Key Takeaways
- The 28/36 rule caps your housing payment at 28% of gross income and total debt at 36%
- Texas property taxes (1.8-2.5%) reduce your buying power by $50K-$100K compared to low-tax states
- City matters: The same income buys $470K in San Antonio but only $420K in Austin
- Down payment: 20% down eliminates PMI and saves $150-$250/month; 3.5% FHA gets you in sooner
The 28/36 Rule Explained
Every affordability calculation starts with the 28/36 rule. This is the standard lenders use to determine how much mortgage you qualify for, and understanding it is the single most important step in setting your home buying budget.
The front-end ratio (28%) says your total monthly housing payment should not exceed 28% of your gross monthly income. Housing payment includes principal, interest, property taxes, homeowner's insurance, HOA fees, and PMI if applicable. This is the number most buyers focus on.
The back-end ratio (36%) says your total monthly debt payments, including housing, should not exceed 36% of your gross monthly income. This includes everything in the front-end ratio plus car payments, student loans, credit card minimums, personal loans, and child support.
Here is what that looks like at different income levels:
| Annual Income | Monthly Gross | Max Housing (28%) | Max Total Debt (36%) |
|---|---|---|---|
| $60,000 | $5,000 | $1,400/mo | $1,800/mo |
| $75,000 | $6,250 | $1,750/mo | $2,250/mo |
| $90,000 | $7,500 | $2,100/mo | $2,700/mo |
| $100,000 | $8,333 | $2,333/mo | $3,000/mo |
| $120,000 | $10,000 | $2,800/mo | $3,600/mo |
| $150,000 | $12,500 | $3,500/mo | $4,500/mo |
Some lenders will approve borrowers with a back-end DTI up to 43% or even 50% for strong credit profiles, but the 28/36 guideline represents the comfortable zone where you can afford your home without being house-poor. Every $100/month in existing debt reduces your home buying power by approximately $12,000-$15,000.
How Texas Property Taxes Change Everything
Texas has no state income tax, which is one of the biggest reasons people move here. But the state makes up for it with property taxes that are among the highest in the country. The statewide effective rate averages approximately 1.8%, but many suburban areas run 2.0-2.5% or higher.
Why does this matter for affordability? Because lenders include property taxes in your monthly housing payment when calculating your DTI. On a $400,000 home, the difference between a 1.0% tax rate (common in states like Colorado, Hawaii, or Alabama) and a 2.2% Texas rate is an additional $400/month in your housing costs. That $400/month directly reduces the mortgage amount you qualify for by roughly $60,000-$70,000.
Here is how Texas property tax rates compare to other popular relocation states:
| State | Effective Property Tax Rate | Annual Tax on $400K Home | Monthly Tax Cost |
|---|---|---|---|
| Texas | 1.8-2.5% | $7,200-$10,000 | $600-$833 |
| California | 0.7% | $2,800 | $233 |
| Florida | 0.9% | $3,600 | $300 |
| Colorado | 0.5% | $2,000 | $167 |
| New York | 1.7% | $6,800 | $567 |
| Illinois | 2.2% | $8,800 | $733 |
The silver lining is the Texas homestead exemption, which reduces your taxable value by $100,000 for school district taxes. On a $400,000 home, this saves roughly $800-$1,200/year in property taxes. You must file for this exemption after purchasing your primary residence. Visit our property tax calculator to estimate your taxes by address and county.
What You Can Afford at Every Income Level
The table below shows approximate maximum home purchase prices at different income levels in Texas, assuming a 6.5% mortgage rate, 20% down payment, no other debts, and an effective property tax rate of 2.0%. These are conservative estimates using the 28% front-end DTI limit.
| Annual Income | Max Home Price (20% Down) | Max Home Price (5% Down) | Max Home Price (3.5% FHA) |
|---|---|---|---|
| $50,000 | $210,000 | $185,000 | $175,000 |
| $60,000 | $260,000 | $225,000 | $215,000 |
| $75,000 | $330,000 | $290,000 | $275,000 |
| $90,000 | $400,000 | $350,000 | $335,000 |
| $100,000 | $445,000 | $390,000 | $375,000 |
| $120,000 | $540,000 | $475,000 | $455,000 |
| $130,000 | $585,000 | $515,000 | $495,000 |
| $150,000 | $680,000 | $600,000 | $575,000 |
These numbers assume zero existing debt. If you have a $400/month car payment, subtract approximately $50,000-$60,000 from the 20% down column and $40,000-$50,000 from the other columns. Student loans, credit card minimums, and other recurring debts have the same compounding effect on your maximum price.
