Key Takeaways for Texas Homebuyers
- Texas mortgage rates: Currently 6.13% (30-year fixed)—about 0.14% below the national average
- Property tax reality: 1.60-2.50%+ depending on county and special districts (MUD/PID)
- 2026 Homestead Exemption: Now $140,000 (up from $100,000)—saves $1,400+/year on school taxes
- Insurance shock: Texas averages $4,500/year (88% above national average) due to hail, wind, and flood risk
- First-time buyer programs: Up to $60,000 in down payment assistance available (Dallas, Houston, Austin)
- Unique Texas rule: 80% maximum LTV on home equity loans—you must keep 20% equity in your home
Quick Answer
Texas has no state income tax—but property taxes average 1.63% (7th highest in the U.S.), and homeowners insurance runs $4,500+/year. On a $350,000 Texas home with 20% down, expect a true monthly payment of $2,850-$3,200 depending on your metro—not the $1,700 principal & interest alone. This calculator factors in Texas-specific costs that generic calculators miss.
What's in This Guide
- Texas Mortgage Calculator
- Texas Mortgage Rates 2026
- The Property Tax Trap
- MUD & PID Taxes Explained
- Homestead Exemption ($140K)
- Texas Insurance Costs
- Austin vs Dallas vs Houston vs San Antonio
- True Monthly Cost Breakdown
- First-Time Buyer Programs ($60K)
- The 80% Home Equity Rule
- Common Texas Buyer Mistakes
- FAQs
- Next Steps
Who This Guide Is For
- Texas homebuyers who need to know their REAL monthly payment (not just P&I)
- Out-of-state relocators surprised by Texas property taxes and insurance costs
- First-time buyers exploring $50,000+ assistance programs
- Suburb shoppers trying to understand MUD and PID taxes before buying
- Current Texas homeowners evaluating refinancing or home equity options
You've probably heard the pitch: "Move to Texas! No state income tax!"
And it's true. Texas is one of only nine states without an income tax.
But here's what the relocation brochures don't mention:
Texas has the 7th highest property taxes in America. The average effective rate is 1.63%—nearly double the national average of 0.90%.
Add in homeowners insurance that runs 66-88% above national norms (thanks to hail, hurricanes, and tornadoes), and that "no income tax" benefit starts to shrink.
Let me show you what this actually looks like:
On a $400,000 home in the Houston suburbs, you might expect a monthly payment around $2,100 based on a 6.13% rate.
The reality? With property taxes at 2.2% (including MUD taxes), insurance at $400/month, and HOA fees—your true monthly cost hits $3,200+.
That's a $1,100/month difference that catches buyers off guard.
This guide fixes that problem.
I'll show you exactly how to calculate your true Texas mortgage payment, explain the hidden costs most calculators ignore, and help you navigate Texas-specific rules like MUD taxes, homestead exemptions, and the state's unique 80% home equity cap.
Texas Mortgage Rates 2026: Better Than the National Average
Why Texas Rates Are Lower
Texas is the 2nd largest mortgage market in the U.S. with $147 billion in annual home loan volume. This intense lender competition drives rates approximately 0.10-0.15 percentage points below national averages.
According to Bankrate and Freddie Mac data as of December 2025:
| Loan Type | Texas Rate | National Avg | Best For |
|---|---|---|---|
| 30-Year Fixed | 6.13% | 6.27% | Long-term stability |
| 15-Year Fixed | 5.56% | 5.58% | Faster payoff, big interest savings |
| FHA 30-Year | 5.97% | 6.02% | Lower credit, 3.5% down |
| VA 30-Year | 5.50-5.95% | 6.29% | Veterans, active military (no down) |
| USDA | 5.60% | 5.60% | Rural areas, 0% down |
| Jumbo (>$806,500) | 6.47% | 6.52% | Homes above conforming limit |
Sources: Bankrate, Freddie Mac PMMS, December 2025
Texas Conforming Loan Limits (2026)
- Single-family: $806,500 (all 254 Texas counties)
- 2-unit: $1,032,650
- 3-unit: $1,248,150
- 4-unit: $1,551,250
Loans above these limits require jumbo financing: typically 700+ credit score, 20% down, and 6-12 months cash reserves.
