Austin Mortgage Rates

Living in Austin, TX

Austin is well-known for its music scene, but that’s just one of the Texas city’s many appealing qualities. In addition to being named the No. 1 place to live in the United States by U.S. News & World Report, it’s home to enough tech companies and innovative startups that it’s earned the nickname “Silicon Hills.”

The housing market reflects Austin’s appeal, with median home prices hitting a record high in May 2019, according to the Austin Board of Realtors. The median price for a single-family home was $407,400 in May, which is a 5.8% increase over the previous year. However, at the same time, new listings have dropped by 3.6%, and active listings have decreased by 11.3%.

The average time Austin homes remain on the market also dropped by six days to 29 days in May. The competitive housing market has made it challenging for first-time homebuyers and those with low-to-moderate incomes to find a home. But it’s not impossible. Given that the city is currently in a home seller’s market, if you see a home that fits your needs and is within your price range, it’s best to put in an offer ASAP.

The rules and costs of buying a home in Austin

Texas has laws in place to protect homebuyers and sellers, as well as those who may be losing their homes due to foreclosure or divorce. Here’s what you need to know if you’re considering buying a home in Austin.

Home seller and buyer laws

All Texas home sellers are required to disclose any issues with a home. Texas law requires sellers to provide written notice that covers all aspects of the property. Anyone with a real estate license in Texas must ensure that sellers use the seller’s disclosure notice provided by the Texas Real Estate Commission, which meets the disclosure requirements under Texas state law.

When the time comes for you to close on your home, you aren’t required to have an attorney present, as Texas is an escrow state. Although not required, homebuyers may want to use an attorney for particularly complex situations.

Most Texas foreclosures are non-judicial, which means the lender can foreclose on your home without going to court. Your lender must give you at least 20 days to bring your mortgage up to date and an additional 21 days notice before your home is sold at auction. If the deed of trust does not contain a “power of sale” clause, which authorizes a non-judicial foreclosure, a lender must file a lawsuit to foreclose on the home.

Texas is a community property state. This means that, in the event of a divorce, everything acquired during the marriage is considered “community property” and divided equally between the two spouses. However, the judge does have some discretion to ensure the split is fair; so although community property is typically divided 50/50, it doesn’t always have to be.

Taxes

If you’re buying a home in Austin, one thing you don’t have to worry about is paying a transfer tax. Texas is one of the few states without a transfer tax. You do have to pay property taxes, though. Austin is the county seat of Travis County, which collects a median property tax of $3,972 per year, according to Tax-Rates.org. This is higher than the statewide median of $2,275 annually.

Travis County does offer several property tax exemptions, which can reduce your property taxes. These include:

  • A homestead exemption for owner-occupied properties
  • An over-65 homestead exemption for those age 65 and older
  • An over-65 and disabled deferral
  • An over-55 exemption for the surviving spouse of someone who qualified for the over-65 exemption
  • A 100% disabled veteran exemption
  • A disabled veteran or surviving spouse of a disabled veteran exemption
  • A disability homestead exemption

To apply for an exemption and find out more information, contact the Travis Central Appraisal District.

Conforming loan limits

A conforming loan limit is the maximum loan amount that government-sponsored entities Fannie Mae and Freddie Mac will purchase. The Federal Housing Finance Agency sets these loan limits each year.

Travis County, where Austin is located, has a conforming loan limit of $484,350. Some pricier areas in the U.S. qualify for higher loan limits, but Austin doesn’t meet the criteria.

Programs for homebuyers in Austin

Home prices in Austin might seem a bit daunting, but there is assistance available for qualified buyers.

Hill Country Home Down Payment Assistance Program

This program offers 30-year, fixed-rate mortgages and down payment grants of 2.5%-4.5% (after lender charges) of the loan amount to cover your down payment or closing costs.

Who qualifies:

  • Borrowers must have a credit score of 640 or higher.
  • Borrowers must have a debt-to-income ratio of 45% or less.
  • Borrowers must complete a HUD-approved homebuyer education class.
  • Borrowers must meet the income limit of $120,400.
  • Borrowers must meet the purchase price limits determined by the lender, which cannot exceed $332,470.

Learn more

Austin Homebuyer Down Payment Assistance Program

This program is administered by the City of Austin’s Neighborhood Housing and Community Development department. It offers a deferred, 0% interest loan to first-time homebuyers and those who have been displaced by divorce. Borrowers can qualify for up to $40,000 in assistance.

Who qualifies:

  • Borrowers must meet the income limit of 80% or less of the Austin area median family income.
  • Borrowers must complete a HousingSmarts or other homebuyer education class.
  • Borrowers must purchase a home with a sales price of $261,000 or less.
  • Borrowers must work with a participating lender.

Learn more

Home Sweet Texas Home Loan Program

This is a statewide program that can be used to purchase a home in Austin. It offers a 30-year, fixed-rate mortgage and down payment assistance as a grant or as a repayable second loan. Borrowers may also be eligible for a mortgage credit certificate, which lowers your federal income taxes.

Who qualifies:

  • Borrowers must meet the income limit, which is $113,520 for a household of one or two people and $132,440 for three or more people.
  • Borrowers must meet the purchase price limits of $350,871 in non-targeted areas and $428,843 in targeted areas.

Learn more

Home for Texas Heroes Program

This program offers mortgage financing and closing cost and down payment assistance to teachers, school librarians, nurses and counselors, police and corrections officers, firefighters, EMS personnel and veterans. Down payment assistance is available for up to 6% of the loan amount and is given as a grant, which means it doesn’t need to be repaid. First-time borrowers may also be eligible for a mortgage credit certificate, which lowers your federal income taxes.

Who qualifies:

  • Borrowers must meet the income limit, which is $113,520 for a household of one or two people and $132,440 for three or more people.
  • Borrowers must meet the purchase price limits of $350,871 in non-targeted areas and $428,843 in targeted areas.
  • Borrowers don’t need to be first-time homebuyers, but first-time homebuyers may receive a lower mortgage rate.

Learn more

Rate shopping tips

As with any big purchase, it pays to shop around for a mortgage. Here are a few ways to make the most of your Austin mortgage options.

Contact at least three lenders on the same day

Mortgage rates fluctuate daily. This means you can be quoted a rate one day that is obsolete by the next. To get an accurate picture of your options so you can truly compare the offers, you should contact at least three lenders on the same market day.

Give each lender the same information

Ask each lender for a quote on the same type of mortgage, such as a 30-year, fixed-interest-rate mortgage. This allows you to more easily compare quotes. Make sure you give each lender the same information about your credit score and household income and other finances as that will impact your quotes, too. If the lenders do not have the same information, you may not be able to make an accurate comparison.

Add up all the lender fees to confirm the costs

While it’s tempting to zero in on your interest rate, there are other fees you should keep in mind. For example, look for any origination or application fees and add those into your calculations when comparing rates. See if any of the lenders are offering you a discount. Adding up all the costs involved gives you a true idea of what your overall price tag will be.

Know when to lock in the rate

A rate lock allows you to lock in a quoted interest rate for a certain time period, so if interest rates rise, your rate will not be affected. A longer rate-lock period is better as it gives you more time to close on a home. Some lenders offer a float-down provision in case interest rates drop after you receive your quote. Ask your lender when your rate is locked and how long the rate-lock period will last.

The information in this article is accurate as of the date of publishing.