Texas Investment Property Boom: What's Driving The Rush?

As of July 2024, the average 30-year fixed mortgage rate in Texas is between 6.738% and 6.90%. The average 15-year fixed mortgage rate is between 5.859% and 6.31%. These rates are higher than they were before the COVID-19 pandemic, making housing affordability a challenge.

Mortgage rates in Texas tend to be close to or below the national average, and Texas mortgage rates are generally a little lower than the average US rate.

Current mortgage interest rates in Texas

As of Monday, July 22, 2024, the current interest rates in Texas are 6.88% for a 30-year fixed mortgage and 6.31% for a 15-year fixed mortgage. The average Texas rate for a fixed 30-year mortgage is 5.96% as of January 2023.

Compared to the national average, Texas mortgage rates tend to be close or fall below it, making monthly mortgage payments relatively reasonable. The rates are influenced by factors such as the Federal Reserve, the economy, consumer demand, credit score, down payment, and income.

Texas has consumer protections in place that help prevent foreclosure. The state also imposes limits on lenders, capping fees and costs at 3% of the loan principal. Additionally, Texas is a non-recourse state, meaning lenders cannot pursue homeowners for the difference between the amount owed and the home's market value in the event of a foreclosure.

The Texas Department of Housing and Community Affairs (TDHCA) offers assistance for first-time homebuyers, including the My First Texas Home program, which provides 30-year fixed, low-interest-rate mortgages, and the Mortgage Credit Certificate, which offers a federal income tax credit of up to $2,000 per year based on mortgage interest paid.

First-time homebuyer programs in Texas

There are a variety of first-time homebuyer programs in Texas that can help with the down payment and closing costs. Here are some of the programs offered by the state and local governments, as well as non-profit organizations:

Texas State Programs

• Texas Department of Housing and Community Affairs (TDHCA): The TDHCA helps moderate- and low-income families achieve homeownership in Texas. They offer two programs for qualified buyers: My First Texas Home and My Choice Texas Home. Both programs provide 30-year fixed-rate mortgages with low interest rates and up to 5% assistance for down payment and closing costs. The assistance is in the form of a zero-interest, no-monthly payment second mortgage. The income and purchase price limits vary based on the program and location. TDHCA also offers the Texas Mortgage Credit Certificate (MCC), which provides tax credits for interest paid on mortgage loans.
• Texas State Affordable Housing Corporation (TSAHC): TSAHC is a non-profit organization that provides assistance to first-time and repeat homebuyers. They offer two major programs: Home Sweet Texas Home Loan Program and Homes for Texas Heroes Loan Program. Both programs offer 30-year fixed-rate mortgages and up to 5% down payment assistance as a grant or zero-interest second mortgage. The Homes for Texas Heroes program is specifically for public service professionals and veterans. To qualify for either program, borrowers need a credit score of at least 620 and must meet income and purchase price limits.
• Veterans Land Board Housing Assistance Program (VHAP): This program provides low-interest loans to veterans or service members looking to buy a home or land in Texas. The loans often do not require a down payment and offer lower interest rates for veterans with a VA disability score of 30% or higher.

Local Programs

• City of Austin: The Austin Housing Finance Corporation (AHFC) offers up to $40,000 in assistance for down payment and closing costs through a forgivable loan. The income limit for a single-person household is $55,400, and the home's sales price must be under $614,054.70.
• City of Houston: The Houston NeighborhoodLIFT program offers up to $15,000 for down payment and closing cost assistance. The program has specific income limits, and completion of a homebuyer education course is mandatory.
• City of San Antonio: The Neighborhood & Housing Services Department (NHSD) offers the Homeownership Incentive Program (HIP 80), which provides loans ranging from $1,000 to $30,000 for down payment and closing cost assistance. The loan is interest-free and has no monthly payments, with the balance being forgiven over 5 to 10 years.
• City of Dallas: The City of Dallas offers a down payment assistance program (DHAP) with a cap of $50,000 in most areas. The program is for households with an income of no higher than 80% of the area's median income. The assistance is provided as a forgivable deferred loan with no interest or monthly payments.
• City of Corpus Christi: The City of Corpus Christi Homebuyer Assistance Program offers up to $25,000 for down payment assistance and an additional $10,000 for closing costs. The assistance is provided as a zero-percent interest forgivable loan with a term of five or ten years. The property must be located in Corpus Christi and have a price of $238,000 or less. There are also income restrictions for this program.