The Texas Property Tax Trap: What No One Tells You
This is where Texas homebuying gets complicated.
Texas property taxes are 81% higher than the national average. The state ranks 7th highest in the country, with an average effective rate of 1.63% versus the 0.90% national average.
Let me put that in real dollars:
| Home Value | Texas Tax (1.63%) | National Avg (0.90%) | Extra Cost/Year |
|---|---|---|---|
| $300,000 | $4,890 | $2,700 | +$2,190 |
| $400,000 | $6,520 | $3,600 | +$2,920 |
| $500,000 | $8,150 | $4,500 | +$3,650 |
Property Tax Rates by Major Texas Metro
Tax rates vary dramatically by county—and that's before adding MUD or PID taxes:
| Metro | Primary County | Effective Rate | Median Annual Tax |
|---|---|---|---|
| Austin | Travis | 1.61% | $7,160 |
| Dallas | Dallas | 1.73% | $4,360 |
| Fort Worth | Tarrant | 1.82% | $4,911 |
| Houston | Harris | 1.77% | $4,168 |
| San Antonio | Bexar | 1.88% | $4,171 |
| El Paso | El Paso | 2.14% | $3,282 |
Source: SmartAsset, Texas Comptroller 2024-2025 data
The median annual tax column appears low because it's based on actual median home values—which are lower than what you'll likely pay for a new purchase. Calculate your taxes based on your purchase price, not the county median.
But wait—it gets worse.
MUD & PID Taxes: The Hidden Cost That Can Double Your Tax Bill
This is the section that could save you $3,000-$5,000 per year.
If you're buying in a new Texas suburb—especially around Houston, Dallas, or Austin—there's a good chance the property sits in a special taxing district that adds significant costs on top of regular property taxes.
What Is a MUD (Municipal Utility District)?
A MUD is a special taxing district that funds infrastructure (water, sewer, drainage, roads) in areas outside city limits. Developers create MUDs to build new neighborhoods without city funding. Homeowners pay back the bonds through additional property taxes—often for 20-30 years until the debt is retired.
Over 1 million Texans live in MUD districts. Harris County (Houston) alone has 650+ special districts. Fort Bend County has 200+.
Here's what MUD taxes actually cost:
| MUD District Age | Tax Rate (per $100) | On $350,000 Home | On $500,000 Home |
|---|---|---|---|
| New development (0-5 years) | $0.90-$1.40 | $3,150-$4,900/year | $4,500-$7,000/year |
| Established (10-15 years) | $0.50-$0.80 | $1,750-$2,800/year | $2,500-$4,000/year |
| Mature (20+ years) | $0.25-$0.50 | $875-$1,750/year | $1,250-$2,500/year |
The Total Tax Burden Shock
When you add MUD taxes to base property taxes, your total rate can exceed 3.0%:
- Base property tax: 1.80%
- MUD tax: 1.20%
- Total: 3.00% = $10,500/year on a $350,000 home
- That's $875/month in property taxes alone
Should You Buy in a MUD or PID?
- Pros: Newer homes, better infrastructure, modern amenities, often lower home prices (taxes subsidize development)
- Cons: Higher total monthly costs, taxes can increase as bonds are issued, less predictable long-term costs
- If you buy in a MUD: Budget for total property tax rates of 2.2-3.5%, not the county average
- If you stay in city limits: Lower total tax rate but older infrastructure, often higher home prices
- How to check: The "Tax Rate" field on Zillow/Redfin listings shows total rate—if it's over 2.2%, you're likely in a MUD or PID
Want to see exactly how MUD taxes affect your payment?
Use Our MUD Tax CalculatorSearch "[County] Appraisal District" and look up the property's full tax statement. It will itemize every taxing entity: county, city, school, MUD, PID, water district, etc. Add them all together for your true rate.
Texas Homestead Exemption: Your $1,400+/Year Tax Break
Here's the good news: Texas offers one of the most generous homestead exemptions in the country.
And it just got better.
In November 2023, Texas voters passed Proposition 4, increasing the homestead exemption to $100,000. Then in 2024, Proposition 13 raised it even further.
