Texas has no state income tax — one of the biggest financial advantages of living here. But there is a trade-off, and it shows up directly in your mortgage payment: property taxes. Texas property tax rates are among the highest in the nation, and failing to account for them correctly is one of the most common budgeting mistakes first-time buyers make.
Texas does not have a single statewide property tax rate. Each county, city, school district, and special district sets its own rate, and they are all added together. In practice, total effective property tax rates in the Houston metro area typically run between 2.0% and 2.5% of appraised value annually. Some suburban districts run even higher.
What that looks like on real homes:
That $550 to $917 per month is added directly on top of your principal and interest payment. A buyer who only budgets for P&I will be significantly underprepared for what their actual monthly payment looks like.
Your mortgage payment is not just principal and interest. Lenders calculate your full PITI — principal, interest, taxes, and insurance — when determining how much you qualify to borrow. Property taxes are divided by 12 and collected monthly as part of your escrow payment. When Kris quotes you a rate and payment, it always includes the full PITI so there are no surprises.
Texas offers a homestead exemption that reduces the appraised value used to calculate your property tax. For your primary residence, the standard homestead exemption is $100,000 off the school district appraised value as of 2023 legislation. Additional exemptions exist for homeowners 65 and older, disabled veterans, and other qualifying groups.
The exemption applies to the school district portion of your tax bill, which is typically the largest component. You must apply for the exemption with your county appraisal district — it is not automatic. Applications are due by April 30 of the year you are claiming it. First-year buyers often miss this and overpay their first year.
Because lenders include taxes in your DTI calculation, high property taxes directly reduce how much home you can qualify for. Two identical buyers with identical incomes and debts will qualify for different loan amounts in different Texas zip codes — purely based on local tax rates. A buyer shopping in a district with a 2.8% rate qualifies for a meaningfully smaller loan than one shopping in a district at 1.9%.
This is something Kris factors in early in the pre-qualification conversation so you are shopping in areas where your budget actually works.
If you are buying rural land or a property with agricultural use in Texas, an AG exemption can dramatically reduce your property tax burden. Agricultural land is taxed based on its productive value rather than market value. A 10-acre tract worth $500,000 on the market might have an AG value of $50,000 for tax purposes. This is one reason land loans in Texas can be more affordable to carry than buyers expect.
The mortgage payment calculator on this site includes a property tax field. Enter your estimated annual taxes to see the full PITI payment before you make an offer. It takes 30 seconds and removes the most common source of buyer surprise at closing.