Dallas Mortgage Rates

Living in Dallas, TX

Dallas has long been an epicenter of history, sports and government, and now it’s a corporate business hub, too. Fortune 500 companies are flocking to the Dallas-Fort Worth area, drawn by favorable tax rates and lifestyle amenities such as quality schools, food and entertainment.

Given the recent influx of businesses, Dallas is also one of the hottest property markets in Texas. The area also leads the nation on new-home construction, which should help with the city’s tight housing inventory. However, affordability is a growing concern in the city. Texas REALTORS listed the median home price in the Dallas-Fort Worth-Arlington area as $260,000 in early 2019, an increase of 1.2% from the previous year. Statewide, the median home price was $230,000 in the first quarter, making Dallas one of the priciest cities in Texas in which to purchase a home. Only the Austin-Round Rock and Midland areas, which have median sale prices of $295,000, are costlier for homebuyers.

New construction has been especially prevalent in the $250,000-$350,000 home range, and municipal laws have hindered affordable housing development. Concerns about decreasing lot sizes and devaluation have made local governments slow to support builder initiatives to develop affordable housing. That may be changing, however, as developers have recently been focusing on building smaller homes when possible, lowering prices and continuing to pressure municipal leaders to clear the path to a more diverse housing market.

Even with affordability concerns, both buyers and sellers can win in the current Dallas market. Closings in Dallas have been up for the past seven years, and the demand here is a boon to sellers. As of early 2019, sellers could expect their homes to be on the market for just shy of two months and to close within 31 days. The amount of time on the market was up by seven days from the first quarter of 2018.

New inventory, combined with the move toward affordable housing construction, benefits buyers, too, particularly those who may have been worried about being priced out of the city.

The rules and costs of buying a home in Dallas

Buying a home is a complicated process, and it can be made all the more so by local and state property and tax laws. Understanding your obligations as both a buyer and seller will help you make educated decisions about your property.

Home seller and buyer laws

Texas law requires sellers to fill out an extensive disclosure form regarding the condition and contents of the home. Mandatory disclosures include whether the seller is currently living in the house and, if not, how long it’s been unoccupied. Sellers are also required to note defects in the property, including foundational issues, problems with smoke detectors, broken appliances, pest issues and a range of other concerns of which buyers would want to be aware. The seller must also disclose whether the home is in a propane gas service area and whether there is a lead-paint risk in the house. Federal law mandates the latter for all homes that were built before 1978.

Although foreclosure may be the last thing on your mind when you purchase a home, it is important to understand Texas foreclosure law in case you should find yourself in such a situation. Texas allows both judicial and non-judicial foreclosures. If your mortgage contract gives your lender power of sale — meaning the lender can sell the home to settle the balance of your loan — you’ll likely go through a non-judicial disclosure. But if the lender does not have power of sale, the company will need to go to court before being granted the right to foreclose.

Texas is a community property state, so if you and your spouse divorce, you’re each entitled to half of any property you acquired while you were married. Therefore, you’ll need to negotiate regarding the sale of the house, since you both legally benefit from the proceeds. Bear in mind that because Texas is a community property state, you’ll need to account for your spouse’s debt, too, when buying a home. Even if you choose to apply for a mortgage solely in your name, the lender will factor his or her debt load into your application under community property law if you apply for a USDA, VA or FHA loan.

When you buy a home in Texas, you must work with escrow and title officers. As an escrow state, Texas law requires that you place the money you’re using to buy the property into an escrow account, where it will be held during the closing process. Your escrow officer’s firm cannot use the money in that account for any purpose other than completing your purchase, and the title officer will investigate any liens or potential obstacles to the property transfer. You do not need to hire a closing attorney in Texas, although you may choose to.

Taxes

One perk of Texas real estate law is that you will not owe real estate transfer taxes when you buy or sell a home. However, if you are buying a home in Texas, make sure all past property taxes on the home are paid before you take ownership. Texas law stipulates that “taxes follow the property,” so you could be liable for any outstanding balances if you don’t verify that the seller has covered them.

Texas offers several property tax exemptions, including a $25,000 homestead exemption that reduces the value of your home for tax purposes. To qualify, the home must be your primary residence and you must have been living in it as of Jan. 1 of the tax year.

Homeowners who are 65 and older or have disabilities may be eligible for property tax exemptions that limit the amount of property taxes they must pay annually. Surviving spouses of homeowners who qualified for these exemptions may be able to claim these benefits, too.

Senior citizens and disabled homeowners can also apply for tax deferrals, under which they are not obligated to pay taxes while they live in their homes. The taxes become due when the home is sold.

Veterans who suffer from complete disabilities, as well as their surviving spouses, may qualify for a full exemption of their appraised property values. The benefit does not extend to a veteran’s surviving children.

Texas also offers partial exemptions up to $12,000 for veterans based on their disability ratings, as assigned by the VA. That benefit also extends to the veteran’s spouse and children. To qualify, the veteran must have a disability rating of at least 10%. Once the veteran turns 65, he or she will qualify for the full $12,000 exemption. Disabled veterans and their surviving spouses who receive homes through charitable donations may claim exemptions equal to their disability ratings.

The state also provides a full exemption for surviving spouses of military service members who died in action, provided that the surviving spouse has not remarried.

