Texas mortgage rates

Living in Texas

Texas is home to more than 28.7 million people, making it the second-most populous state in the U.S. The Lone Star State is also the second-largest state in the country, covering 268,597 square miles and beat only by Alaska in size. Whether you’re looking for city life in Houston or Dallas, wide expanses of desert land or could imagine nothing finer than settling down in the Great Plains, Texas has no shortage of real estate opportunities for homebuyers.

The housing market is heating up in Texas as prices rise. The median home price in the first quarter of 2019 was $230,000, up 2.7% from the first quarter of 2018, according to a report from Texas Realtors. This upward trend holds steady across the Fort Worth area, while prices in the Austin area remain flat. Additionally, the number of homes sold in the Lone Star State increased 0.7% in the first quarter of 2019 compared with the previous year.

However, the number of days homes remain on the market and the state’s inventory level are both slightly up, suggesting this isn’t entirely a seller’s market. Across Texas, single-family homes were on the market for an average of 100 days in the first quarter of 2019, which is one day longer than the previous year. Inventory is also slightly higher, giving buyers more options heading into the summer months.

The rules and costs of buying a home in Texas

If you’re thinking of buying a home in Texas, it’s important to keep in mind that the Lone Star State has a variety of laws and state-specific costs. Consider the following regarding property disclosure, foreclosure, the division of property in divorce and home closings.

Home seller and buyer laws

What must sellers disclose? The Texas Real Estate Commission requires sellers to disclose certain information to buyers during the homebuying process. Sellers are required to provide buyers with a seller’s disclosure notice that alerts buyers to any issues or defects with interior and exterior walls, the roof, ceilings, doors, fences, plumbing, electrical systems and more.

How does foreclosure work? When a homeowner falls behind on their mortgage and repeatedly fails to make payments on their home loan, lenders may foreclose on a borrower’s property. Some states, referred to as nonjudicial states, allow the foreclosure process to proceed without involving the court system. Other states, known as judicial states, require lenders to file a judicial lawsuit in court to carry out a foreclosure. Texas allows foreclosures to proceed through either a judicial or nonjudicial process.

How is property divided in divorce? Texas is what is known as a community property state, which means that everything a couple acquires during the marriage is considered equally owned by both spouses. When a couple divorces, Texas state law mandates that assets, including property, debt and earnings, are divided 50/50 between the two parties.

Does a lawyer need to be present during a home closing? Many states, including Texas, do not require a lawyer to be present during the homebuying process. These so-called escrow states give homebuyers the option to work instead with escrow agents, who handle the process of transferring property from seller to buyer.

Taxes

Upon closing, many states impose a transfer tax, which is based on the value of the property being purchased. Texas, however, is one of the 13 states that does not impose a real estate transfer tax during the homebuying process.

Additionally, there are no statewide property taxes in Texas. Instead, property taxes are determined and implemented on a local basis, so check with your county and city governments to determine the amount you will owe in property taxes for a home in Texas. In the city of Houston, for example, buyers can expect to pay a property tax of 63.875 cents for every $100 in assessed home value.

Although there are no statewide property taxes in Texas, the Texas state government does offer certain groups reductions and exemptions from paying local property taxes. Exemption programs exist for those age 65 or older, disabled persons who meet the disability guidelines set forth by the Federal Old-Age, Survivors and Disability Insurance Act, disabled veterans and surviving military spouses and children.

Conforming loan limits

The conforming loan limit across Texas is currently $484,350 for a single unit-home. This is the limit for a single-family residence in most areas of the U.S.

Conforming loans are mortgages that are eligible for purchase by government-sponsored enterprises Fannie Mae and Freddie Mac. National conforming loan limits are set at the beginning of each year by the Federal Housing Finance Agency (FHFA). Those with good credit can generally expect conforming loans to offer better interest rates, and as a result, lower monthly payments.

Programs for homebuyers in Texas

Before you commit to a lender and a home, make sure you explore programs that can help you purchase a home in Texas. Some programs offer down payment assistance, others are designed specifically for first-time buyers and others provide tax credits that can help make your home more affordable year after year.

My First Texas Home

  • 30-year, fixed-rate mortgages
  • Down payment assistance and closing cost assistance available up to 5% of the total loan value
  • May be combined with Texas Mortgage Credit Certificate (available to first-time homebuyers only)

Who qualifies:

  • First-time homebuyers, veterans or a buyer who has not owned a home in the past 3 years
  • 620 minimum credit score
  • Buyer must meet specific income and purchase price limits, which vary based on county and household size
  • Purchase price must fall within limits

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My Choice Texas Home

  • 30-year fixed-rate mortgage loans
  • Down payment and closing cost assistance available up to a maximum of 5% of the total loan value
  • Option to use government-backed loans including FHA, VA, USDA or conventional loans

Who qualifies:

  • First-time and repeat buyers
  • 620 minimum credit score
  • Buyer must meet specific income and purchase price limits, which vary based on county and household size
  • Purchase price must fall within limits

Learn more

Texas Mortgage Credit Certificate

  • Tax credit that reduces federal tax liability, available only in combination with My First Texas Home mortgage
  • The tax credit is available as long as the buyer lives in their first home and the mortgage loan is active

Who qualifies:

  • First-time homebuyers, veterans and those who have not owned a home in the previous 3 years
  • Must have a My First Texas Home mortgage loan
  • Buyer must meet specific income and purchase price limits, which vary by county and household size
  • Purchase price must fall within limits

Learn more

Rate shopping tips

Once you’ve familiarized yourself with the finer points of Texas state homebuying laws, tax structures and homebuying programs, it’s time to shop for a mortgage rate. Here are a few tips to help you compare rates and secure the best option possible.

Contact at least 3 lenders on the same day

Mortgage rates fluctuate daily and also vary from lender to lender. That’s why it’s important to reach out to at least three lenders on the same day, allowing you to accurately compare rates from one financial institution to the next. While it’s a myth that shopping for a mortgage rate will hurt your credit in and of itself, it’s still important to make multiple inquiries within a 30-day period so credit bureaus can tell you’re shopping for a home loan.

Give each lender the same information

When approaching a lender while shopping for a mortgage, make sure to provide each lender with the same information. By doing so, you’ll be able to get an accurate assessment of the mortgage rates obtained from each lender. The information you’ll need to provide will include bank statements, 401(k) documentation and your FICO Score.

Add up all the lender fees to confirm the costs

Stay on the lookout for additional fees, which can add up quickly and also range from one lender to the next. Fees may include closing costs, attorney fees, processing fees and charges to record a loan. Include these expenses when comparing rates between lenders to get the most accurate comparison of total cost.

Know when to lock in the rate

When you’ve found the home you’re ready to finance, the lender you want to work with and a mortgage rate that’s right for you, it’s time to lock in your rate. By locking it in, you’ll secure the mortgage interest rate you want without it being subject to market changes, whether positive or negative.

Begin by asking lenders about their rate-lock policies, most of which range from 30 to 60 days in length. You’ll need to close on a home during that period to hold on to the rate, so once you’re ready to lock, get ready to get moving.

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