How Much House Can I Afford in Texas?

Texas Affordability at a Glance

Can I Afford a Home in Texas?

Texas presents a housing paradox: no state income tax and a median home price of $318,000 that appears moderate nationally, yet the nation's fourth-highest effective property tax rate at 1.63% and steadily rising homeowners insurance costs have made true monthly affordability a significant challenge for the average Texas household. The Lone Star State remains one of the most active housing construction markets in the world, which has moderated prices from their 2022 peaks, but affordability remains strained.

Income Needed to Buy in Texas

To afford Texas's $318,000 median home with 20% down at 7% interest, monthly principal and interest is approximately $1,692. However, adding Texas's 1.63% property tax ($432/month) and average insurance of $398/month brings PITI to a substantial $2,522/month. Under the 28% rule, you need to earn approximately $108,100 annually. Texas's median household income of $78,980 falls about 37% below that threshold, with property taxes and insurance accounting for the majority of the affordability gap.

Affordability by City in Texas

Austin remains the most expensive major Texas market, with medians near $510,000 to $540,000 in the city proper after some post-peak correction, requiring incomes above $140,000. Dallas and its northern suburbs of Plano, Frisco, and McKinney run $380,000 to $480,000. Houston metro averages $325,000. San Antonio is the most affordable major Texas metro at medians near $275,000 to $295,000, where income requirements drop to approximately $95,000 when taxes and insurance are included. El Paso remains the state's most accessible large city at medians near $210,000.

Down Payment Reality in Texas

A 20% down payment on Texas's $318,000 median home requires $63,600 in cash before closing. Texas has no state real estate transfer tax, keeping closing costs lower than many peer states. A household saving 10% of Texas's $78,980 median income ($7,898/year) would need approximately 8 years to reach a 20% down payment. TSAHC's Home Sweet Texas grant of up to 5% of the loan amount (approximately $15,900 on a $318,000 purchase) significantly reduces this burden for income-eligible buyers.

Texas Housing Market Context

Texas's housing market in 2026 has undergone significant correction from its 2022 peak. Austin has seen notable price declines of 10% to 15% from peak in many submarkets, with average days on market above 60 days and buyer concessions common. Dallas and Houston have been more resilient, averaging 35 to 50 days with continued activity from corporate relocation buyers. San Antonio remains one of the nation's most active new construction markets, with builders offering aggressive incentives. Texas's massive housing construction pipeline, which leads the nation in annual permits, is providing ongoing supply relief across all major metros.

First-Time Buyer Tips for Texas

TSAHC's Home Sweet Texas grant requires no repayment and is available to all income-eligible buyers, not just first-timers. TDHCA's My First Texas Home adds a Mortgage Credit Certificate (MCC) that provides an annual federal tax credit of up to 40% of mortgage interest paid, one of the nation's most generous MCCs. Texas buyers should carefully research homestead exemption applications, which must be filed with the county appraisal district to cap future tax increases at 10% per year on the assessed value. Texas's property tax bills arrive in October and are due January 31 of the following year; buyers at closing receive credits and debits based on proration, which can create a significant out-of-pocket expense if closing mid-year without awareness.

Why Texas Is Challenging for Buyers

Texas's affordability challenge is principally a property tax story. The state uses property taxes, which are set by numerous local taxing entities including school districts, counties, municipalities, and special purpose districts, as the primary revenue mechanism in the absence of a state income tax. The combined effective rate of 1.63% is among the highest in the nation. Insurance costs have escalated dramatically due to hail events, winter storms, and flooding in the Gulf Coast region. On the positive side, Texas builds more homes than any other state and has permissive zoning in most cities, which has moderated price appreciation significantly and is a major structural advantage for long-term affordability.

Down Payment Options in Texas

Based on Texas's $318,000 median home price. Closing costs are additional (typically 2–5% of purchase price).

First-Time Buyer Programs in Texas