Featured Experts
James Gaines
James Gaines Chief economist, Real Estate Center, Texas A&M University View bio
Leslie Rouda Smith
Leslie Rouda Smith Past chairman, Texas Association of Realtors View bio

This guide was written by

Money Geek Team

As the second-largest state in the country, Texas has always been an important gauge of the U.S. economy. For residents of the Lone Star State, home ownership is an important step toward financial stability. While the state's economy remained strong throughout the economic crisis, many residents are only now beginning to consider purchasing homes or moving up. Although buying a home and qualifying for a loan can be daunting, this step-by-step guide is designed to make it easy for anyone living in Texas to learn how to assemble the resources and navigate the process of getting a mortgage.


Research Texas Mortgage Rates

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While mortgage rates remain within a certain range nationally, they can vary dramatically from one state to the next. Texas's rates are in line with the national average, but there are factors that can cause reductions or increases in what you pay. The market in a particular city can determine rates, for instance, as well as the housing demand at a given time. In addition to the general rates quoted by a lender, a borrower will find that credit score and other financials drive the interest rates a financial institution offers. Before getting rate quotes from multiple lenders, learn as much as possible about what determines rates.


Help for First-Time Homebuyers in Texas

Help is available for first-time homebuyers through the Texas Department of Housing and Community Affairs. My First Texas Home offers mortgage loans at competitive rates for first-time homebuyers. The state also has the Texas Mortgage Credit Certificate Program, which allows qualifying homebuyers to claim a tax credit for a portion of the interest they pay each year.

Another problem for first-time homebuyers in the state is the low supply of available homes. Dr. Jim Gaines, director of strategic planning for the Real Estate Center at Texas A&M, advises first-time homebuyers to have their down payment, financial records and proof of income in place before they begin their home search to ensure success.

"They need to have all of their financing pre-arranged," says Dr. Gaines. "Sometimes you can get prequalified but you're not preapproved. Getting prequalified is easier. All buyers, not just first-time buyers, need to understand that there is this difference. Some banks won't preapprove, but you should at least ask for it. That way you know that you have that loan in your back pocket. Otherwise, any contract you place is contingent on getting a loan."

Qualified homebuyers can win a bidding war on a house by having everything in place before they put in a contract. The Texas Department of Housing and Community Affairs is a great place to start to scope out the resources you need to get preapproved for a home loan.

Financial Assistance for First-Time Homebuyers in Texas

The below tool will help Texas's first-time homebuyers find financial assistance.

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Understanding Affordability in Texas Homebuying

As demand has outpaced supply, some Texas homeowners have found themselves in bidding wars over available houses, which sometimes means paying more than the asking price. Buyers should keep this in mind as they start house hunting, since they may find themselves paying top dollar for a house they like. Monthly payments include not only the monthly repayment on the amount they've borrowed, but also insurance, utilities, property taxes and sometimes homeowners' association (HOA) fees for that home. Before looking at houses, buyers should have already spoken with a lender to find out how much house they can afford based on their current income and expenses.

How Will Texas Interest Rates and Home Prices Impact Your Payments?

Metro Area Estimated Monthly Mortgage Payment* Q3 2019 (Change from Previous Year) 2018 Median Home Price 2017 2016
Abilene $683 $186,200 (+11.4%) $166,800 $161,200 $157,500
Amarillo $614 $167,400 (+1.0%) $158,600 $157,700 $154,600
Austin-Round Rock $1,214 $330,700 (+3.9%) $315,900 $295,800 $284,000
Beaumont-Port Arthur $627 $170,900 (+7.4%) $154,600 $150,300 $144,300
Corpus Christi $752 $204,900 (+3.4%) $194,300 $186,300 $187,700
Dallas-Fort Worth-Arlington $995 $271,100 (+3.4%) $260,000 $247,400 $227,100
El Paso $611 $166,500 (+5.2%) $155,800 $151,500 $148,500
Houston-Baytown-Sugar Land $914 $248,900 (+3.6%) $238,800 $231,100 $217,400
San Antonio $883 $240,600 (+3.8%) $228,100 $217,200 $206,900
Sherman-Denison $731 $199,200 (+7.0%) $178,800 $164,400 $144,800
Wichita Falls $458 $124,700 (+7.9%) $120,000 $114,900 $111,800

Source: National Association of Realtors Q3 2019 Metropolitan Median Area Prices and Affordability report.
*Estimated Monthly Mortgage Payment is based on median home prices for the metro area in Q3 2019, a 20 percent down payment and a 30-year fixed mortgage at 3.68 percent. The figure is for principal and interest only and excludes insurance and property taxes.


Discover How Much You Can Borrow in Texas

In Texas, Federal Housing Administration (FHA) loan limits vary by family and type of house, but throughout most of the state, the limit on a single-family home is currently $314,827. For Fannie Mae or Freddie Mac-conforming loans, those limits are much higher, at $484,350 for a single-family home. While the median home price in Texas is in the $200,000 range, homes can command much higher sales prices in larger cities. The below table demonstrates the FHA and conventional loan limits in Texas.

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Experts Speak on Buying a Home in Texas


James Gainesis chief economist at Texas A&M University's Real Estate Center.

Leslie Rouda Smith

Leslie Rouda Smith is past chairman of the Texas Association of Realtors.

Where did Texas's housing market stand before the housing crisis? How does that compare to where it stands now?


From 1990 to 2006, it was almost a continuous steady increase. Almost every year was a new record year or was better than the year before with the exception of the 1994-95 time period. That was the only time it didn't step up a little bit. In 2015, in terms of Texas home sales, we surpassed the 2006 peak. We rebounded completely from 2006-2015. Home sales volume declined almost one third but came back up and in 2016, at least year to date, we're actually running slightly ahead of last year, so we may set another record.