How to find the best mortgage rate in Texas

As of Monday, July 22, 2024, the current interest rates in Texas are 6.88% for a 30-year fixed mortgage and 6.31% for a 15-year fixed mortgage. These rates are higher than they were before the COVID-19 pandemic, making it challenging to secure affordable housing. However, there are steps you can take to find the best mortgage rate in Texas.

Step 1: Strengthen Your Credit Score

Before you start looking for a mortgage lender or applying for a loan, check your finances and improve your credit score if needed. Lenders give the best rates to borrowers with a credit score of 740 or higher.

Step 2: Determine Your Budget

To find the right mortgage, you need to know how much house you can afford. This will help you narrow down your options and ensure you don't take on a loan that is beyond your means.

Step 3: Know Your Mortgage Options

There are several types of mortgages available, such as conventional mortgages, FHA loans, VA loans, and USDA loans. Research and decide which type of mortgage is best for you, considering your finances and short- and long-term goals.

Step 4: Compare Rates and Terms from Several Lenders

Shop around and compare rates and terms from at least three different banks, credit unions, or mortgage companies. Consider factors such as APRs, lender fees, and closing costs to ensure accurate comparisons.

Step 5: Get Preapproved for a Mortgage

Getting preapproved for a mortgage will give you accurate loan pricing for your specific situation. This will help you secure the best deal and ensure that you are getting a competitive rate.

By following these steps, you can increase your chances of finding the best mortgage rate in Texas and making a well-informed decision about your home loan.

Texas mortgage rate trends

Texas mortgage rates are difficult to predict, but the current consensus is that they will remain well above historical lows for the foreseeable future. As of July 26, 2024, the average 30-year fixed mortgage rate in Texas was 6.738%, the 15-year fixed-rate mortgage was 5.859%, and the 5-year adjustable-rate mortgage (ARM) was 7.633%.

Compared to the national average, Texas mortgage rates tend to be close or fall below it, making monthly mortgage payments relatively reasonable. The state's largest cities, including Houston, San Antonio, Dallas, Austin, and Fort Worth, are popular choices for homebuyers.

Texas mortgage rates are influenced by various factors, including the Federal Reserve's actions, the state of the economy, and consumer demand. Additionally, Texas has specific consumer protection laws in place that affect the mortgage market, such as limiting the total mortgage debt on a home to 80% of its market value.

It's worth noting that mortgage rates can fluctuate daily and are influenced by factors like inflation, the bond market, and the overall housing market. As of July 22, 2024, the interest rates in Texas were 6.88% for a 30-year fixed mortgage and 6.31% for a 15-year fixed mortgage.

When considering a mortgage in Texas, it's important to compare rates and terms from multiple lenders, as rates can vary. Additionally, seeking guidance from a mortgage loan officer or a financial advisor can be beneficial in navigating the homebuying process and making informed decisions.

Texas mortgage taxes

Texas has some of the highest property taxes in the US. The average effective property tax rate in the state is 1.60%, well above the national average of 0.99%. The typical Texas homeowner pays $3,797 annually in property taxes.

These taxes are the primary source of revenue for local governments, funding local services like schools, water systems, and law enforcement. There are around 4,000 local entities that can collect property taxes in Texas, including every city, county, and school district.

Property tax rates in Texas are recalculated each year after appraisers have evaluated all the property in the county. They are calculated based on the total property value and total revenue needed.

Texas does not levy a state property tax. Local taxing units, such as cities, counties, and school districts, are responsible for setting and collecting property taxes.

Residential property in Texas is appraised annually by county appraisal districts, which determine the current market value of all property within the county. Disagreements about any findings are brought to an appraisal review board made up of local citizens.

Homeowners in their primary residence can benefit from the homestead exemption, which is the most common exemption. It exempts at least $25,000 of a property's value from taxation. Persons who are at least 65 or disabled can claim an additional exemption of $10,000.

When it comes to mortgage rates in Texas, as of Monday, July 22, 2024, the current interest rates are 6.88% for a 30-year fixed mortgage and 6.31% for a 15-year fixed mortgage.

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