You can find out more about property tax exemptions in Dallas here.

Those exemptions are particularly meaningful in Texas, which has the third-highest property tax rate in the country, according to Tax-Rates.org. At 1.81%, it’s second only to New Jersey and New Hampshire. Dallas County residents pay a median of $2,827 in property taxes, which is slightly more than the statewide median of $2,275.00 and represents roughly 4.3% of their total annual income. The county isn’t the most expensive to live in, however. That honor goes to King County, where residents pay a median of $5,066 annually in property taxes.

Conforming loan limits

The conforming loan limit in Dallas County is $484,350, which became the statewide limit this year. That number represents the maximum loan amount you can borrow if you want a mortgage backed by government-sponsored entities Fannie Mae and Freddie Mac. For a larger mortgage, you’ll have to opt for a jumbo loan. Jumbo loans provide greater flexibility in spending power, but they often carry stricter lending criteria or higher down payment requirements.

Programs for homebuyers in Dallas

Although the Dallas area is one of the more expensive Texas metros in which to buy a home, median prices here are still lower than the national median of $277,000. Still, getting together a down payment and closing costs can be a barrier to homeownership for many. Fortunately, there are local and state programs that help ease those costs and make the city more accessible than you might think. Here are some options.

Housing Choice Voucher (HCV) Homeownership Program

What they provide: Low-income Dallas residents who receive public housing choice vouchers may use those vouchers toward purchasing their first homes. The HCV program is administered by the Dallas Housing Authority (DHA).

Who qualifies: Residents must have high enough credit scores to qualify for a mortgage loan and meet the employment and income requirements established by the HCV Homeownership Program. DHA also requires prospective homeowners to complete homeowner education training. At the time of this writing, the HCV program was closed to new applicants but planned to launch an open enrollment period through which new participants could apply.

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My First Texas Home

What they provide: This statewide program provides access to a 30-year, fixed-rate mortgage, as well as up to 5% in closing cost and down payment assistance. The program is available for FHA, VA, USDA and Fannie Mae Preferred HFA loans.

Who qualifies: Veterans and first-time homebuyers may apply. Applicants must have a credit score of 620 or higher and are subjected to income limits and purchase price restrictions based on the area in which they plan to live.

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Home Sweet Texas Home Loan Program

What they provide: Another statewide option, this program enables you to take a grant of up to 4% in down payment assistance or up to 6% as a second lien. The second lien is a 0% interest loan, and you don’t have to repay it until you sell or refinance the property.

Who qualifies: Borrowers must meet income limits of no more than 115% of the area median income (AMI), which is set by the U.S. Department of Housing and Urban Development (HUD). In Dallas, the AMI for 2019 is $83,100. Borrowers must have at least a 620 credit score to qualify for grant assistance and a 680 or better for the 6% second lien.

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Homes for Texas Heroes Loan Program

What they provide: Eligible homebuyers may receive a 30-year, fixed-rate mortgage and up to 6% in down payment assistance. Up to 4% may be received as a grant. Those who wish to take 6% in down payment assistance can take it as a 0% interest second lien that they repay when they refinance or move.

Who qualifies: Homebuyers must be Texas firefighters, teachers, emergency services providers, school counselors, nurses and librarians, police or corrections officers or veterans to qualify. The credit score requirement is 620 for those who wish to take the down payment grant and 680 for those who want the second lien. Dallas-area applicants cannot earn more than 115% of the local AMI, which is $83,100.

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Rate shopping tips

You want to be especially strategic when shopping for interest rates because they dramatically affect how much you’ll pay over the life of your mortgage loan. Use the following tips to help ensure you choose the best all-around offer for your situation.

Contact at least three lenders on the same day

Interest rates fluctuate frequently — as in, they can change every day. That’s why you need to contact all your potential lenders at once. This gives you the best comparison because all of their rate offers will be based on the same information. If you spread out your quote requests, you can’t know whether one lender is offering a genuinely better deal than another, and your comparison points will be out of date.

Give each lender the same information

If you provide conflicting information to the lenders you contact, you won’t be able to accurately compare the quotes you receive, and therefore can’t make a sound decision about which is the best. You also run the risk of skewing your perspective on how much you can actually borrow, and at what rates. Make sure to give every lender complete, truthful information on your finances so both they and you can fully understand your position.

Add up all the lender fees to confirm the costs

Before making a final decision on a lender, review all the fees associated with each offer. What are the origination fees? How much will you pay for flood certification or for the lender to pull your credit report? What does the application cost? Look at each lender’s fees alongside their rate offers to determine which truly gives you the best value, and so you can understand what your actual price tag will be.

Know when to lock in the rate

Once your application has been approved and you expect the loan to close, you may want to lock in your interest rate. Keep in mind, though, that rate locks don’t apply indefinitely, so you shouldn’t lock unless you have a closing date and are confident that the loan is moving forward. You may want to seek your lender’s advice on when to close, particularly if interest rates are fluctuating and you’re not sure how to time the lock. You may be able to file for an extension past the rate-lock-expiration date, possibly for a fee. Some lenders may offer a float-down provision that allows you to adjust your rate if interest rates actually decrease after you lock yours in.

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