Texas Mortgage Guide 2026

Buying a home in Texas means contending with one of the country's highest property tax burdens — and some of its most accessible first-time buyer programs. The two facts live side by side. Understanding both is the only way to know what your monthly payment will actually look like before you start touring houses.

Texas levies no state income tax, which is part of why the state leans so hard on property taxes to fund schools and local government. That trade-off is baked into every mortgage payment here. On a median-priced Texas home, property taxes alone can add $400 to $500 a month to your housing cost — more than many buyers anticipate when they run a quick online calculation.

Texas Property Taxes

Texas has an effective property tax rate on owner-occupied housing of approximately 1.40 to 1.60 percent, according to Tax Foundation data (2024). That puts the state among the top ten highest in the country. New Jersey leads the nation at 2.08 percent, but Texas still sits well above the national average of roughly 1.0 percent.

Unlike most states, Texas has no state-level property tax. All property taxes are levied locally — by counties, school districts, cities, and special taxing districts — and those rates stack on top of each other. A homeowner in the Houston suburbs might face a combined rate of 2.0 to 2.5 percent on their assessed value once all taxing entities are added together, while someone in a rural West Texas county could pay significantly less.

Source: Tax Foundation, Property Taxes by State and County, 2024. Rate reflects calendar year 2022 data (the most recent published), which is the basis for Tax Foundation's state rankings.

The Homestead Exemption

Texas homeowners who use their property as a primary residence can claim the homestead exemption. Starting January 1, 2025, the school district portion of the exemption rose from $100,000 to $140,000 after Texas voters approved Proposition 13 in November 2025. That means if your home is appraised at $300,000, you pay school district taxes as if it were worth $160,000. Homeowners 65 and older receive an additional $60,000 school district exemption on top of that, bringing their combined school district exclusion to $200,000.

Many counties and cities offer their own exemptions on top of the school district amount. You must file a homestead exemption application with your county appraisal district — it is not automatic. The deadline is April 30 of the tax year, though late filings are accepted in some circumstances. The Texas Comptroller's office maintains current exemption rules at comptroller.texas.gov.

Closing Costs & Transfer Taxes in Texas

Texas does not impose a state real estate transfer tax. That is a genuine benefit for buyers and sellers alike. States like New York, Pennsylvania, and Florida charge transfer taxes that can run into the thousands on a typical purchase; in Texas, that line item simply does not exist.

That said, Texas closing costs are not cheap. Buyers typically pay 2 to 5 percent of the purchase price in closing costs, while sellers pay roughly 3 to 5 percent on top of agent commissions. The main cost drivers for buyers are:

• Loan origination fee: typically around 1 percent of the loan amount
• Lender's title insurance: required by most lenders; cost scales with loan amount
• Owner's title insurance: optional but strongly advisable; seller traditionally pays in Texas, though this is negotiable
• Appraisal: $400–$600 for most single-family homes
• Prepaid escrow: several months of property taxes and insurance collected upfront
• Recording fees: modest, set by county

On a $340,000 purchase, a buyer might realistically spend $6,800 to $17,000 in closing costs before prepaid items. The wide range reflects how much lender fees and negotiated items can vary. Always compare Loan Estimates from at least two lenders — lender fees are the line items most within your control.

First-Time Buyer & Down Payment Assistance Programs

Texas runs two major housing finance agencies with active programs. Both require a minimum 620 credit score and a completed homebuyer education course.

TDHCA: Texas Department of Housing and Community Affairs

TDHCA administers the Texas Homebuyer Program (welcomehome.tdhca.texas.gov), which currently offers two loan products:

My First Texas Home pairs a 30-year fixed-rate mortgage with down payment and closing cost assistance up to 5 percent of the loan amount. The program is designed for first-time homebuyers and qualifying veterans. Income and purchase price limits apply and vary by county; check the program's current rate notice for up-to-date figures.

My Choice Texas Home carries the same 30-year fixed mortgage and up to 5 percent assistance, but is available to repeat buyers as well — you do not need to be purchasing your first home. Qualified borrowers may also be eligible for loan forgiveness on the assistance portion after three years. TDHCA also offers a Texas Mortgage Credit Certificate to first-time buyers and veterans, which provides a federal income tax credit of up to $2,000 per year for the life of the loan.

TSAHC: Texas State Affordable Housing Corporation

TSAHC (tsahc.org) runs two programs alongside its lender network:

Homes for Texas Heroes serves teachers, police officers, firefighters, emergency medical personnel, county jailers, and correctional officers. Qualifying buyers receive a mortgage paired with down payment assistance that can be structured as a grant (no repayment required) or as a forgivable second lien that disappears after three years if you stay in the home.

Home Sweet Texas covers everyone else who meets the income guidelines but does not qualify under the Heroes program. It functions similarly — 30-year fixed mortgage plus grant or forgivable second lien for down payment assistance.

Sample Monthly Payment

The figures below are estimates only, intended to illustrate how Texas property taxes affect a real payment. Your actual payment will depend on your credit score, lender, local tax rates, and insurance premium.

Texas homeowners insurance tends to run higher than the national average due to hail, wind, and severe storm exposure — particularly in North Texas and along the Gulf Coast. The $175/month estimate above is a rough midpoint; actual premiums vary widely by location and coverage level.

The $140,000 school district homestead exemption would reduce the taxable value on this $335,000 home to $195,000 for school taxes specifically, which can lower the effective tax bill meaningfully once you file. That savings is not reflected in the table above, which uses the pre-exemption appraised value to show a conservative worst-case number.