Question 1

Does Texas homestead law block a second mortgage on my Sherman rental?

Accepted Answer

No, if the rental is not your homestead. Article XVI, section 50 of the Texas Constitution permits liens on a homestead only for a closed list of debts, and the home equity rules on that list (consent of each owner and spouse, total homestead debt capped at 80% of value, a 2% fee cap with exclusions, foreclosure only by court order) protect the homestead. A rental you do not live in falls outside them, and a second lien on it is an ordinary deed-of-trust lien. Homestead turns on use and intent, and title companies can treat a borrower's only Texas residential property as homestead by default, so expect occupancy to be checked, not assumed. This is not legal advice; your attorney or title company has the final say. Terms are on the second mortgage program page, and the Texas investment property second mortgage guide goes deeper.

Question 2

Where does a second lien on a Sherman rental record, and can it be filed electronically?

Accepted Answer

With the Grayson County Clerk, on paper or by eRecording. The Sherman-Denison metro is a single county, so a deed of trust on a rental in Sherman, Denison, Howe, Whitesboro, Pottsboro, Gunter or Bells records in Grayson; Van Alstyne straddles the county line, and a parcel on the Collin side records in Collin County, so check the parcel's county, not the mailing city. The clerk's electronic filing notice lists Simplifile, CSC Global, eRecording Partners Network and Indecomm Global Services as contracted vendors, for filers allowed under Local Government Code section 195.003. Include each grantee's mailing address: the clerk's schedule adds a penalty of the greater of twice the filing fee or $25 when it is missing, under Property Code section 11.003. Confirm the current page fee with the clerk or your title company before closing. County fees are not USAM terms.

Question 3

Where are Grayson County foreclosure sales held, and what happens to a second lien?

Accepted Answer

At the west door of the Grayson County Courthouse on the first Tuesday, and a first-lien sale can wipe out the second. The County Clerk says Grayson County Commissioners designated the west door of the courthouse at 100 W. Houston in Sherman, with the specific time listed on each Notice of Sale; the clerk file-marks and posts the notices, and the trustee runs the sale. Property Code section 51.002 requires at least 21 days of notice, and the Texas Supreme Court has held that foreclosure of a senior lien extinguishes inferior liens. A second only holds its value while the first stays current, which is why combined loan-to-value counts every lien. See lien position explained.

Question 4

Does Sherman require anything from a short-term or long-term rental owner?

Accepted Answer

Short-term rentals register with the city; single-family long-term rentals currently do not need a rental license. Sherman defines a short-term rental as a dwelling unit rented for fewer than 30 consecutive days, and owners and operators must register with the city within 30 days of starting and again after a change in ownership, with hotel occupancy tax handled through the city. The city's Residential Rental Property License (Ordinance 6824, March 2025) covers multi-family complexes only, and single-family rentals are exempt at this time. Short-term rentals are eligible for our second mortgage, but confirm the current rules with the city, including who can hold the registration if the property sits in an LLC.

Question 5

Is a second mortgage on a Sherman rental a consumer loan under Texas law?

Accepted Answer

Texas decides that by purpose. Finance Code chapter 342, the secondary mortgage loan chapter, covers a loan only if, among other conditions, it is extended primarily for personal, family or household use, and the residential mortgage licensing chapters use the same test. We found no Texas regulator guidance on business-purpose seconds specifically, so this describes the statutes and is not a licensing opinion. Talk to your attorney about your own structure.

Question 6

What tax bill should I underwrite on a Sherman rental before adding a second payment?

Accepted Answer

The full investor rate, with no homestead relief. For tax year 2025 the combined rate inside Sherman comes to about $2.19 per $100 of value (2.193280) and inside Denison about $2.32 (2.318114). Newer lots can sit in one of the county's nine municipal utility districts or five flat-fee public improvement districts; one Van Alstyne MUD parcel runs about 3.18% of assessed value. Check the parcel's full tax stack before you size a second, and run the payment side with the second mortgage calculator. Talk to your CPA about your own figures.

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