Buying a home is one of the biggest financial decisions you’ll make, and it’s important to approach it with a clear understanding of your priorities. A common debate is whether someone should rent or buy, even in physician circles, but most of our clients want to own a home, which is why we want to address how to go about this the right way.
Another important premise for us is that many homeowners fall into the trap of thinking of their home as an investment. In reality, a home is primarily a consumption/lifestyle item—a place to live, something you will always need. With that in mind, here are the key considerations when buying or building a home as a physician.
1. How Much Should You Borrow?
A good rule of thumb is to keep your mortgage under two times your gross household income. If your income is $300,000, aim for a mortgage of $600,000 or less.
Lenders set borrowing limits too high, meaning if you take out as much as they’ll approve, you’ll likely feel stretched thin. Banks don’t consider your other financial goals, lifestyle choices, or future expenses—they only assess whether you can technically make the payment. Borrowing at their limit often leads to feeling house poor, leaving little room for saving, investing, or unexpected expenses.
2. Determine What You Can Afford After Setting Priorities
Instead of choosing a home price first, figure out your other financial priorities. If you still have student loans, need to build an emergency fund, or haven’t started saving at least 15% of your income for retirement, those should come first.
Once you’ve allocated enough to savings and financial goals, calculate how much house comfortably fits within your budget. If your mortgage limits your ability to save, travel, or enjoy your life, it’s probably too expensive.
3. Planning for Post-Purchase Costs
Homeownership costs more than just your mortgage. Many buyers underestimate ongoing expenses, including:
- Furniture & Décor: The furniture from your apartment or starter home may not work in a larger, more expensive house.
- Maintenance & Repairs
- Landscaping & Improvements: Fencing, patios, driveways, and yard maintenance can add up quickly.
Setting aside cash for these expenses before you buy helps prevent financial stress later.
4. First-Time Buyers Should Be More Conservative
If you’re buying your first home, be even more cautious. Many new attendings finishing training feel like they have more money than ever before and they certainly do, but they need to be particularly thoughtful as they venture into a home purchase.
First-time buyers often still have student loans, haven’t built long-term savings habits, and may see changes in income, family size, or job stability. A mortgage that feels manageable now could become a burden later if expenses increase.
5. Understanding Physician Mortgage Loans
Physician mortgages are marketed as a great option, but they have trade-offs. These loans allow low or no down payment, no private mortgage insurance (PMI), and flexible underwriting based on an employment contract rather than proven earnings.
However, they often come with higher fees and slightly higher interest rates than conventional loans. Banks offer them because physicians are low-risk borrowers, and they hope to gain future business in banking, investments, and insurance.
A physician loan only makes sense if you do not have the funds for a down payment or you can use the money you would have put toward a down payment for a better financial purpose, such as paying off high-interest student loans or maximizing retirement contributions. If you have a solid financial foundation, a conventional mortgage with a 20% down payment is often the better long-term choice.
Final Thoughts
The key to responsible homeownership is making intentional and proactive financial choices. A home should align with your financial goals, allowing you to build security and flexibility while still enjoying your lifestyle. Buying a home should enhance your life, not create unnecessary financial stress.