2026 Texas Homestead Exemption Amounts
- General Homestead (School Taxes): $140,000 (up from $100,000)
- Senior/Disabled Additional: $60,000 (up from $10,000)
- Total Senior/Disabled Exemption: $200,000
How Much Does the Homestead Exemption Save?
The exemption applies to school district taxes only (the largest portion of your bill, typically 40-50%).
| Home Value | Taxable Value (After $140K) | Annual Savings (~1.0% School Rate) |
|---|---|---|
| $300,000 | $160,000 | $1,400/year |
| $400,000 | $260,000 | $1,400/year |
| $500,000 | $360,000 | $1,400/year |
| $750,000 (Senior) | $550,000 | $2,000/year |
You Must Apply—It's Not Automatic
The homestead exemption doesn't happen automatically. You must file Form 50-114 with your county appraisal district by April 30th of the tax year (but you can file late and it may be applied retroactively).
- Who qualifies: Texas residents who own and occupy their home as their primary residence on January 1st
- New homeowners: File as soon as you close—don't wait until April
- Required docs: Texas driver's license or ID with property address, deed or settlement statement
Texas Homeowners Insurance: The $4,500/Year Reality
If property taxes are the first shock, insurance is the second.
Texas ranks 5th most expensive in the nation for homeowners insurance, with average premiums running 66-88% above national average.
| Coverage Level | Texas Average | National Average | Difference |
|---|---|---|---|
| $300K dwelling | $3,851-$4,585/year | $2,110-$2,601/year | +$1,740-$1,984 |
| Monthly equivalent | $321-$382/month | $176-$217/month | +$145-$165/month |
Source: Policygenius, Insurance.com, 2024-2025 data
Insurance Costs by Texas Region
| Location | Annual Premium | Risk Factor |
|---|---|---|
| El Lago (ZIP 77586) | $14,025 | Coastal storm surge |
| Galveston | $10,000+ | Hurricane exposure |
| Corpus Christi | $6,610 | Coastal wind |
| Houston metro | $4,500-$6,000 | Hurricane/flood/hail |
| Dallas-Fort Worth | $4,000-$5,000 | Hail Alley |
| Austin | $3,500-$4,500 | Hail, some flood |
| San Antonio | $3,500-$4,500 | Moderate |
| El Paso | ~$2,000 | Low risk (46% below avg) |
Impact-resistant roofing (Class 4) can cut premiums 5-35%. Bundle home + auto for ~15% discount. Consider higher wind/hail deductibles. State Farm consistently offers the lowest Texas rates ($2,444-$3,725/year).
Austin vs Dallas vs Houston vs San Antonio: 2026 Market Comparison
Texas isn't one market—it's several very different markets with distinct price points, tax rates, and trajectories.
Here's how they compare:
Austin
- Down 17-20% from 2022 peak ($667K)
- Property tax: 1.61% (Travis)
- 2026 forecast: -1% to -2% (continued correction)
- Best suburbs: Hutto ($345K), Kyle ($300K)
- Risk: Tech layoffs still impacting market
Dallas-Fort Worth
- 302,400 jobs added (Aug 2023-2024)
- Property tax: 1.73-1.82% (varies by county)
- 2026 forecast: +1% to +3%
- Best suburbs: Princeton ($350K), Waxahachie ($364K)
- Note: Most Fortune 500 HQs of any metro
Houston
- 85,163 homes sold in 2024 (+1.3%)
- Property tax: 1.77-3.5% (with MUD)
- 2026 forecast: +1% to +2%
- Best suburbs: Cypress (#1 moved-to ZIP in US)
- Warning: 60% of properties face severe flood risk
San Antonio
- 41% below national median
- Property tax: 1.88% (Bexar)
- 2026 forecast: +2% to +3%
- Strong VA loan relevance (military bases)
- Note: 40-50% cheaper than Austin
El Paso
- Outperforming other TX metros
- Property tax: 2.14% (highest)
- 2026 forecast: +3.7% (most optimistic)
- Lowest insurance in Texas (~$2,000/year)
- Fastest market: 30-46 days on market
Which Texas Metro Is Right for You?
