Houston Mortgage & Real Estate Q&A

Jump to topic Down payment & affordability Loan programs Houston specifics The process New construction

Down payment & affordability

How much down payment do I need to buy a home in Houston?

It depends on the loan program. FHA loans require 3.5% down, conventional loans 3% to 5% for most first time buyers, VA loans 0% down for eligible veterans, and USDA 0% in eligible suburban or rural areas around Houston. Doctor loans can go up to 100% financing with no PMI. On a $325,000 Houston home, that ranges from $0 to $11,375 down depending on program. Texas down payment assistance programs like TSAHC can cover most or all of the down payment as a grant or forgivable second lien.

Can I buy a home in Houston with no down payment?

Yes. Three paths get you to zero down. VA loans for eligible veterans and active duty service members require no down payment and have no PMI. USDA loans are available in eligible Houston metro areas (parts of Cypress, Magnolia, Tomball, Richmond, Rosenberg, and beyond the Beltway). Doctor loans for licensed medical professionals offer up to 100% financing with no PMI. If you do not qualify for these, the TSAHC down payment assistance program through participating lenders like InSync can provide up to 5% as a grant or forgivable second lien, which can cover the FHA 3.5% minimum entirely.

How much house can I afford in Houston with an income of $80,000 or $120,000?

As a baseline, lenders use a 28% to 33% front end debt to income ratio for housing payment. At $80,000 gross income that is $1,867 to $2,200 monthly housing budget, which supports a Houston home around $260,000 to $310,000 depending on rate, down payment, and the property tax rate of the area. At $120,000 gross income, the housing budget is $2,800 to $3,300, which supports roughly $390,000 to $470,000. Houston's higher property tax rates (1.8% to 3.5%) mean you qualify for less house than the same income would in lower tax states. Inside the Loop with a 2.1% tax rate stretches further than a Katy MUD area at 2.7%. Try the Houston mortgage calculator with your specific tax rate to see real numbers.

Do I need 20% down to avoid PMI?

On conventional loans, yes. PMI is required when your down payment is less than 20% on a conventional loan and runs roughly 0.3% to 1.5% of the loan amount per year. PMI drops off automatically when you reach 78% LTV (loan to value) and can be requested at 80% LTV. There are conventional loans without PMI, lender paid mortgage insurance options that bake the cost into a slightly higher rate, and doctor and physician loans that waive PMI even with 0% down. FHA loans charge mortgage insurance regardless of down payment and that charge often lasts the life of the loan.

Loan programs

What is the difference between FHA and conventional loans in Texas?

FHA allows lower credit scores (down to 580 with 3.5% down, 500 with 10% down) and is more flexible on debt to income ratios but charges mortgage insurance for the life of the loan in most cases. Conventional requires 620+ credit, allows 3% to 5% down for first time buyers, and PMI drops off automatically at 78% LTV. For Houston buyers with strong credit (720+) and at least 5% down, conventional typically wins on long term cost. For buyers with credit between 580 and 700 or higher debt loads, FHA usually qualifies them for more house at a better rate.

What is the minimum credit score for a Houston mortgage?

FHA accepts scores as low as 500 with 10% down, or 580 with 3.5% down. VA does not have a fixed minimum but most lenders require 580 to 620. Conventional requires 620 minimum, with the best pricing at 740+. USDA generally needs 640. Doctor and bank statement loans usually start at 660 to 680. If your score is in the low 600s, an FHA loan typically wins on rate and approval odds. Below 580, plan to spend a few months building score before applying.

Can I get a Houston mortgage if I am self-employed?

Yes. Self-employed buyers in Houston have three paths. Standard conventional or FHA loans use two years of tax returns plus a year-to-date P&L if available. Bank statement loans qualify you using 12 or 24 months of personal or business bank statements rather than tax returns, useful when write offs reduce reported income. Profit and loss only or asset depletion loans are available for higher credit and larger down payment scenarios. The bank statement loan is the most common pick for 1099 contractors and S-corp owners whose Schedule C or K-1 numbers underrepresent real cash flow.

What is a doctor loan and who qualifies?

A doctor loan (also called physician mortgage) is a residential mortgage program designed for licensed medical professionals: MD, DO, DDS, DMD, DPM, DVM, PharmD, and CRNA. It allows up to 100% financing with no PMI, loan amounts up to $2 million, and flexible handling of student loan debt using income driven repayment (IDR) payments rather than full balance. Residents and fellows can qualify on a signed employment contract starting within 150 days of closing, no actual paychecks needed yet. The program exists because lenders have decades of data showing this borrower group has very low default rates.

