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  • Writer's pictureNathan Zarcaro

Physician Mortgage Loans in Texas: 4 Signs One is Right For You


It is common for healthcare providers across the United States to use physician mortgages to finance and pay for their first homes.


These programs have exploded in popularity over the past decade, and for good reason! They offer flexibility to physicians that otherwise may not be able to buy homes. Lenders enjoy underwriting these loans too, since it allows them to build relationships with future high net worth clients early in their careers.


Texas is not immune to this national trend. In fact, according to quick estimates, there are more than fifteen different options available to buyers in the state.


Here are four signs that physician loans may be right for Texans.



What are physician loans?


Physician loans are a special type of mortgage loan, available to qualifying healthcare professionals and occasionally professionals in other fields. Physician mortgages are known for offering a few unique traits, including:


  • Low or no down payment: These programs are geared towards early career physicians, individuals that tend to have high levels of student debt and little cash to make a down payment. So, many lenders offer low, or even no, down payment requirement.


  • No private mortgage insurance: Since successful physicians are likely to be financially responsible, many lenders waive PMI requirements for borrowers making less than a 20% down payment.


  • Relaxed DTI requirements: Generally, prospective home buyers need to have a debt-to-income ratio at or below 43% in order to be approved for a mortgage. But since so many young doctors have high levels of student debt, many lenders offer either relaxed requirements or exclude student loans entirely from the calculation.



4 signs a Texas physician loan is right for you


Here are five signs that a physician loan is a good move for your home purchase in Texas:


  1. You plan to relocate

  2. You're buying in a low property tax area

  3. You need to live in a pricy area

  4. You want to buy your forever home



1. You plan to relocate


Physicians completing a residency or fellowship elsewhere in the country can use a physician mortgage loan to buy a home before relocating to Texas.


Many programs, by design, allow physicians to buy their homes and close on their loans up to 90 days before officially beginning their careers, as long as they can provide proof of employment.


This can be a huge help in securing home financing that is based on your future earning potential, rather than your past earning history.



2. You're buying in a low tax area


Property taxes across Texas are a good deal higher than the national average - 7th in the United States, according to SmartAsset.


But for those buying in the lower tax areas of Texas, physician loans can be a great idea. Since these doctor loans allow buyers to buy with a low or even zero down payment, you can expect your ongoing monthly mortgage payments to be higher. But if you're paying less than the state average in property tax, your overall payments could be on the same level as other buyers in higher tax areas that had a larger down payment.



3. You need to live in a pricy area


Of course, many physicians will be forced to buy into pricy real estate markets, like those in and around cities like Dallas, Houston, and San Antonio.


Many of the state's best medical facilities are, after all, in and around these cities.


The extra financing available through many physician loan programs could be the difference between being able to afford a home and not being able to.



4. You want to buy your forever home


Physician loans provide a once in a lifetime opportunity to buy your forever home, particularly for Texas buyers. This opportunity isn't available in many other areas of the country, at least to the same extent. The reason for this?


Texas has a higher amount of large, newly built homes at affordable prices.


This is not to say that you should buy more home than you can afford, but you should keep in mind the potential savings in not having to pay closing costs multiple times if you move.



Why Texas is appealing to physicians


The number of practicing physicians in Texas has grown over the past decade or so, even outpacing the population growth in the state. While there are still shortages in some areas, the number of physicians providing patient care increased by 33.6% between 2010 and 2020, while the state's population only increased by 15% over that same time span.


It's easy to see why The Lone Star State is attractive, including:


  • Medical malpractice laws

  • Cheaper cost of living than other parts of the country

  • Availability of physician loans



1. Medical malpractice laws


Many physicians are intrigued by Texas thanks to lawsuit limits in medical malpractice cases. These rules tend to benefit healthcare providers, since plaintiffs are capped at:


  • $250k per claimant against a physician

  • $250k per claimant against one institution

  • $500k per claimant if multiple institutions are involved


These capped lawsuits tend to make liability insurance cheaper for physicians as well.



2. Affordable cost of living


Texas is one of the more affordable states in the country.


Not only does the state not charge residents any state income tax, but many communities, including suburbs of cities like Dallas and Houston, have more affordable pockets than many suburbs on either the East or West coasts of the United States.


According to the Missouri Economic Research and Information Center, The Loan Star State has the 15th lowest cost of living in the whole country.



3. Plenty of physician loan options


As we've alluded to, Texas buyers have no shortage of physician mortgage programs to apply to and consider!



5 physician loan lenders in Texas


Here are five of our favorite physician mortgage programs available to Texans.



1. First Horizon Bank


First on the list of options is First Horizon Bank, a popular bank across the southeast. Home buyers can exclude their student loans from consideration for mortgage approval if they have been deferred for more than twelve months.


Buyers with a MD, DO, DPM, or OMS may qualify to borrow up to $2.5 million, though the program is not open to future physicians still completing a residency.



2. First National Bank of Omaha


At this time, FNBO offers their doctor loan program to home buyers in about eleven counties in and around the Dallas/Fort Worth metroplex. At this time, prospective buyers must have/be a MD, DO, DDS, DMD, DPM, PA, NP, CRNA, DVM, JD, CFA, or CPA in order to qualify.


Qualifying borrowers may qualify to borrow up to $850,000 without a down payment.



3. KeyBank


Doctors looking to buy an enormous amount of house can borrow up to $1 million at 100% financing if approved by KeyBank. Further than that, certain buyers with high enough income may borrow up to the maximum loan of $3.5 million, though doing so will require a down payment.


Unfortunately, the KeyBank program is not open to many, as only MDs, DOs, DDSs, DMDs, and DPMs qualify at this time.


However, residents, fellows, and attending physicians with signed employment offers can close up to 90 days before beginning employment.



4. Truist


Truist Bank, based in Charlotte, NC, offers a program that can be used by physicians all the way until they are fifteen years removed from training.


Similar to KeyBank, the program is open to those with these degrees:


  1. MD

  2. DO

  3. DDS

  4. DMD

  5. DPM


Buyers can borrow up to $1 million at 100% financing, including residents, interns, and fellows, which is unusual.



5. Amerant Mortgage


Fifth on our list is Amerant Mortgage, offering loans to those with a MD, DO, DPM, DMD, DDS, DVM, or JD. To qualify, buyers need a credit score of at least 720 and must be a newly licensed medical resident that meets one of the following requirements:


  • Recently completed a residency and about to begin a career

  • Have less than six months of a residency left


Those that qualify may borrow up to $1 million at 100% financing.



Conclusion


Physicians across Texas have seemingly countless options if they're looking for a physician loan. Lenders local and national have programs in place to help doctors buy homes and establish roots in Texas as they begin their careers.


Would you consider using a doctor loan to buy your home in Texas?


Tell me why or why not in the comments below.



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About Nathan Zarcaro

Nathan Zarcaro is the founder of The Student Debt Destroyer and is passionate about personal finance related causes.  A 2018 graduate of Providence College's Liberal Arts Honors Program, Nathan studied Finance, and has worked for industry leaders in both finance and healthcare.  In his free time, Nathan enjoys playing golf and traveling with his wife Brigid.

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