Texas Physician Mortgage Loans in 2022
The Great Lone Star State is booming. People are moving from all over the country to Texas, and many of them are medical professionals just like you. Almost 5,000 newly licensed physicians were practicing in Texas in 2019, an increase of 7.9% increase from 2018. Three out of four of these physicians went to medical schools outside of Texas.
In this piece, we’ll cover why physicians move to Texas, the benefits of physician mortgage loans in Texas and who the best lenders are. By the time you’re done reading this article, you’ll know more than you should about physician loans in Texas.
Let’s dive in.
Why Physicians Move to Texas
There are several reasons to move to Texas:
The state is famous for not charging residents a state income tax, on top of the federal income tax. Texas ranks 47th in the nation for the amount of money that goes toward taxes, according to the Tax Foundation. The lack of income tax makes it easier to put more money toward a home.
Capped Malpractice Lawsuits
Texas has limits on the compensation a plaintiff can receive in a medical malpractice case. There are different caps, depending on the situation, including a $250k per-claimant cap against a physician or health care provider and a $250k per-claimant cap on a single health care institution. In cases against multiple health care institutions, there is a per-claimant cap of $500k. No single institution can be on the hook for more than $250k per claimant.
Every year the U.S. News and World Report ranks America’s hospitals. Texas-based hospitals are always high on the list, but in 2021, Houston Methodist Hospital was named #1. Another excellent hospital in Texas that attracts physicians from other states is the University of Texas M.D. Anderson, a wonderful place to work, practice medicine and be cared for.
These are just three out of dozens of reasons to move to Texas. Texas also has an incredibly strong economy, a strong job market, a low cost of living, affordable housing, great schools, beautiful weather and friendly people.
Benefits of Physician Mortgage Loans in Texas
One of the benefits of getting a physician mortgage in Texas is that you will close faster than you would through a conventional mortgage. Here are the other physician mortgage benefits:
Many physician loan lenders offer up to 100% financing, which means you don’t have to put down money for a down payment. This is helpful since residents often have little to no savings from having been in medical school.
Private mortgage insurance (PMI) is a type of insurance that protects your lender if you default on your loan. Lenders ask borrowers to make PMI payments if they can’t come up with a down payment greater than or equal to 20% of the loan amount. However, physicians are waived from having to pay this expense!
Lax Debt-to-Income Ratio
Physician mortgage lenders understand that physicians carry large amounts of medical school debt. Debt-to-income (DTI) refers to the amount of debt you have relative to your income. Luckily for doctors, physician mortgage lenders disregard your student loans altogether!
Lower Interest Rates
You may think because doctors don’t have to make a down payment, they pay for that through higher interest rates. But that is not the case. Lenders tend to extend lower interest rates to doctors, despite their levels of debt and little to no savings.
The Best Mortgage Loans for Physicians in Texas
In this section, we want to list our lenders in Texas and highlight their program requirements and loan terms.
Regions offers 100% financing up to $750k and 95% financing for loans up to $1MM. Designations are MD, DO, DDS and DMD, but unfortunately the bank only operates in 15 states (southeast).
Learn More: Regions Physician Loan Review
First Horizon Bank has a big footprint in Texas. Their doctor loan program is available for MD, DO, DDS, DMD and DPMs. They offer residents and practicing physicians alike 100% financing up to $1.5MM.
PNC recently purchased BBVA and now offers a doctor home loan program. In 27 states, including Texas, you can qualify for 95% financing up to $1MM but must be a MD, DO, DDS or DMD.
Learn More: PNC Physician Mortgage Review
U.S. Bank is a national lender in all 50 states, including Texas. That said, their doctor loan program is only available for MDs and DOs. If you have one of those degrees, then you can get 90% financing up to $1.25MM.
Learn More: U.S. Bank Physician Loan Review
Northpointe’s doctor loan program is available for a wide range of medical specialties: MD, DO, DDS, DMD, DPM, OD, DP, DCH, DVM and DCs. Not only that, but Northpointe allows borrowers to use a physician loan for a primary, secondary or rental home purchase. Whether you’re in training or attending, you can get 100% financing up to $1MM.
BMO Harris extends physician mortgages to MDs, DOs, DDS and DMD designations. The loan is available for purchase or refinance and whether you are still in school or practicing, you can get 100% financing up to $1MM. If you’ve been attending for longer than 10 years, you can qualify for 90% financing up to $2MM.
Learn More: BMO Harris Physician Mortgage Review
Homeownership Laws and Taxes in Texas
It’s true Texas doesn’t charge an income tax, but they definitely charge property taxes. Texas is ranked 7th in the country for what they charge homeowners in property taxes. According to Taxease.com, the average property tax rate in Texas is 1.80%. So if your home is valued at $200,000, your personal property taxes at the average rate of 1.80% would be $3,600 for the year.
Texas property taxes brings in money to pay for schools, roads, police and firemen, emergency response services, libraries, parks and other services provided at the local level. There are three parts to the property tax system in Texas:
- An appraisal district in each county sets the value of property each year. A chief appraiser operates the appraisal office.
- A citizen board hears any disagreements between a property owner and the appraisal district.
- Local taxing units decide on a budget. The units set tax rates.
To understand the homeownership laws and terms, ask your loan officer as many questions that you can think of. Understand your purchase agreement inside and out and understand how it dovetails with your finances. Purchasing property out of your price range (even if you have a high salary as a physician) can cause you to struggle with your payments.
The Texas Housing Market Landscape
The Texas housing market has continued to rise, trending upward despite ongoing supply constraints. The lack of inventory for homes under $300,000 is a major challenge for Texas’ housing market, especially because demand remained steady despite the lack of inventory. Even despite these challenges, Texas’ diverse and expanding economy and steady population growth support a favorable outlook.
Home prices statewide were up 18.9% year-over-year in January. At the same time, the number of homes sold rose 3.7% and the number of homes for sale fell 29.5%. Median home price in a few of the popular cities in Texas include the following, according to Realtor.com:
- Austin: $385,000
- Dallas: $350,000
- Coppell: $450,000
- Corpus Christi: $195,000
- El Paso: $159,000
- Fort Worth: $234,000
Ready to jump on a physician home loan in the Lone Star State?
Things Know When Applying for a Physician Mortgage in Texas
Let’s take a look at a few extra costs of getting physician mortgage loans in Texas:
- Down payment: A down payment refers to an upfront payment you make to your lender to buy a home. Many physician mortgage loans allow you to make no down payment or a smaller down payment. Check with a handful of lenders to learn more about your options.
- Closing costs: Closing costs include fees you pay at closing. They include fees such as application fees, appraisal fees, attorney fees, courier fees, discount points, homeowners association (HOA) fees, loan origination fees, title searches, title insurance, deed recording fees and credit report fees.
- Home inspection: A home inspection thoroughly examines a home to find issues such as damage to certain parts of your home. Home inspections can save you a lot of money in the long run because a home inspector may help you discover issues with your home.
- Earnest money: Earnest money, or a “good faith deposit,” refers to money that you put down on a house before closing to show sellers that you’re serious about buying the house.
- Escrow fees: Escrow accounts are third-party accounts that hold money until a certain condition occurs during and sometimes after the sale process. Escrow accounts typically hold earnest money for tax and insurance purposes.
- Homeowners insurance: You must buy homeowners insurance if you get a mortgage. Homeowners insurance covers damage to your home caused by fires or storms and also if someone sues you because they become injured on your property.