“How much house can I afford?” sounds like a simple question, but the honest answer is: it depends. Your income, your debts, your credit, your down payment, and the full monthly cost of owning a home in Texas all play a part. Just as important, the most a lender will approve may not fit your budget.
This guide explains the pieces so you can build a realistic number before touring homes.
What lenders look at
When you apply for a mortgage, a lender generally reviews:
- Income that is stable and documented.
- Debts such as car loans, student loans, and credit card debt.
- Credit history and score.
- Down payment and savings, including money left over after closing.
- The home itself, including its price, location, and appraised value.
Those factors help determine which loans and programs may be available to you.
Debt-to-income ratio (DTI), explained
Your debt-to-income ratio is one of the main yardsticks lenders use. The Consumer Financial Protection Bureau (CFPB) defines it as your total monthly debt payments divided by your gross monthly income, your income before taxes and other deductions.
How it works
Add up your monthly debt payments, including the new housing payment you are considering. Then divide by your gross monthly income. If your debts total one-third of your gross monthly income, your DTI is about 33%.
Why it matters
A higher DTI means more of your income is already spoken for. The CFPB notes that different loan products and different lenders use different DTI limits, so there is no single number that applies to every buyer. Your loan officer can show you how DTI is calculated for each loan type.
Down payment: what it does for your budget
A larger down payment generally means a smaller loan, which can mean a smaller monthly payment. It can also affect whether you pay mortgage insurance (more on that below). Down payment requirements vary by loan type, and some programs, such as VA and USDA loans for eligible buyers, may allow no down payment.
Don’t forget closing costs and the cash you want left in the bank afterward. If cash to close is your biggest hurdle, read our guide to first-time homebuyer programs in Texas, which covers TSAHC and TDHCA down payment assistance.
Your real monthly cost: more than principal and interest
The loan payment itself is only one part of the monthly cost. Lenders usually look at the whole housing payment, which commonly includes:
- Principal and interest on the loan.
- Property taxes.
- Homeowners insurance (and flood or windstorm coverage if needed).
- Homeowners association (HOA) dues, if applicable.
- Mortgage insurance, if your loan requires it.
Many lenders collect taxes and insurance through an escrow account, which means a portion of each monthly payment is set aside and paid on your behalf. According to the CFPB, taxes and insurance can change from year to year, so your total monthly payment may change as well.
Property taxes in Texas
Texas does not charge a state personal income tax, according to the Texas Comptroller’s office, but property taxes are an important cost for homeowners. Here is what to know:
- There is no state property tax. Local taxing units, such as school districts, counties, cities, and special districts, set their own rates, so your bill depends on where the home is located. Two homes of similar value in different areas can have very different bills.
- Appraisal districts set values, not rates. They appraise property as of January 1 each year, and you have the right to protest a value you disagree with.
- Bills are generally due by January 31 of the following year.
- Homestead exemption. If the home is your primary residence, you may qualify for a residence homestead exemption. The Comptroller says school districts must provide a $140,000 exemption, which reduces the value used for school taxes. Taxing units may also offer additional local exemptions. You generally need to apply through the local appraisal district.
- Homestead appraisal cap. A qualifying homestead has a limit on how quickly its appraised value can increase, which begins after the first year you qualify for the exemption.
- MUDs and special districts. Some homes, especially in newer neighborhoods, are located in a municipal utility district or another special district with its own tax. Sellers must give buyers notice of the district’s current tax rate.
Because every address is different, ask your loan officer and agent to estimate taxes for the specific home, not for the county in general.
Homeowners insurance in Texas
Insurance costs also vary by location and coverage choices. A few points from the Texas Department of Insurance (TDI):
- Most homeowners policies do not cover flooding. Lenders require flood insurance if the home is in a designated flood zone, but floods can occur elsewhere as well.
- Outside the coast, a standard policy generally includes wind and hail coverage, though the deductible may be different. Along the coast, you may need a separate windstorm policy, often through the Texas Windstorm Insurance Association (TWIA).
- Compare several quotes and ask about the deductibles for wind, hail, and hurricane damage, as well as the standard deductible.
