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Informational only. Not mortgage advice. Consult an NMLS-licensed loan officer for personalised guidance.
Texas Mortgage Pre-Approval 2026
Texas pre-approval is dominated by one math trade: no state income tax (boosting take-home pay) paired with some of the highest property tax rates in the country (cutting DTI capacity on identical loan amounts). The state's housing-finance stack (TSAHC) is competitive, the conforming and FHA limits track national levels with metro-specific adjustments, and the Section 50 constitutional rules add wrinkles for cash-out refinance but not for purchase. This page walks through the tax-and-income math, the metro-level affordability lines, and TSAHC stacking.
All figures as of May 2026. Property tax rates from county appraisal district data; sale price medians from Texas A&M Real Estate Research Center.
Quick Answer for Texas
$400K Houston home, 20% down, $95K income: qualifies tight
Property tax escrow on $400K home: ~$700-833/mo
Houston effective rate ~2.1-2.5%. Income tax savings partially offset. As of May 2026.
Texas Property Tax: How It Cuts Pre-Approval
Texas has no state income tax but funds schools, county services, and city services almost entirely through local property tax. Effective rates by county typically run 1.8 to 2.5 percent of market value, with some districts higher. Houston (Harris County): typically 2.1-2.5 percent. Dallas (Dallas County): 2.0-2.4 percent. Austin (Travis County): 1.8-2.2 percent, with significant variation by school district. San Antonio (Bexar County): 1.9-2.3 percent.
For mortgage qualification, the lender uses the actual estimated property tax based on the purchase price and the county/city tax rate. On a $400K Houston home at 2.3 percent, that is $9,200 a year, or $767 a month escrowed. On the same $400K home in a 1.0 percent state like Hawaii or Colorado, the tax line would be $4,000 a year, or $333 a month. The Texas premium of $434 a month directly reduces DTI capacity.
The Texas homestead exemption (typically $40,000 of assessed value exempted from school taxes, plus additional exemptions for seniors and disabled veterans) reduces the bill, but only applies to a homestead designation filed after closing. The first year's escrow is usually based on the full non-homestead tax, with adjustments at the second year escrow review.
No-Income-Tax Take-Home Math
Texas does not levy a state income tax, which boosts take-home pay relative to states with high income tax (California marginal 9-13 percent, New York 6-10 percent, Oregon 9 percent at moderate incomes). On a $120K Texas salary, federal income tax plus FICA leaves roughly $87,000 take-home. On the same $120K California salary, state tax adds roughly $7,500 of additional withholding, dropping take-home to about $79,500.
The catch: most of the take-home gain gets eaten by property tax. On a $400K home, the Texas property tax premium (vs a low-tax state) is roughly $5,000-$6,000 a year. On a $600K home, the premium is $8,000-$10,000. So the net Texas affordability advantage vs California is positive but modest, not the order-of-magnitude difference that the headline tax comparison implies. The advantage grows for renters (who do not pay property tax directly but benefit from the lower nominal rents typical of Texas metros).
For DTI purposes, the gross income is identical. The take-home advantage shows up in the comfortable-affordability calculation, not the lender-qualification calculation. A Texas buyer at $120K can afford the same lender-max house as a California buyer at $120K, but the Texas buyer has more cash left over each month after PITI.
Income Required by Texas Metro
Approximate gross income required to qualify at 43 percent DTI on median-priced home in each metro. Assumes 20 percent down, 6.50 percent rate, property tax at typical metro rate, no other debts.
| Metro | Median Sale Price | Property Tax Rate | Income to Qualify |
|---|---|---|---|
| Austin | $560,000 | 1.9% | $135-150K |
| Dallas-Fort Worth | $450,000 | 2.1% | $110-125K |
| Houston | $360,000 | 2.3% | $90-100K |
| San Antonio | $320,000 | 2.0% | $80-90K |
| El Paso | $245,000 | 2.4% | $65-75K |
| Lubbock | $235,000 | 2.1% | $60-70K |
| Corpus Christi | $255,000 | 2.2% | $65-75K |
Median sale prices approximate from Texas A&M Real Estate Research Center Q1 2026. Property tax rates are typical metro-area effective rates; actual rate varies by school district within each metro and can be 0.3-0.5 percentage points higher or lower.
TSAHC: Home Sweet Texas and Heroes
Texas State Affordable Housing Corporation (TSAHC) operates two main first-time-buyer down payment assistance programs that stack with any conforming, FHA, VA, or USDA first mortgage.
Home Sweet Texas
For all qualified first-time buyers. Grant up to 5 percent of the loan amount toward down payment and closing costs. Income limits apply (varies by household size and county, typically 80-115 percent AMI). Sales price limits also apply. Borrower must complete a homebuyer education course. Funding occasionally pauses when annual allocation runs out.
Homes for Texas Heroes
For teachers, professors, librarians, school counsellors, police, fire, EMS, paramedics, corrections officers, and veterans. Grant up to 5 percent of loan amount. Income limits are typically more generous than the standard Home Sweet program. Same homebuyer education requirement.
On a $300K Houston purchase with TSAHC stacking at 5 percent grant ($15,000) plus FHA at 3.5 percent down ($10,500), the borrower brings only the closing costs (typically $6,000-$8,000) to close. The TSAHC grant does not require repayment.
