How Much House Can I Afford in Texas?
How Much House Can I Afford in Texas?
If you're thinking about buying a home in Texas, one of the first questions to ask is how much house you can actually afford. The answer involves more than just the loan amount you qualify for. It depends on your income, your debts, your down payment, and especially Texas-specific factors like property taxes and homeowners insurance. Here's a clear breakdown of how to figure out what fits your budget.
The Difference Between What You Qualify For and What You Can Afford
Lenders will often pre-approve you for a higher loan amount than what truly fits your lifestyle. Qualifying is based on numbers like your income and credit. Affording is about whether the monthly payment still leaves you room for everything else in life: groceries, gas, retirement savings, vacations, kids' activities, and the occasional emergency.
A common mistake is shopping at the top of your pre-approval. A safer approach is to find the payment that fits your real budget, then work backward to the home price.
The 28/36 Rule
A widely used guideline for affordability is the 28/36 rule:
28 percent: Your total housing payment (principal, interest, taxes, insurance, and HOA if applicable) should be no more than 28 percent of your gross monthly income.
36 percent: Your total monthly debt payments (housing plus all other debts like car loans, student loans, credit cards) should be no more than 36 percent of your gross monthly income.
For example, if you earn $10,000 per month before taxes:
28 percent of $10,000 = $2,800 maximum for housing
36 percent of $10,000 = $3,600 maximum for all monthly debts
This isn't a hard rule, but it's a useful starting point.
Why Texas Changes the Math
In many states, affordability calculators give a reasonable estimate based on loan amount alone. In Texas, those calculators can be misleading because of two big factors:
Property taxes: Texas has some of the highest property tax rates in the country, often 1.6 to 2.5 percent of a home's value, depending on the county and any MUD or PID taxes.
Homeowners insurance: Texas insurance premiums tend to run higher than the national average due to weather risks like hail, wind, and hurricanes along the coast.
Together, these two costs can add hundreds of dollars per month to your payment compared to other states. A $400,000 home in Texas often has a noticeably higher monthly payment than the same home would in a lower-tax state.
This is why looking at your full PITI payment (Principal, Interest, Taxes, Insurance) is critical when calculating affordability in Texas.
How to Calculate Your Maximum Home Price
To get a realistic estimate of what you can afford, follow these steps:
Step 1: Add Up Your Gross Monthly Income
Use your pre-tax income, including base salary, regular bonuses, and any other consistent income.
Step 2: List Your Monthly Debts
Include:
Car loans or leases
Student loans
Minimum credit card payments
Child support or alimony
Personal loans
Any other recurring debt payments
Do not include things like groceries, utilities, or subscriptions. Those aren't part of the debt-to-income (DTI) calculation lenders use.
Step 3: Calculate Your DTI
Divide your monthly debts by your gross monthly income. For example, $2,000 in debt payments divided by $8,000 monthly income equals 25 percent DTI.
Most conventional loans look for a DTI under 45 percent, including the new mortgage payment. FHA loans can sometimes go up to 50 percent. The lower your DTI, the more room you have for a larger mortgage.
Step 4: Determine Your Maximum Total Monthly Payment
Take the maximum DTI your loan program allows, multiply it by your gross monthly income, and subtract your existing debt payments. That's the most a lender will likely allow for your housing payment.
Step 5: Work Backward to a Home Price
Once you know your maximum housing payment, you can estimate the home price that fits. A mortgage broker can run this calculation accurately using current interest rates, property tax estimates for the specific area you're shopping, and realistic insurance quotes.
Example: Affordability for a Texas Buyer
Let's say you have:
$9,000 gross monthly income
$700 in monthly debts (car payment and student loans)
Looking to buy in Frisco, TX where the combined tax rate is approximately 2.1 percent
Using the 28/36 rule:
28 percent of $9,000 = $2,520 maximum housing payment
Subtract estimated taxes and insurance: roughly $700 to $900 per month combined
That leaves about $1,600 to $1,800 for principal and interest
At current interest rates, this typically supports a home price somewhere in the $300,000 to $375,000 range, depending on your down payment and the exact rate.