Affordability by Texas City
Your dollar stretches differently across Texas. Property tax rates, median home prices, insurance costs, and HOA prevalence all vary by metro. Here is what a $100,000 household income can buy in each major market (20% down, 6.5% rate, no other debts).
Austin: ~$420,000 | Median Home Price: ~$525,000
Austin is the most expensive of Texas's Big Five metros. The median home price of approximately $525,000 means a household needs roughly $130,000/year income with 20% down to comfortably afford the median home. Travis County's effective property tax rate averages 1.95%, and Williamson County (Round Rock, Cedar Park) runs 2.2% or higher.
At $100K income, your $420,000 budget buys a 1,400-1,700 sq ft home in Pflugerville, Round Rock, Manor, or southeast Austin. Central Austin at this price point means condos or townhomes. First-time buyers should explore down payment assistance through TSAHC and TDHCA programs, which have income limits up to $120,000 in Travis County.
Houston: ~$460,000 | Median Home Price: ~$350,000
Houston offers exceptional value. The median home price is well below what a $100K earner can afford, meaning you have options in desirable neighborhoods rather than being pushed to the far suburbs. Harris County's effective rate averages 2.0%, but Fort Bend and Montgomery counties offer slightly lower rates at 1.8-1.9%.
A $90,000 household income comfortably covers Houston's $350,000 median. At $100K, you can target 1,800-2,200 sq ft homes in Katy, Cypress, Pearland, and Spring, or townhomes inside the 610 loop in Montrose and the Heights. Houston's lack of zoning keeps housing supply flexible, which is why prices remain more affordable than Austin or Dallas.
San Antonio: ~$470,000 | Median Home Price: ~$295,000
San Antonio is the most affordable of the Big Five. With a median home price around $295,000, a household income of roughly $75,000 covers the median comfortably. Bexar County's effective rate averages 1.85%, and Comal County (New Braunfels, Schertz) runs as low as 1.7%.
At $100K, you have significant buying power in San Antonio. A $470,000 budget opens up 2,000-2,500 sq ft homes in Stone Oak, Alamo Heights border neighborhoods, Cibolo, Boerne, and the far north side. New construction in Converse, Schertz, and New Braunfels regularly delivers modern 4-bedroom homes under $400K.
Dallas-Fort Worth: ~$440,000 | Median Home Price: ~$420,000
Dallas and Fort Worth sit between Austin and Houston on the affordability spectrum. Dallas County averages 2.0% effective rate, Collin County (Frisco, McKinney, Plano) runs 2.0-2.1%, and Tarrant County (Fort Worth, Arlington) is slightly lower at 1.9%.
The DFW median of approximately $420,000 requires about $105,000 income with 20% down. At $100K, a $440,000 budget gets you 1,600-2,000 sq ft in Garland, Grand Prairie, and older parts of Plano and Richardson. Fort Worth proper and mid-cities offer better value per square foot than Dallas. New construction in Forney, Celina, and Anna delivers 2,000+ sq ft homes in the low $400s.
Down Payment Scenarios
Your down payment is the second-biggest variable (after income) in determining how much house you can buy. Here are the four most common scenarios for Texas buyers.
3.5% Down: FHA Loan
FHA loans require just 3.5% down with a minimum 580 credit score. On a $350,000 home, that is $12,250 down plus approximately $10,000-$12,000 in closing costs. The tradeoff is mandatory mortgage insurance premium (MIP) for the life of the loan, adding $150-$200/month. Best for: first-time buyers with limited savings who want to get into a home quickly.
5% Down: Conventional Loan
Conventional loans starting at 5% down are available for buyers with 680+ credit scores. On a $400,000 home, that is $20,000 down plus $12,000-$14,000 in closing costs. PMI runs $150-$200/month but can be removed once you reach 20% equity. Best for: buyers with moderate savings who want to avoid FHA's lifetime MIP requirement.
20% Down: No PMI
The gold standard. Putting 20% down eliminates PMI entirely, gives you the lowest monthly payment, and makes your offer the strongest in a competitive market. On a $450,000 home, that is $90,000 down plus closing costs. Best for: buyers with strong savings who want maximum buying power and the lowest long-term cost.