Texas Department of Housing and Community Affairs (TDHCA) also runs the My First Texas Home program with similar mechanics. TDHCA programs and TSAHC programs cannot be stacked with each other, so borrowers choose the most favourable based on income and county.
Section 50 Cash-Out Refinance Rules
Texas Constitution Section 50(a)(6) imposes unique rules on home equity loans and cash-out refinances of Texas homesteads. Maximum loan-to-value is 80 percent (vs 80-85 percent in most states). Total lender fees are capped at 2 percent of the loan amount (excluding survey, title insurance, appraisal). A 12-day cooling-off period applies between application and closing. Only one home equity loan can be outstanding at a time.
The rules do not apply to purchase financing, rate-and-term refinances (no cash out), or refinances that are not cash-out. They originated in the 19th century Texas Constitution to protect homesteads from creditor seizure and have been periodically amended (Proposition 2 in 2017 expanded eligibility and reduced some restrictions).
Practical implication: Texas borrowers cannot extract as much equity as borrowers in other states. The 80 percent LTV cap means a borrower with a $400K home and a $200K existing mortgage can take out a cash-out refinance only up to $320K, freeing $120K in cash. The same situation in California would allow up to $340K-$360K depending on lender, with $140K-$160K in cash freed.
Frequently Asked Questions
How does Texas property tax affect mortgage qualification?
Texas property tax is among the highest in the US: typical effective rates run 1.8-2.5 percent of market value depending on county and city overlay. On a $400K Houston home, expect $7,200-$10,000 annual property tax, or $600-$833 a month in escrow. That is roughly double what a buyer would pay on the same price in a low-tax state like Hawaii or Colorado. The high tax line cuts qualifying capacity meaningfully: on $90K gross income, the difference between a 1 percent and a 2.5 percent property tax state is roughly $60K-$80K in maximum home price under DTI constraints.
Does the no-state-income-tax help mortgage qualification?
Yes, on the take-home affordability side, but not on the DTI side. Lenders qualify based on gross income, which is identical regardless of state income tax. But the lack of state income tax means a Texas borrower's actual take-home is roughly 5-9 percent higher than the same gross income in a California, Oregon, or New York. The comfortable-affordability rule (25 percent of take-home on PITI) therefore supports a larger home in Texas than in income-tax states, even though the lender pre-approval number is identical. The property tax line typically eats roughly half of the income tax savings, so net take-home is modestly higher in Texas, not dramatically so.
What are the Texas-specific cash-out refinance rules?
Texas Constitution Section 50(a)(6) imposes unique cash-out refinance rules. Maximum loan-to-value on a Texas home equity loan or cash-out refinance is 80 percent, fees are capped at 2 percent of the loan amount (excluding certain pass-through costs), no closing within 12 days of application, and the borrower must wait 12 days between the application and closing. The rules originated in the 19th century Texas Constitution to protect homesteads from creditor seizure and have evolved over time but remain stricter than other states. They do not affect purchase financing.
How does TSAHC help first-time Texas buyers?
Texas State Affordable Housing Corporation (TSAHC) runs two main first-time-buyer programs. TSAHC Home Sweet Texas offers a grant up to 5 percent of the loan amount toward down payment and closing costs (income limits apply, varies by household size and county). TSAHC Homes for Texas Heroes targets teachers, police, firefighters, paramedics, corrections officers, EMS workers, and veterans, with grants up to 5 percent of the loan amount. Both stack with conventional, FHA, VA, or USDA first mortgages, and the grant does not require repayment. Programs occasionally pause when funding is exhausted; check availability before assuming.
What credit score do I need in Texas?
Same as nationally: 580 for FHA 3.5 percent down, 620 for conventional, no published minimum for VA (most overlay 580-620), 640 for USDA Guaranteed streamlined. Texas does not have any state-specific credit overlays. Major Texas-headquartered lenders (Caliber Home Loans, NewRez, Cornerstone Home Lending) and broker shops generally fund at the program minimums. The state's large independent mortgage bank presence means 580-619 FHA loans are easier to fund in Texas than in big-bank-dominated coastal markets.
What is the typical income needed for a Texas purchase?
Highly variable by metro. Austin median sale price is approximately $560,000 (Q1 2026), requiring roughly $135,000-$150,000 gross income at 43 percent DTI with 20 percent down. Dallas-Fort Worth median around $450,000 needs $110,000-$125,000. Houston median around $360,000 needs $90,000-$100,000. San Antonio median around $320,000 needs $80,000-$90,000. The Texas property tax hit means the same income qualifies for less house in Texas than in lower-tax states; budget 10-15 percent less home price than you would on the same income elsewhere.
Are FHA limits different in Texas?
Yes, in some metros. For 2026, most Texas counties are at the FHA national floor of $541,287. Austin (Travis County) is at $735,725. Dallas-Fort Worth metro counties are at $581,750-$614,100. Houston (Harris, Fort Bend) is at $541,287 in most cases. The full HUD county-level table lists each county's specific limit. Conforming limit follows the same county-level adjustment for high-cost counties.