- Maximum affordability: San Antonio or El Paso
- Best job market: Dallas-Fort Worth (corporate relocations)
- Price correction opportunity: Austin (if you believe in long-term tech)
- Lowest insurance costs: El Paso (46% below state average)
- Veterans/military: San Antonio (Joint Base SA), El Paso (Fort Bliss)
- Avoid if flood-averse: Houston suburbs without careful research
True Monthly Cost Breakdown: What You'll Really Pay
This is the table every Texas homebuyer needs to see.
Here's what a $350,000 home actually costs per month in each major metro, including ALL the Texas-specific costs generic calculators miss:
| Component | Austin | Dallas | Houston | San Antonio | El Paso |
|---|---|---|---|---|---|
| P&I (6.13%, 20% down) | $1,700 | $1,700 | $1,700 | $1,700 | $1,700 |
| Property Tax | $470 | $505 | $516 | $548 | $624 |
| Insurance | $325 | $375 | $450 | $325 | $167 |
| HOA (typical) | $150 | $150 | $150 | $125 | $100 |
| TOTAL (No MUD) | $2,645 | $2,730 | $2,816 | $2,698 | $2,591 |
| With MUD Tax (+1.0%) | $2,937 | $3,022 | $3,108 | $2,990 | N/A |
Notice something?
The principal & interest ($1,700) is less than half of the total payment in Houston with MUD taxes. That's why you can't trust generic mortgage calculators for Texas.
Texas First-Time Buyer Programs: Up to $60,000 in Assistance
Here's where Texas actually helps homebuyers.
Between state programs and local assistance, qualifying Texas buyers can access $30,000-$60,000 in down payment help—often as forgivable grants.
Let me break down the major programs:
State-Level Programs
TSAHC (Texas State Affordable Housing Corporation)
- Home Sweet Texas: Up to 5% of loan amount as a grant (doesn't require repayment!)
- Homes for Texas Heroes: Same benefits for teachers, police, firefighters, EMS, veterans, corrections officers
- No first-time buyer requirement (unlike many programs)
- Credit score: 620 minimum
- Income limits: Vary by county ($99K-$124K for most metros)
TDHCA (Texas Department of Housing)
- My First Texas Home: Up to 5% down payment assistance
- 3-year forgivable option: Second mortgage forgiven if you stay 3 years
- Mortgage Credit Certificate (MCC): 20% tax credit on mortgage interest annually
- MCC lifetime value: $60,000+ in tax savings over 30 years
- First-time buyer required: Haven't owned a home in 3 years
- Credit score: 620 minimum
Local Programs (Larger Assistance)
| City | Maximum Assistance | Terms | Income Limit |
|---|---|---|---|
| Dallas | $50,000-$60,000 | Forgivable loan | 80% AMI |
| Houston | $50,000 | Forgivable after 5 years | 80% AMI |
| Austin | $40,000 | Shared equity (deferred mortgage) | 80% MFI |
| San Antonio | $30,000 | HIP 80 - forgivable over 10 years | 80% AMI |
| Fort Worth | $20,000 | Forgivable over 5-10 years | Varies |
Many buyers combine state assistance (TSAHC/TDHCA) with local city programs. A Dallas first-time buyer could potentially access 5% state grant + $50,000 city assistance. Work with a TSAHC-approved lender who knows how to layer programs.
The 80% Home Equity Rule: Texas's Unique Constitutional Restriction
This is something every Texas homeowner needs to understand—and it's completely unique to Texas.
The Texas Constitution (Article XVI, Section 50(a)(6)) places strict limits on home equity lending that don't exist in any other state.
The Texas 80% LTV Cap
In Texas, you can never borrow more than 80% of your home's value through any combination of home loans. You must always retain at least 20% equity.
- Home value: $400,000
- Maximum total debt: $320,000 (80%)
- Current mortgage: $280,000
- Maximum cash-out available: $40,000
Other Texas Home Equity Rules
Texas Section 50(a)(6) Requirements
- 12-Day Cooling Off Period
- You must wait at least 12 days between application and closing for any home equity loan. No exceptions.
- 2% Fee Cap
- Lender fees on home equity loans are capped at 2% of the loan amount.
- One Loan Per Year
- You can only take out one home equity loan per 12-month period.
- Both Spouses Must Sign
- Even if only one spouse is on the title, both must consent to a home equity loan on a homestead.
- Non-Recourse Lending
- Lenders can only pursue the home itself—not your other assets—if you default.