The Texas housing market did not experience the large spikes in home prices that other states like California and Florida did a decade ago, and correspondingly, we didn't see the significant drops in value and waves of foreclosures as were seen elsewhere. In addition, Texas continues to have a business-friendly environment, so our state has seen increases in employment and personal income as well as decreases in unemployment consistently since the late 2000s. Today, the Texas housing market is seeing strong price increases and inventory shortages due to growing demand for Texas homes.

What is the health of the markets in Texas's major cities? How does one city compare to another in terms of where it stood both before and after the housing crisis?


We never truly had the crisis in Texas that they had in these other states. It just didn't happen. The major cities still suffer from a housing shortage. You'll find a much more balanced market in areas like Wichita Falls and Texarkana. El Paso down to Brownsville, what we call the Border Towns, those are a whole world unto themselves. Their economies, more international flow, transportation going back across the river. Their housing markets are more in balance. The price levels and sales levels are steadier.


The four major Texas metro areas of Austin, Dallas-Fort Worth, Houston and San Antonio, known as the Texas Triangle, continue to be hubs for relocation activity, business development, and job growth. All of these cities are showing stronger demand than a decade ago, as evidenced by significantly higher prices, smaller housing inventories and sales volume levels that match or exceed the previous height of the market in 2006.

What do first-time homebuyers need to know about buying a home in Texas?


They need to know that it's going to be a tough process mainly because the inventory has shrunk. The homebuilders are not only not building enough, but they're especially not building enough low-priced homes. Land costs, material cost, labor costs have made it hard for even the big builders to make money on lower-priced homes under $200,000, which means the first-time homebuyer will get into a bidding war if there is an existing home for sale in the lower-price levels. If you're a first-time buyer and you find a house that you can at least tolerate, you'd better grab it because it might not be there tomorrow.


In Texas, we're excited to see strong demand for homes in our market and rising values for homeowners, but we're also cognizant of the affordability challenges that can present, particularly for first-time homebuyers. That's why the Texas Association of Realtors is working actively to encourage development, advocate for transportation solutions and take other steps to protect the housing affordability that has spurred Texas' growth. That said, homes in Texas' largest cities remain among some of the most affordable in the country in large metropolitan areas.


All About Closing Costs in Texas

On average, Texas's closing costs are similar to those in most other states. Third-party fees push costs up higher than some other states, but rates are still lower than states like New York and North Carolina. Texas has historically shown higher closing costs than many other states, especially for title insurance, but experts say this is due to the many processes put in place to protect lenders and borrowers. The fees listed are the statewide average and can vary dramatically from one area of the state to the next. It's important for homeowners to check closing costs specific to their area of the state before committing to a purchase.

Average Closing Costs in Texas

Average Origination
Average Third-Party
Average Total Closing

Source: Bankrate's 2015 survey of closing costs.

Refinancing a Mortgage in Texas

Texas's industry is booming, with the recent addition of big corporations like State Farm and Toyota to the Dallas area. With the extra population coming to the state's urban areas, the housing market throughout Texas is thriving.

Homeowners have been slow to refinance, but lenders have seen an increase in consumer inquiries about refinancing. Chris Johnson, senior sales manager with TexasLending.com, described the refinancing activity mortgage companies have seen recently, both from homeowners searching for a lower interest rate and to use as equity for purchases.

"On average, home values have increased 10 percent to 15 percent and in some areas it's as high as 20 percent, which means people have more equity in their home and that means they have more money now to pay off debt and or fix up/remodel their homes and get rid of mortgage insurance," Johnson says. "The average monthly savings on a refinance depends on what type of loan you are doing but we have clients saving $200+ a month. We have clients who are pulling out equity or cash, or both, from their homes to remodel and still saving hundreds each month."

Resources for Texas Homebuyers

Texas State Affordable Housing Corporation

Learn more about Texas's down payment assistance programs, home repair grants, foreclosure prevention programs, and more.

First Time Homebuyer Grants

The state offers assistance to both first-time homebuyers and those who are buying a subsequent home.

Mortgage Credit Certificate Program

First-time homebuyers can get assistance through this program, which offers a dollar-for-dollar savings of up to $2,000 as a special tax credit.

Home Buyer Education

Homebuyers purchasing a new home through one of TSAHC's programs must participate in one of the courses listed here to meet eligibility requirements.

Habitat for Humanity

Learn more about where Habitat for Humanity builds homes in your area. Working with volunteers, you can build your own home and purchase it at no profit to the organization with a zero-interest loan.

Dallas Home Buyer Assistance Program

Dallas-area residents can access 80 percent of their income to reduce their principal or put a down payment on a home purchase. This program also offers closing cost assistance of up to $8,500.

Austin Home Buyer Assistance

For Austin-area residents, this site links to various resources, including down-payment assistance and counseling opportunities.

Irving Homebuyer Down Payment Assistance Program

The City of Irving provides financial and housing counseling to first-time homebuyers, as well as zero-percent interest loans.

Texas Home Programs

This searchable database of homebuyer-assistance programs helps homebuyers find down-payment assistance, below-market mortgage interest, and more.

Care Connection Aging & Disability Resource Center

Seniors and disabled residents interested in buying a home can find links to Texas resources here.

Texas Mortgage Lenders

Search for lenders by rating and read reviews from past homebuyers who have used them to buy a home.

Texas Real Estate Agents

Enter your city in the search box to find a list of real estate agents with reviews in your area.


If you're looking for a new home, this site will help you search only new homes in your area.