What is a DSCR loan and how does it work for Houston investors?

A DSCR (debt service coverage ratio) loan qualifies the property's rental income rather than the borrower's personal income. No tax returns, no W-2s, no employment verification. The lender calculates DSCR by dividing the property's projected rent by the proposed full PITI payment. A 1.0 DSCR means rent equals payment; most DSCR loans require 1.0 to 1.25. Down payments are usually 20% to 25% with rates 0.5% to 1.5% above conventional. DSCR is the standard play for Houston investors scaling beyond two properties since conventional caps at 10 financed properties and many investors want LLC ownership for liability. See the DSCR loan guide for Houston investors for the full breakdown.

Can I use a VA loan to buy a home in Houston?

Yes. VA loans for Texas-eligible veterans, active duty service members, and certain surviving spouses offer 0% down, no PMI, and competitive rates. Texas adds a property tax exemption for disabled veterans (full exemption at 100% disability rating) which can drop your monthly payment significantly. The VA funding fee runs 1.4% to 3.6% of the loan amount and can be rolled into the loan. There is no maximum loan amount on VA in 2026 if you have full entitlement, though lender overlays may cap above $1.5M. The Texas Veterans Land Board (VLB) offers an additional below-market rate program for Texas residents using their VA eligibility.

Houston specifics

What are property tax rates in Houston by neighborhood?

Houston metro property tax rates range from about 1.8% to 3.5% of assessed value, depending on county, school district, city, and special districts (MUD, PID, LID). Inside the Loop in Houston ISD averages around 2.1% to 2.3%. Suburban MUD-heavy areas like Katy, Cypress, Manvel, and parts of Sugar Land often hit 2.7% to 3.3%. Newer master-planned communities frequently start at the high end and decrease over time as MUD bonds get paid off. The Texas homestead exemption knocks $100,000 off the school district portion of the assessed value for your primary residence and caps annual taxable value increases at 10%, which softens the headline rate substantially.

What is a MUD tax in Houston?

A MUD (Municipal Utility District) tax is a special property tax levied in many Houston suburban subdivisions to fund water, sewer, drainage, roads, and parks. MUDs typically add 0.5% to 1.5% to the total tax rate. They exist because the developer borrowed against future homeowners to build the infrastructure rather than the city or county providing it. MUD rates are highest when a community is new (debt is fresh) and decline over time as bonds are paid down. A 20-year-old Cypress MUD might be at 0.4% today; a brand new Manvel MUD might be at 1.4%. Always ask the seller for the current MUD rate AND the bond amortization schedule before closing.

Do I need flood insurance in Houston?

If your property is in a FEMA-designated Special Flood Hazard Area (Zone A or AE), the lender requires flood insurance. Even outside designated zones, roughly 30% of Houston flood claims come from properties not in the 100-year floodplain. Flood insurance through the National Flood Insurance Program (NFIP) costs $700 to $3,000 per year for typical Houston homes; private flood policies (Neptune, Wright, FloodSimple) often beat NFIP by 20% to 50% with higher coverage limits. Standard homeowner's insurance does not cover flood damage. Many Houston buyers carry flood coverage even when not required because of post-Harvey claim experience in non-floodplain areas.

What are typical closing costs in Houston?

Buyer closing costs in Houston typically run 2% to 4% of the purchase price, which is $6,000 to $13,000 on a $325,000 home. The breakdown includes lender fees ($1,500 to $3,500), title insurance and escrow ($1,500 to $3,000), appraisal ($550 to $750), prepaid taxes and insurance for escrow setup ($2,000 to $5,000), and recording fees and title-related charges. Texas requires the seller to pay for the title insurance policy that covers the buyer in most transactions, which is unusual versus other states. On builder new construction, the builder often pays $5,000 to $20,000 of closing costs as an incentive when you use their preferred lender, which is a real number to factor into the total cost comparison.

What is the Texas homestead exemption and how does it lower my mortgage payment?