TDI and the Office of Public Insurance Counsel offer a free comparison tool at HelpInsure.com.
Mortgage insurance
Mortgage insurance depends on the loan type:
- Conventional loans: Private mortgage insurance (PMI) is often required when the down payment is on the smaller side. It protects the lender, not you. Under federal law, it can generally be removed once you build enough equity, if you meet the conditions.
- FHA loans: FHA requires mortgage insurance premiums, usually both upfront and annual.
- VA loans: No monthly mortgage insurance, but most borrowers pay a one-time funding fee unless exempt.
- USDA loans: These carry their own upfront and annual guarantee fees.
Ask your loan officer for the details on your Loan Estimate so you can compare total costs.
A quick monthly cost checklist
| Cost | What to ask | Texas note |
|---|---|---|
| Property taxes | What are the current taxes for this exact address, and is a homestead exemption in place? | Rates are set locally; check the appraisal district and any special district |
| Homeowners insurance | What does it cost to insure this home, and what are the deductibles? | Flood is usually separate; coastal homes may need windstorm coverage |
| HOA or special district dues | What are the dues and assessments? | Ask for the MUD notice on newer neighborhoods |
| Mortgage insurance | Does my loan require it, and can it be removed later? | Varies by loan type |
| Utilities and upkeep | What did the owner pay? | Ask the seller or agent for recent utility costs and the age of the roof and systems |
Five steps to a number you can trust
- List your gross monthly income and every monthly debt payment.
- Decide your comfort level. Think about what you can pay each month while still saving, not only what a lender will approve.
- Estimate the full housing cost for homes you actually like, including taxes, insurance, and dues.
- Plan your cash: down payment, closing costs, and a post-closing reserve.
- Talk with a loan officer to turn your estimate into a pre-qualification and see which programs may help.
If the numbers say you aren’t ready to buy yet, compare renting with rent-to-own, which lets you rent a home now while your payments build earned equity.
Frequently asked questions
Is the amount I am approved for the amount I should spend?
Not necessarily. Approval indicates how much a lender is willing to lend based on the guidelines. Your comfortable budget also depends on savings goals, family needs, and other costs.
Are property taxes included in my mortgage payment?
Often, yes, through an escrow account. If your loan does not use escrow, you would pay taxes and insurance yourself, so plan for those bills. Either way, they can change from year to year.
Does Texas have a state income tax?
No, according to the Texas Comptroller’s office. Property taxes are a significant part of homeownership costs, so include them in your budget.
Is flood insurance required?
If the home is in a designated flood zone and you have a mortgage, your lender requires it. Standard homeowners policies generally do not cover flooding, so ask your insurance agent whether flood coverage makes sense even if you are outside a flood zone.
Can down payment assistance change what I can afford?
It can help with cash needed at closing, but program rules, income limits, and loan requirements still apply. Your loan officer can explain how a program may fit your needs.
Talk with a local loan officer
A loan officer at The Texas Mortgage Pros can review your income, debts, and goals, walk through the full monthly cost for the area where you want to buy, and explain which programs may apply. You can start a pre-qualification, visit our Texas down payment assistance page, or call (877) 280-4833.
Official sources
- CFPB: What is a debt-to-income ratio?
- CFPB: What is an escrow account?
- CFPB: What is private mortgage insurance?
- Texas Comptroller: Property tax basics and property tax exemptions
- Texas Department of Insurance: Home insurance guide
- HUD: FHA loans; VA funding fee; USDA guaranteed loan program
The Texas Mortgage Pros, NMLS #2665861. This article is for general information only. It is not a commitment to lend or extend credit, and it is not legal, tax, or insurance advice. Tax rules, exemptions, program requirements, and limits are subject to change without notice. All loans are subject to credit approval and other restrictions. The Texas Mortgage Pros is not affiliated with or endorsed by HUD, FHA, the U.S. Department of Veterans Affairs, USDA, the Texas Comptroller, TDI, TSAHC, or TDHCA, and this is not a government document. Last verified October 2, 2026.
Equal Housing Opportunity. We do business in accordance with federal fair lending laws.
