Texas Property Tax: What Every Homebuyer Needs to Know Before Getting a Mortgage

One of the most common surprises for Texas homebuyers — especially first-timers relocating from other states — is the property tax bill. Texas has no state income tax, but we make up for it with some of the highest property tax rates in the country. Understanding how this affects your mortgage is not optional. It's essential.

How Texas Property Tax Works

In Texas, property tax is levied by your county, school district, and sometimes additional taxing entities (MUD districts, hospital districts, etc.). The rate is expressed as a percentage of your property's "appraised value" as determined by the county appraisal district (CAD).

Important: the appraised value the CAD uses is supposed to equal market value, but it often lags actual sale prices — especially in fast-moving markets like Austin. This can work in your favor in the first year after purchase.

Property Tax Rates by Market

Rio Grande Valley (Hidalgo, Cameron Counties)

Property tax rates in the RGV are typically 2.0–2.3% of assessed value. On a median RGV home priced at $215,000, that's:

• Annual tax: ~$4,515
• Monthly escrow: ~$376

This is lower than San Antonio and Austin, which is one reason the RGV is still an accessible market despite rising home prices.

San Antonio (Bexar County)

Bexar County rates run 2.4–2.7%. On a median San Antonio home at $290,000:

• Annual tax: ~$7,250
• Monthly escrow: ~$604

This is a significant number. I see buyers every week who build their budget around principal and interest only, then discover the real payment when we add taxes. Always know the PITI — principal, interest, taxes, and insurance.

Austin (Travis County)

Travis County rates average 2.1–2.4%, but Austin home prices are much higher — so the dollar impact is severe. On a median Austin home at $549,000:

• Annual tax: ~$12,078
• Monthly escrow: ~$1,007

That's over $1,000 per month just in property taxes. This is why I tell every Austin buyer: know your real payment, not just the rate.

How Property Tax Affects Your Mortgage Qualification

Lenders qualify you based on your total monthly debt obligation — including property taxes. This is your DTI (debt-to-income) ratio. Most conventional and FHA loans allow a maximum DTI of 43–50%.

Here's the real-world impact. If you earn $6,000/month and want to buy in San Antonio:

• Maximum DTI at 45%: $2,700/month total debt payment
• Minus $604 property tax escrow: leaves $2,096 for P&I + insurance + other debts
• At 7% rate, $2,096 in P&I supports about a $270,000 loan

Without factoring in taxes, you might think you qualify for much more. This is the number one reason buyers get pre-approved for one amount and then struggle to find homes in that range when you account for the real payment.

The Homestead Exemption — Your Tax Reduction Tool

Texas offers a Homestead Exemption for your primary residence. For 2023 and forward, the standard exemption is $100,000 off your appraised value for school district taxes. This reduces your tax bill significantly.

On a $300,000 home with the $100,000 homestead exemption, you only pay school district taxes on $200,000 of value — a substantial savings depending on your school district rate.

Important: You must apply for the homestead exemption with your county appraisal district. It doesn't happen automatically. File your application as soon as you close — it must be filed by April 30 to take effect for that tax year.

What to Do Before Buying

1. Look up the actual tax rate for the specific address you're considering. The county appraisal district website shows this. Rates vary block by block based on overlapping taxing entities.
2. Run the PITI number, not just the P&I. Any good loan officer (including me) will show you the full payment estimate before you start shopping.
3. Check if the home is in an MUD district. Municipal Utility Districts in suburban areas add additional tax layers — sometimes 0.5% or more.
4. Understand that taxes will increase. Texas property taxes tend to rise over time as values are reassessed. Build some buffer into your budget.

Questions about how Texas property tax affects your specific home purchase? Call me directly at (956) 358-2770 or send me a message. I'll run the real numbers for your situation.