An Early-Career Physician’s Guide to Buying a Home

The average cost of medical school? About $235,000, according to the most recent data from the Education Data Initiative. The average cost to buy a home? Nearly double that: over $420,000 in 2024, per the National Association of Realtors.

The thought of adding more debt to an already-dizzying student loan balance may seem overwhelming, and we haven’t even gotten to the rapid rise of mortgage rates in the past couple of years, which has meaningfully reduced how much house you can afford.

But regardless of the financial landscape, saving for a home as a physician may be a significant life milestone and necessary emotional and financial step to settling down and locking into your career. If you’re in the market for a home, here’s our physician home-buying guide to preparing to buy in the way most advantageous to you.

Step 1: Calculate How Much Home You Can Afford as a Physician

The natural starting place for preparing to own a home is deciding on what you’d like to buy and where. If you aren’t sure where you’d like to settle, consider an area that balances opportunities, compensation, cost of living, and quality of life. For what it’s worth, Nerdwallet ranked Montana the best state — and Hawaii the worst state — for doctors in 2024.

You’ll want to settle on how much you’d like to spend on a home. It’s smart to consider your desired total purchase price and monthly payment, which will influence the down payment you’ll need. Think about rises in home prices (and your income) between now and when you plan to buy a home.

There are plenty of home affordability calculators out there for you to try, but a good rule of thumb is to make sure your monthly housing costs are no more than 28% of your gross income and no more than 36% of all debts (including student loans).

Example: Molly, a prospective first-time homebuyer, earns $300,000 a year — $25,000 a month — working as a physician. Her debts include a monthly car payment of $750 and a monthly medical student debt payment of $2,500. Let’s calculate how much she should aim to spend on housing costs.

Based on our rule of thumb, Molly should spend no more than $7,000 ($25,000 ✕ 28%) on her housing costs and no more than $9,000 ($25,000 ✕ 36%) on her total debts. However, if Molly spent $7,000 on housing in addition to $750 on a car and $2,500 on student loans, her total debt would be higher than 36% of her gross income. To keep her total debt within an acceptable range, she’ll need to limit her housing costs to $5,750 ($9,000 – $750 – $2,500).

Step 2: Explore Homebuyer Programs

On a physician’s salary, it’s unlikely that you’ll qualify for state-provided down payment assistance and grant programs. The qualifications vary by county, but the programs generally only apply to those with income lower than 150% of the area median income based on the number of people in your household. Still, it’s worth checking whether you can benefit from other homebuyer programs, including those for first timers, that may affect your savings goal.

• Consider applying for a physician mortgage loan if you qualify. This is a type of mortgage designed for early-career physicians who are saddled with student loan debt but have high, stable incomes. Down payments of less than 20% typically require private mortgage insurance (PMI), a monthly cost that protects the lender from your defaulting on a giant loan balance relative to the value of your home. However, physician loans often don’t require PMI. On the (pretty major) downside, physician mortgage loans only come as adjustable-rate mortgages (ARMs), and the rates are often higher than standard mortgages.
• Consider Freddie Mac’s HomeOne program. This lets you put down as little as 3% of the purchase price on your first home. The program is available to buyers regardless of their income level, and it can apply to a house in any part of the country. One notable restriction: HomeOne provides only conforming loans. The program isn’t available to those seeking jumbo loans, or mortgages that exceed the Federal Housing Finance Agency conforming mortgage limit of $766,550–$1,149,825, depending on your location. The minimum down payment is usually 10% with jumbo loans.
• You may also qualify for a VA loan or USDA loan. Both of which come with attractive perks. Working with a mortgage broker can be immensely helpful to understand your options.

Step 3: Set a Realistic Savings Goal for Your Home Purchase

Before you start your home search, you’ll want savings to cover four things:

• Emergencies: It’s important to feel financially stable when you buy a home. Have some money set aside — three to six months of necessary expenses, including your estimated mortgage payment — so that big out-of-nowhere costs become mere inconveniences rather than true emergencies.
• Down Payment: Depending on the mortgage type, you may be required to put down a minimum of 0%–20%. Note that you’re always free to put down more than the minimum. Here’s what to consider when picking your down payment amount.
• Closing costs: When you close on a home, you’ll typically pre-pay some mortgage interest, property tax and home insurance. You’ll also pay a bunch of fees. You’ll want to budget between 2% and 5% of your target purchase price to cover closing costs. (If the buyer pays them as part of your negotiation, great! You have extra savings! But don’t expect it.)
• Immediately necessary expenses: Moving costs money, and you’ll likely want to invest in new furniture and things soon after settling in. And don’t forget that Murphy’s Law absolutely applies to homeownership (not speaking from experience or anything), so expect the unexpected by adding a modest buffer.

Step 4: Set a Due Date to Reach Your Savings Goal

Make your goal more tangible by attaching milestones and a due date.

Example: Let’s return to Molly, who earns $300,000 a year — $25,000 a month — as a physician. She’s saving to buy a home in Montana for about $650,000. She already has an emergency fund and wants to save 20%, or $130,000, for a down payment over the next four years. She figures that she’ll need another $15,000 to cover closing costs and new furniture to be purchased within the first few weeks of buying the home.

Molly has $30,000 to seed her home-buying fund, so her savings goal is $115,000. If she wants to have that $115,000 in four years, she’ll need to save $28,750 per year or $2,395 per month minus any interest earned along the way.

Step 5: Revise Your Budget According to Your Home-Buying Goal

If buying a home is a high priority, make sure your budget reflects that. In addition to redirecting current savings to your home-buying goal, look for ways to limit excess spending.

If you can’t squeeze any more savings out of your budget without affecting your other financial investments and want to buy a home particularly soon, you might question whether to scale back on their retirement investments or slow down on aggressive student loan repayments. Get a financial advisor involved if you’re unsure about the effects of these decisions, especially ones that affect your retirement.

Step 6: Open a Home-Buying Savings Account

It’s recommended to keep your home savings in a separate bank account. You’ll be less tempted to withdraw the money, and you’ll be able to watch the account grow each month.

You may be tempted to invest your home savings in the stock market or a speculative asset such as Bitcoin. However, because you’ll need that money in the next few years, it’s best to keep that money in an interest-earning vehicle that can’t lose value, such as a high-yield savings account, money market account, or a certificate of deposit.

Step 7: Save, Save, Save

By this point, you have everything you need to get started on achieving your home-buying goals. Put your new budget to use by saving what you can for your first home.

To stay on track, consider setting up automatic transfers from your checking account.

Join the Discussion

What questions do you have about buying a home? If you've gone through the process already, what tips can you share about the process and/or balancing paying for a mortgage with paying off student debt? Did anyone get a physician loan? How did that go? Let us know in the comments below.