"Once a Texas Cash-Out, Always a Texas Cash-Out"
If you take a cash-out refinance in Texas, every future refinance of that loan remains subject to the 80% LTV restriction—permanently. This is true even if rates drop and you just want to refinance for a lower rate.
- Impact: No FHA or VA cash-out refinancing available in Texas—only conventional
- Strategy: Consider a HELOC for small amounts instead of cash-out refi to keep your primary mortgage "clean"
7 Costly Texas Homebuying Mistakes (And How to Avoid Them)
Mistake #1: Using a Generic Mortgage Calculator
- The Cost:
- Underestimating your payment by $500-$1,000/month. Generic calculators don't account for Texas's 1.6%+ property taxes or $4,500/year insurance. Use a Texas-specific calculator and verify tax rates through the county appraisal district.
Mistake #2: Not Checking for MUD/PID Districts
- The Cost:
- An extra $2,000-$5,000/year in taxes you didn't budget for. Before making an offer, look up the property's complete tax statement showing ALL taxing entities. If the total rate exceeds 2.2%, dig deeper.
Mistake #3: Forgetting to File for Homestead Exemption
- The Cost:
- $1,400+ per year in unnecessary taxes. File Form 50-114 with your county appraisal district as soon as you close—don't wait until April. Set a calendar reminder.
Mistake #4: Skipping the Property Tax Protest
- The Cost:
- $400-$1,100/year in excess taxes. With 65-80% success rates, there's no reason not to protest. Even if you hire a service (25-40% of savings), you're ahead. Deadline: May 15th.
Mistake #5: Not Shopping Insurance Aggressively
- The Cost:
- $500-$2,000/year overpayment. Texas insurance varies wildly by carrier. Get at least 5 quotes. Consider impact-resistant roofing for major discounts. State Farm consistently offers the lowest rates.
Mistake #6: Ignoring Flood Risk Outside Flood Zones
- The Cost:
- Catastrophic uninsured loss. 40% of Texas flood claims occur OUTSIDE designated flood zones. Even if not required, consider flood insurance ($800-$2,000/year) in Houston, Austin, and DFW areas.
Mistake #7: Missing First-Time Buyer Programs
- The Cost:
- Leaving $30,000-$60,000 on the table. Many Texas buyers don't know about TSAHC/TDHCA programs or local city assistance. Even if you're not a first-time buyer, TSAHC has programs for you. Work with an approved lender.
Frequently Asked Questions About Texas Mortgages
What is a good mortgage rate in Texas in 2026?
As of December 2025, Texas 30-year fixed rates average around 6.13%, which is about 0.14% below the national average. If you have excellent credit (760+), you should be able to secure rates in the 5.9%-6.1% range. VA-eligible borrowers in Texas can often get rates as low as 5.50%. If you're being quoted above 6.5%, shop around.
Why are Texas property taxes so high?
Texas has no state income tax, so property taxes fund most local government services. The state relies heavily on school district taxes (which are the largest component of your bill), plus county, city, and special district taxes. Texas ranks 7th highest nationally at 1.63% average effective rate. The tradeoff: no state income tax means higher earners often still save money overall.
What is a MUD tax and how do I know if my property has one?
A MUD (Municipal Utility District) is a special taxing district that funds infrastructure in new developments. MUD taxes add 0.50-1.40% to your property tax rate—potentially $1,500-$5,000/year extra on a typical home. Check the "Tax Rate" field on Zillow/Redfin listings (anything over 2.2% likely includes MUD), or look up the property on your county appraisal district website for a complete breakdown of all taxing entities.
How much does the Texas homestead exemption save?
The 2026 Texas homestead exemption removes $140,000 from your home's taxable value for school district taxes (the largest portion of your bill). This saves approximately $1,400+ per year on a typical home. Seniors and disabled homeowners get an additional $60,000 exemption for a total of $200,000. You must file Form 50-114 with your county appraisal district—it's not automatic.
What is the 80% home equity rule in Texas?
Texas is the only state that constitutionally limits home equity borrowing to 80% loan-to-value. You must always keep at least 20% equity in your home. If your home is worth $400,000, your total mortgage debt (including any HELOCs or cash-out refinances) can never exceed $320,000. Once you do a cash-out refinance in Texas, all future refinances of that loan remain subject to the 80% cap permanently.