0% Down: VA and USDA Loans
VA loans (for eligible veterans and service members) and USDA loans (for qualifying rural areas, including much of suburban Texas) offer 0% down payment. No PMI on VA loans. These programs offer the highest buying power per dollar of income. If you qualify, there is rarely a reason not to use them. See our Texas VA Loan Guide for details.
| Down Payment | Cash Needed ($400K Home) | Monthly PMI/MIP | Total Monthly PITI |
|---|---|---|---|
| 3.5% FHA ($14,000) | ~$26,000 | $195/mo (lifetime) | $3,540 |
| 5% Conv. ($20,000) | ~$32,000 | $170/mo (removable) | $3,440 |
| 10% Conv. ($40,000) | ~$52,000 | $110/mo (removable) | $3,220 |
| 20% Conv. ($80,000) | ~$92,000 | $0 | $2,960 |
| 0% VA | ~$12,000 (closing only) | $0 | $2,810 |
Assumes $400,000 home, 6.5% rate, 2.0% property tax, $220/mo insurance. Closing costs estimated at $12,000.
Hidden Costs of Texas Homeownership
Your mortgage payment is only part of the equation. Texas homeownership comes with several recurring costs that can add $500-$900/month on top of your principal and interest.
Homeowner's Insurance: $200-$300/month
Texas insurance premiums are among the highest nationally, driven by hail, wind, and severe storm exposure. The average annual premium for a $400,000-$450,000 home is $2,400-$3,600. Houston-area premiums tend to be the highest due to hurricane and flood risk. Standard policies do not cover flooding, which requires a separate policy costing $1,200-$2,500/year if your home is in a FEMA flood zone.
HOA Fees: $0-$350/month
Approximately 60% of Texas homes built since 2000 are in HOA-governed communities. Monthly fees range from $25 for basic lawn maintenance to $350+ for master-planned communities with pools, gyms, and walking trails. Always request the HOA budget, reserve study, and any pending special assessments before making an offer.
Maintenance: 1-2% of Home Value/Year
Budget at least 1% of your home's value annually for upkeep. On a $400,000 home, that is $4,000/year ($333/month). Texas-specific costs include HVAC servicing (your system runs 8-9 months per year), foundation watering and maintenance (critical on clay soil), roof repairs from hail, and pest control. Older homes may need 2% or more.
Utilities: $250-$400/month
Texas electricity bills spike in summer. Budget $150-$300/month for electricity (peaks of $300-$500 in July/August), $30-$60 for water/sewer, $30-$50 for natural gas, and $20-$40 for trash. Total utility costs for a 1,800 sq ft home typically run $250-$400/month averaged across the year.
Frequently Asked Questions
On a $75,000 salary in Texas with 20% down, no other debts, and a 6.5% mortgage rate, you can afford approximately $310,000-$350,000 depending on the city. San Antonio and Houston offer the most buying power due to lower median prices and slightly lower effective property tax rates, while Austin is the most expensive market at this income level.
Texas has no state income tax but compensates with property tax rates averaging 1.8%-2.5% of appraised value. Lenders include property taxes in your monthly housing payment when calculating your debt-to-income ratio. On a $400,000 home, Texas property taxes add $600-$833/month to your housing costs, which reduces the loan amount you qualify for by $70,000-$100,000 compared to states with 1% property taxes.
The 28/36 rule is a lending guideline stating your total housing payment (mortgage, taxes, insurance, HOA) should not exceed 28% of your gross monthly income (front-end ratio), and total monthly debts including housing should not exceed 36% of gross income (back-end ratio). For example, on a $100,000 salary, your maximum housing payment would be $2,333/month and total debt $3,000/month.
Down payment requirements in Texas range from 0% to 20% depending on the loan type. FHA loans require 3.5% down (minimum 580 credit score), conventional loans start at 5% down (some at 3%), VA loans offer 0% down for eligible veterans, and USDA loans offer 0% down for qualifying rural areas. Putting 20% down eliminates private mortgage insurance (PMI), saving $150-$250/month on a typical Texas home.
Beyond your mortgage payment, Texas homeowners should budget for homeowner's insurance ($200-$300/month, higher than national average due to storm exposure), HOA fees ($0-$350/month), maintenance (1-2% of home value per year), utilities ($250-$400/month with summer spikes), flood insurance if in a flood zone ($100-$210/month), and closing costs (2-3% of purchase price, paid upfront).
Ready to Find Out What You Can Afford?
Our Texas agents provide free, personalized affordability analyses based on your exact income, debts, and target city. No obligation.
Book a Free ConsultationYou May Also Like
Related Resources
Last updated: June 5, 2026