These numbers change based on the rate, the specific neighborhood's tax rate, and the loan program. A mortgage broker will calculate this with real numbers based on your situation.
Down Payment: How It Affects Affordability
The size of your down payment directly affects how much house you can afford. A larger down payment means:
A smaller loan amount
Lower monthly payments
Less interest paid over the life of the loan
Possibly avoiding private mortgage insurance (PMI) on conventional loans
Common down payment minimums by loan type:
Conventional: 3 percent for first-time buyers, 5 percent for others
FHA: 3.5 percent
VA: 0 percent for eligible veterans
USDA: 0 percent for eligible rural areas
You don't necessarily need 20 percent down, but understanding how different down payment amounts change your monthly payment can help you decide what makes sense.
Don't Forget Closing Costs
In Texas, closing costs typically run 2 to 5 percent of the loan amount. These cover lender fees, title work, appraisal, prepaid taxes, prepaid insurance, and other items. On a $350,000 loan, that's roughly $7,000 to $17,500 to bring to closing on top of your down payment.
Some buyers negotiate seller-paid closing costs, which can reduce out-of-pocket expenses significantly. This is something a mortgage broker can help you strategize.
Other Costs to Plan For
Affordability isn't just about the monthly payment. Be realistic about:
Maintenance and repairs: Plan for about 1 percent of the home's value per year
HOA dues: Especially in master-planned communities in DFW, Austin, and Houston
Utilities: Texas summers can mean high electric bills
Furniture and moving costs: Especially if upgrading to a bigger space
Buyers often underestimate these and end up "house poor" with a beautiful home but no money left to enjoy life.
What to Avoid When Calculating Affordability
A few common mistakes:
Using online calculators without Texas property taxes: Many national calculators assume an average tax rate around 1 percent, which is far lower than reality in Texas.
Forgetting about insurance: Texas insurance premiums can be a significant portion of the monthly payment.
Maxing out your DTI: Just because a lender allows 45 to 50 percent DTI doesn't mean it's comfortable to live at that level.
Ignoring future changes: If you're planning to have kids, change jobs, or take on other expenses soon, factor that in now.
Assuming today's interest rate will hold: Rates change daily. Lock-in timing matters, and a broker can help you plan accordingly.
What a Mortgage Broker Can Do for You
Online calculators give estimates. A mortgage broker can give you real numbers based on:
Current interest rates for your credit profile
Accurate property tax rates for the specific city or neighborhood
Real insurance quotes from Texas insurers
Loan program options that fit your situation
Strategies like buydowns, seller concessions, or down payment assistance
Working with a broker before you start shopping helps you avoid wasted time looking at homes outside your budget and gives you a strong pre-approval letter when you're ready to make offers.
The Bottom Line
How much house you can afford in Texas depends on your income, debts, down payment, and the property taxes and insurance for the area you're buying in. The 28/36 rule is a good starting point, but the real answer comes from running actual numbers with current rates, real tax data, and your specific financial picture.
If you want to know what you can truly afford in Texas, reach out to Colton Chase at Texas Made Mortgage. We'll run real numbers for your situation, walk through different scenarios, and help you find a payment that fits your life, not just the maximum a lender will approve.
Colton Chase | NMLS #2040073 Texas Made Mortgage, LLC | NMLS #2676326 2591 Dallas Pkwy Suite 300, Office 62, Frisco, TX 75034 (817) 718-6269 | Equal Housing Opportunity
This article is for educational and informational purposes only and does not constitute a commitment to lend. Affordability calculations are estimates based on general guidelines and current market conditions. Actual loan approval is based on a full review of your credit, income, assets, debt-to-income ratio, property details, and other factors. Rates and terms are subject to change.