The Texas homestead exemption removes $100,000 from the school-district portion of your home's assessed value for property tax purposes (state-wide minimum, some districts allow more). On a $325,000 Houston home in HISD, the school portion of the bill drops by roughly $1,000 to $1,200 per year, which is $80 to $100 per month off your escrow payment. It also caps the annual taxable value increase at 10%, which protects you from rapid appraisal jumps. To qualify, the home must be your primary residence as of January 1, you must own it on January 1, and you file a one-time application with the county appraisal district (HCAD for Harris County) by April 30 in any year. There is no fee. Filing late does not lose past years; the exemption is retroactive.

The process

What is the difference between pre-qualification and pre-approval?

Pre-qualification is a soft estimate based on numbers you tell the lender, no documents pulled, no underwriting review. It is essentially a guess. Pre-approval is a documented underwriting check with verified income, assets, employment, and credit pulled. Sellers and listing agents in Houston take pre-approval letters seriously and ignore pre-qualifications. For a competitive offer in any Houston neighborhood with multiple buyers, you need a full pre-approval. The strongest version is fully underwritten pre-approval (sometimes called TBD underwriting) where the file has gone through a real underwriter, missing only the property address. Read more on real buying power vs pre-approval.

How long does it take to close on a Houston home?

Resale closings in Houston typically run 25 to 35 days from offer accepted to closing date. New construction varies widely depending on construction stage; buying a quick move-in (QMI) inventory home can close in 30 to 45 days, while contracting on a to-be-built home is 6 to 9 months. The mortgage clock has hard waiting periods (3-day disclosure, 7-day appraisal turnaround typical) so anything under 21 days requires every party moving instantly and is rare. VA loans tend to need 30 to 35 days due to VA appraisal scheduling. Cash transactions can close in 7 to 14 days if title work moves fast.

What documents do I need to apply for a mortgage in Houston?

For W-2 borrowers: 30 days of paystubs, last 2 years of W-2s, last 2 years of federal tax returns, 2 months of bank statements (all pages), photo ID, and any retirement or investment account statements. For self-employed: 2 years of business and personal tax returns plus a year-to-date P&L. For VA loans add the DD-214 and Certificate of Eligibility. For investors using rental income, current leases and 12 months of rent deposits. The lender will also pull credit and verify employment directly. Pre-approval typically takes 24 to 72 hours once all docs are in.

Can I lock my interest rate before I find a home?

Generally no. Most lenders require an executed purchase contract with a property address before locking. There are some specialty lock-and-shop or upfront-lock products that let you lock without a contract for a fee, useful when rates are dropping or you expect a long search. The standard pattern is: get pre-approved, shop for homes, lock the rate the same day your offer is accepted. Locks are typically 30, 45, or 60 days, with longer locks costing slightly more. Float-down options exist on some products that let you re-lock at a lower rate if rates drop after your initial lock.

New construction

Do I have to use the builder's preferred lender in Houston?

No, but the builder will price the incentive accordingly. Most Houston builders (Lennar, Pulte, DR Horton, Toll Brothers, Chesmar, Perry, Highland, Coventry) offer $10,000 to $25,000 in closing cost help or rate buydowns when you use their preferred lender. You can almost always use an outside lender, but the builder usually withdraws or reduces the incentive. The math: an outside broker who beats the preferred rate by 0.5% on a $400K loan saves about $24,000 in interest over 5 years, which often outpaces the lost incentive. Run both scenarios. A dual licensed broker can model the actual numbers side by side, including the builder's incentive and the outside broker's rate.

How do builder rate buydowns work in Houston?

A builder rate buydown means the builder pays the lender money up front to lower the buyer's interest rate. It comes in two forms. A permanent buydown reduces the rate for the entire 30 years (the builder pays roughly 1% of loan amount per 0.25% rate reduction). A temporary buydown (1-0, 2-1, or 3-2-1) reduces the rate for the first 1, 2, or 3 years and then steps up to the note rate. The 2-1 buydown is most common: 2% lower in year 1, 1% lower in year 2, full rate from year 3 onward. The total buydown cost goes into escrow at closing and pays the difference each month. Buydowns only apply if you use the builder's preferred lender.

Can I get a construction loan in Houston?

Yes, two main types. A one-time close construction-to-perm loan funds the construction draws and converts to a permanent mortgage at completion with a single closing, single set of fees, and one rate locked at the start. A two-time close uses a separate construction loan (usually interest-only, variable rate, 12 months) and then refinances into a permanent loan when the home is finished. One-time close is more common for owner builds because of fee savings and rate certainty. Houston construction loans typically require 20% to 25% down (or 20% to 25% equity in the lot), 700+ credit, and detailed builder contracts and draw schedules.