the week of September 24, 2026 (MedMoneyGuide), plus a 0.20% physician loan premium:

  • 0% down (physician loan): $600,000 loan at 7.23%, $4,085 per month principal and interest
  • 5% down: $570,000 loan at 7.03%, $3,804 per month principal and interest
  • 10% down: $540,000 loan at 7.03%, $3,604 per month principal and interest
  • 20% down: $480,000 loan at 7.03%, $3,203 per month principal and interest

The 5% down borrower adds $30,000 cash at closing and pays $281 less per month before PMI. PMI on that $570,000 loan runs about $171 to $399 per month using Freddie Mac's figure of $30 to $70 per $100,000 borrowed (MedMoneyGuide), so the all in payment lands around $3,975 to $4,203. Roughly a wash with the 0% down physician loan in the early years, but the PMI drops off and the balance is $30,000 smaller from day one.

Over 30 years, the total interest paid tells the full story: about $870,600 at 0% down versus about $673,100 at 20% down. That $197,000 gap is the combined effect of the rate premium and the bigger balance. Most of it is the balance, not the premium. On the same $600,000 loan, the 0.20% premium alone costs $81 per month, about $29,200 over 30 years. The rest is the price of borrowing the down payment.

Cost 3: Slow equity and underwater risk

At 0% down, you start with zero equity and build it slowly. After three years on a $600,000 loan at 7.23%, the balance is still about $581,200. You have paid down roughly $18,800 of principal. After five years, about $33,800.

That thin equity is the real risk of zero down, and it has nothing to do with the rate. If the home's value drops 5%, a $600,000 house is worth $570,000 and you owe about $581,200. You are underwater by about $11,200. You cannot sell without writing a check, and you cannot refinance easily. A 20% down buyer in the same market still has roughly 15% equity.

When zero down is smart

Zero down is the right call in three situations:

  1. The resident with no savings and a high earning trajectory. The average PGY-1 stipend is $68,166 (AAMC 2025 Survey of Resident/Fellow Stipends and Benefits). The median medical school debt for the class of 2025 is $215,000 (AAMC). Saving a 20% down payment on those numbers while servicing debt is a multi year project. If buying makes sense on the horizon math (see the resident post in this series), the physician loan's 0% down is the only way in, and the rate premium is simply the cost of buying years earlier.
  2. The new attending preserving cash for the transition. Moving, licensing, board exams, furnishing a home, and the weeks before the first attending paycheck all cost money. MedMoneyGuide puts it plainly: the surer value of keeping cash is not investment returns, it is cash on hand in the first year of practice, an emergency fund, moving costs, and the gap before the first paycheck. Borrowing the $130,000 down payment on a $650,000 home costs about $867 per month in principal and interest at a 7.03% rate. Whether investing the cash beats that depends on returns no one can promise. Liquidity in year one is not a return, it is insurance.
  3. The buyer who will refinance anyway. If rates fall or your credit profile improves, the rate premium is temporary because you refinance. The bigger balance is not temporary, but neither is the equity you built by buying years earlier.

When zero down is not smart

Zero down is the wrong call in three situations:

  1. You have 20% down and excellent credit. Conventional wins on rate, PMI drops off, and the long term math is not close. The physician loan is a tool for a specific situation: cash poor, income strong. If you are not cash poor, it is the wrong tool.
  2. Your quote is more than 0.5% above conventional. At that spread, PMI on a conventional loan is likely cheaper than the rate differential (List with Clever).
  3. You might sell within three years. After three years you have paid down about $18,800 on a $600,000 loan. Closing costs on the purchase and the costs of selling will eat most or all of that. A flat market leaves you roughly breaking even; a down market leaves you writing a check. If your horizon is under three years, renting is usually cheaper, and the 0% down feature does not change that.

The framework

Think of 0% down as buying time, not saving money. The price of that time is a 0.125 to 0.25% rate premium, interest on a balance that is $30,000 to $120,000 larger, and an equity position that stays fragile for the first three to five years. For a resident or new attending whose income is about to multiply and whose cash is needed elsewhere, that price is often worth paying. For everyone else, it is worth running the conventional math first.

Sources

Payment and balance figures computed by standard 30 year amortization at the stated rates.

Last reviewed: October 4, 2026. Limits and program terms change; the reviewed date moves when they do.

Ryan Inman spent 10 years as a financial advisor to physicians, hosted the Financial Residency podcast, and founded Financial Fellowship to teach physicians the money mechanics of a medical career.

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