Texas Mortgage Calculator

Factors in Your Texas Mortgage Payment

Property taxes in Texas are known for being quite high compared to the rest of the country. It’s one of the first things to add to your housing budget if you’re planning on buying a home in the state. The average effective property tax rate is 1.60%, which is good for eighth-highest in the U.S. That said, Texas doesn’t have an income tax, so the majority of local government services such as libraries, road systems and schools are paid for by locally administered property taxes.

Property tax rates in Texas are levied as a percentage of a home’s appraised value. The percentage depends on local tax rates from schools and other county concerns, so it varies per area. For example, a house appraised at $250,000 in Houston or one of its suburbs has an effective tax rate of 1.82% or $4,550 a year. Harris County, which contains Houston and its suburbs, has some of the highest tax rates in not only Texas, but the U.S. at large. The lowest tax rate in the state is 0.34% in Crockett County. If you owned a house appraised at $250,000 in this sparsely populated county, your annual property taxes would be only $850.

Wondering how your home is appraised? Each year the county will determine the current market value of your home, and that’s the number your tax payments are based on. Tax bills are sent usually in early October and are due by the end of January in the following year. The good news for Texas homeowners is that there are a number of different exemptions to property tax that may apply to you. If you’re a veteran, disabled, older than 64 or living in your primary residence, you may qualify for a property tax exemption.

Along with high property taxes, Texas is known for having some of the highest annual homeowners insurance costs. According to recent data from Insurance.com, Texas ranked as quite expensive for this insurance at an average of $3,525 per year. That puts the Lone Star State right near Florida, Louisiana and Mississippi, all states that have heavy hurricane and flooding risk.

While Texas does have many of the same weather risks, with large cities frequently exposed to hurricane, tornadoes and hailstorms, there are other reasons the insurance price is so high in this state. According to a white paper issued by Texas’ Office of Public Insurance Counsel, agent commissions and acquisition costs, advertising and underwriting are 65% higher in Texas than the U.S. average.

A financial advisor can help you understand how homeownership fits into your overall financial goals. Financial advisors can also help with investing and financial planning - including retirement, taxes, insurance and more - to make sure you are preparing for the future.

Costs to Expect When Buying a Home in Texas

One of the first things to consider when you find a home you’d like to buy is a home inspection. In Texas, expect to pay $200 to $450 for the service. If you want a termite or mold inspection or radon testing, you’ll pay an additional fee for each service. If you’re curious about your inspector’s education, Texas issues inspector licenses so the industry is regulated.

Closing costs are another expense you’ll have to consider before buying a home. Luckily, these fees are only charged once at the closing of the mortgage, and don’t carry on annually like insurance and property taxes. On average, to cover closing costs for a home in Texas, you'll need to save around 2.17% of the purchase price. Fortunately, Texas is one of the few states that doesn’t levy transfer taxes or include a state recordation tax, which will save you a percentage of overall costs.

Our Closing Costs Study assumed a 30-year fixed-rate mortgage with a 20% down payment on each county’s median home value. We considered all applicable closing costs, including the mortgage tax, transfer tax and both fixed and variable fees. Once we calculated the typical closing costs in each county we divided that figure by the county’s median home value to find the closing costs as a percentage of home value figure. Sources include U.S. Census Bureau, Bankrate and government websites.

At the time of closing, you’ll be responsible for paying the mortgage lender a number of fees. This includes origination points, commitment fee, broker fee, processing charges, tax service and more. You’ll also be responsible for a credit report charge, flood certification and possibly appraisal, survey and attorney fees, if you opt for those services.

You’re also responsible for title insurance, which helps guaranteed the property against problems such as outstanding liens and taxes. It’s a hefty charge. In Texas title insurance rates are set by the state, which means pricing isn’t competitive - it’s set. And, according to Dallas News, Texas pays near the highest in the nation for title insurance. Luckily, you do save in other areas: In Texas, you won’t have to pay mortgage tax or any local or transfer fees.

Details of Texas Housing Market

Texas is the largest state by size in the contiguous U.S., taking up roughly 261,800 square miles. It’s the second-largest state by population (behind California) with an estimated 29.5 million residents.

Most of Texas’ population resides in Houston, San Antonio, Dallas, Austin and Fort Worth, which are the five largest cities in the state. Overall, Texas has three of the 10 largest cities in the U.S. by population. The overall median home value in the state is $237,400, according to the Census Bureau.

If you’re hoping to live in Houston, you’ll likely have to have a bigger budget, as the median home value in Austin is $381,400, based on Census data. Austin has had one of the highest home value increases in the past few years, thanks to a number of tech companies moving to the capital city. Thinking about San Antonio? Median home values are lower there, at about $167,700 for a home in the seventh-largest city in the U.S.

Local Economic Factors in Texas

It’s no mystery what industry Texas dominates. With well over $100 billion generated each year by oil and gas extraction, Texas is the nation’s leading energy producer.  In addition to growing industry jobs, Texas also increased its total population by 2.7 million from 2010 to 2016. In comparison, the largest U.S. state, California, only increased by 2 million residents in the same time period. Texas’ December 2022 unemployment rate was 3.9%, according to the Bureau of Labor Statistics, compare this to a national average of 3.5%.

