Covering 268,596 square miles, Texas stands as the second largest state in both size and population, drawing professionals with its appealing tax climate and warm weather. With over 67,000 active physicians, including more than 20,000 in primary care, Texas is well-prepared to meet the needs of its booming population. The U.S. Census highlights an influx of over 4 million new residents in the past decade, fueling a robust demand for housing.

The combination of an influx in population with increased housing demand from the COVID-19 pandemic has caused housing prices to skyrocket in many parts of the state. The median sale price of a home in the state during the first quarter of the year was $325,000, which is an 18.6% increase over the same period last year. This competitive market can be difficult to purchase into because of how swiftly prices are rising.

If you’re a Texas medical doctor, dentist or other professional that hasn’t yet had a chance to save up a substantial down payment, you may find it challenging to qualify for a conventional loan for your dream home and with a low down payment, you may be concerned about the expense of financing.

Pros/Cons of Texas physician mortgage loans

A physician mortgage loan, sometimes called a doctor mortgage, can often make owning a home a reality much sooner than a conventional mortgage.

Some of the advantages of physician mortgage loans:

• Low or no down payment financing. Many physician loan lenders offer up to 100% financing. However, a small down payment (e.g. 3% to 10%) might be necessary depending on the size of the mortgage.
• No private mortgage insurance (PMI). Private mortgage insurance cost hundreds of dollars a month but can be avoided entirely on physician mortgage loans, potentially saving you thousands of dollars each year.
• Favorable treatment of student loan debt. Many medical doctors, dentists and other professionals have trouble meeting the debt-to-income ratio required by mortgage lenders thanks to expensive graduate education degrees and the corresponding high student loan debt. Physician loan underwriters are aware of the cost of these degrees and make special accommodations when calculating your debt-to-income ratio.
• Higher mortgage limits are okay. You can expect to find physician mortgage loan programs that will let you borrow up to $2 million, which is significantly higher than loan limits for conventional mortgages.
• Employment contracts are good enough. Another advantage of the doctor mortgages is that you won’t need to wait until you begin your job to qualify for a mortgage. Usually a contract is sufficient evidence of income to get you through the underwriting process.

Some of the disadvantages of physician mortgage loans:

• Low or no down payment financing. Many physician loan lenders offer up to 100% financing. However, a small down payment (e.g. 3% to 10%) might be necessary depending on the size of the mortgage.
• No private mortgage insurance (PMI). Private mortgage insurance cost hundreds of dollars a month but can be avoided entirely on physician mortgage loans, potentially saving you thousands of dollars each year.
• Favorable treatment of student loan debt. Many medical doctors, dentists and other professionals have trouble meeting the debt-to-income ratio required by lenders thanks to expensive graduate education degrees and the corresponding high student loan debt. Physician loan underwriters are aware of the cost of these degrees and make special accommodations when calculating your debt-to-income ratio.

The main potential negative of a doctor mortgage loan in Texas is that you really need to be prudent in the home buying process. You’ll likely qualify for a much higher loan amount than you would with a conventional loan. However, that doesn’t mean you’ll be able to responsibly afford a more expensive home or lot.

How to decide whether a Texas physician mortgage loan make sense for your home purchase

Fortunately, there are doctor mortgage programs that make it easier for high-earning medical doctors, dentists and other professionals to qualify for mortgages and achieve homeownership. Texas physician mortgage loans come with huge benefits for doctors, dentists and other professionals. You can purchase a home without a large down payment, which allows you to get into a home quickly or allows you to use the down payment funds for another purpose.

The downside is that you’ll probably pay a slightly higher amount for using a physician mortgage than if you pursued a conventional mortgage. Additionally, if you don’t have the money for a down payment, you’ll need to understand whether it’s the right time to buy a house. There’s no rush to purchase a home and maybe people rent for years before making their first purchase, allowing you to save up for the down payment and closing costs.

Another potential pitfall with a doctor loan program in Texas is that you may buy more home than you can afford. Just because a lender is willing to lend you a lot of money doesn’t mean that it’s the right financial decision. A realtor scouring the NMLS might be able to convince you to buy a bigger house than you need in Dallas, Houston or Austin. You may already be in significant student loan debt and you’ll want to ask yourself whether borrowing additional money is the right decision.

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