How much is homeowners insurance in Texas?
Texas homeowners insurance averages $3,851-$4,585/year ($321-$382/month) for $300,000 dwelling coverage—about 66-88% above the national average. Costs vary significantly by region: El Paso is cheapest (~$2,000/year), while coastal areas like Galveston can exceed $10,000/year. Hail and wind damage are the primary drivers. Shop at least 5 carriers and consider impact-resistant roofing for discounts.
What first-time homebuyer programs are available in Texas?
Texas offers substantial first-time buyer assistance. TSAHC (Texas State Affordable Housing Corporation) offers up to 5% of the loan as a grant—and doesn't require first-time buyer status. TDHCA offers the "My First Texas Home" program with up to 5% down payment assistance and valuable Mortgage Credit Certificates (MCCs) worth $60,000+ in lifetime tax savings. Major cities offer additional programs: Dallas up to $60,000, Houston up to $50,000, Austin up to $40,000.
Is it better to buy in Austin, Dallas, Houston, or San Antonio?
It depends on your priorities. San Antonio offers the best affordability (median $256,000—41% below national). Dallas-Fort Worth has the strongest job market (302,400 jobs added 2023-2024). Austin is still correcting from its 2022 peak, offering potential value but with tech sector uncertainty. Houston has the most inventory but significant flood/MUD tax considerations. El Paso is outperforming all other Texas metros with +3.7% forecast appreciation and the lowest insurance costs.
Should I protest my Texas property taxes?
Yes, almost always. Professional tax protest companies report 65-80% success rates, with average assessed value reductions of $20,000-$50,000+. At a 2.2% total tax rate, that's $440-$1,100/year in savings. You can protest yourself (free) or hire a service (typically 25-40% of savings). The deadline is May 15th or 30 days after receiving your notice, whichever is later. There's virtually no downside—your taxes can't increase from protesting.
Do I need flood insurance in Texas?
If your property is in a FEMA flood zone (A or V), your mortgage lender will require it. But even outside designated zones, consider it—40% of Texas NFIP flood claims occur outside high-risk areas. Texas averages $783-$879/year for flood insurance through NFIP, though Houston-area premiums can reach $2,000+. Private flood insurance often offers better coverage limits than NFIP's $250,000 cap.
Your Texas Homebuying Action Plan
You now understand more about Texas mortgage costs than most buyers—and definitely more than the relocation brochures told you.
Here's your action plan:
Your Texas Mortgage Action Plan
Before You Start Shopping
- Decide on your target metro—prices, taxes, and insurance vary dramatically
- Check credit scores from all three bureaus (760+ gets the best rates)
- Calculate your TRUE budget—P&I plus 1.6-2.5% property tax plus $350-$500/month insurance
- Research first-time buyer programs—TSAHC, TDHCA, and local city assistance
When You Find a Property
- Look up the FULL tax rate—county appraisal district will show all entities (base + MUD + PID)
- Check flood zone status—FEMA flood map tool or ask your agent
- Get 5+ insurance quotes—rates vary dramatically by carrier and region
- Get mortgage quotes from 3-5 lenders—include a TSAHC-approved lender
- Calculate total monthly cost using this guide's formula before making an offer
After You Close
- File for homestead exemption IMMEDIATELY—Form 50-114 to your county appraisal district
- Calendar your property tax protest deadline—May 15th of each year
- Review insurance annually—shop for better rates each renewal
Texas-Specific Reminders
- No state income tax = more take-home pay, offset by higher property taxes
- 80% home equity cap is constitutional—plan financing accordingly
- MUD districts can add 1%+ to your tax rate in new suburbs
- $140,000 homestead exemption saves $1,400+/year—but you must apply
Ready to Calculate Your Texas Payment?
Use the Texas Mortgage Calculator
Related Texas Calculators
Helpful Resources
- Mortgage Rates Guide - Understand what drives rates and how to get the best one
- How Amortization Works - See how your Texas mortgage payments split between principal and interest
- TSAHC Official Site - Apply for Texas first-time buyer assistance
- TDHCA Official Site - My First Texas Home program information
- Texas Comptroller - Official property tax information