Texas’ economy remains robust thanks to some of the largest public and private companies calling Texas home. On top of industry giants such as ExxonMobil, Valero and Phillips 66, Texas is also host to AT&T's headquarters as well as Sysco, Halliburton and American Airlines.

As for what the cost of living difference will be if you’re relocating to Texas, it’ll depend on what area you’re looking at. For example, if you and your partner are moving from New York City to Dallas and you have a pre-tax combined income of $110,000, your cost of living will be 26% lower in Texas on average. Let’s say you’re considering Austin instead. In that case, the cost of living in the same scenario is about 23% lower on average. One of the biggest benefits of moving to Texas is that there is no state income tax. That means if you’re looking at renting rather than buying, the only taxes you’d effectively pay would be federal. You could stand to save a good bit of money, especially if you’re coming from a heavily tax-burdened state like New York or California.

Mortgage Legal Issues in Texas

Texas is considered relatively consumer-friendly for mortgages. The state put its own protection measures to help prevent foreclosures well before the housing crisis, which helped the state escape relatively unscathed during the real estate meltdown. Homeowners weren’t allowed to even get home equity loans until 1997. Another protection measure is that mortgage debt cannot exceed 80% of a home’s market value, which means you can’t borrow more money until you have more equity in your house. It can help prevent defaulting on the loan or getting into more debt. You also can only take one home equity loan per year, and you can’t get a secondary loan prior to repaying your primary home equity loan. There’s a generous amount of time for closing, as well. You have 12 days after you apply and receive official notice of your rights to change your mind and opt out of the loan. This is helpful if you need time to review the terms and make sure your finances are in order.

As for foreclosures, Texas has judicial as well as non-judicial processes depending on your mortgage document. If you have a deed of trust, which is another type of mortgage document, your lender can invoke the “power of sale,” which is a non-judicial foreclosure and generally has a quicker timeline than the court (judicial) option. However, Texas does have a number of provisions in place for homeowners. It’s a non-recourse state, which means if your house sells for $150,000 at public auction, but you owe $175,000 to the lender for it, the lender can’t pursue the remaining deficiency, which is $25,000. That said, situations can differ depending on what type of mortgage you obtained and the specific foreclosure proceeding, so you may be liable for the deficiency in certain situations.

In Texas, lenders are required to give at least 20 days’ notice to cure (pay) the mortgage payments in default before accelerating the loan. If you don’t pay the delinquent balance in those 20 days, the lender or mortgage servicer will request that the trustee that was designated in the deed of trust (mortgage document) to sell the property. After that, the trustee starts the process by giving a 21-day advance notice of the sale by posting and filing a number or notifications. The property will be sold at public auction on a Tuesday, and you are allowed to bid on your own property. However, Texas doesn’t have what’s called the “right of redemption” which enables the foreclosed borrower to repurchase the property after the auction for the price it brought at the sale.

The state itself also provides resources if you’re in danger of foreclosure. You can find links to advice, government agencies that provide help and the Homeownership Preservation Foundation (HOPE Hotline) on the Texas Department of Housing and Community Affairs website.

Texas Mortgage Resources

The Texas Department of Housing and Community Affairs (TDHCA) offers a multitude of resources for homebuyers. You can take a two-hour “Becoming a Homeowner” course online, which covers preparation, financing and purchasing your home. This course is required if you want to take advantage of another of TDHCA’s offerings: My First Texas Home. This program offers 30-year fixed interest loan underwriting and down payment and closing cost assistance. While this program is for first-time homebuyers, if you’re a veteran and looking to buy a home in Texas, that requirement is waived.

TDHCA also offers a program for federal tax credits up to $2,000 a year. There is criteria to meet in order to receive the credit. You can find out more about the benefit on the Texas Mortgage Certificate Program webpage.

Another state agency for homebuyers is the Texas State Affordable Housing Corporation (TSAHC). Homebuyer assistance programs are offered for a variety of special populations including teachers, police officers, veterans and low-to-moderate-income homebuyers. If you qualify for the program, you can benefit from 3% to 5% down payment assistance (that doesn’t have to be repaid), 30-year loan rates and options, as well as help even if you aren’t a first-time homebuyer. TSAHC offers education classes in person as well as online for a variety of prices from free to about $100.

Texas has large quantities of United States Department of Agriculture (USDA) loan-eligible land. You have to meet certain income restrictions to qualify for a USDA-backed loan, but if you do, it’s a good resource to help you on your home owning journey. The program helps with down payments, home repair costs and rural businesses, as well.

For those soon-to-be Texans, there are some things you should know before moving to Texas. Good news for potential homeowners: no. 13 on the list is “Texas homes are affordable.” And if that’s not enough, you can take a look at the true cost of living in Texas, which will help you see how food, taxes, healthcare and other costs will factor into your overall budget.