Texas has a lot to offer to prospective buyers: no state income tax, a diverse job market, and a range of lifestyle options, from seaside living to wide open country to bustling urban centers. With so much opportunity, potential buyers often wonder, “How much house can I afford in Texas?”
Quick Affordability Calculation: The 28/36 Rule
The 28/36 rule is a speedy way to figure out how much you can comfortably afford to spend on monthly mortgage payments.
This metric recommends keeping your total housing costs under 28% of your gross monthly income, and the total of your housing costs and debt payments under 36%. Housing costs include mortgage payments, property taxes, homeowners’ insurance, and HOA fees if applicable; debt payments include your car and student loan payments, minimum credit card payments, and payments towards personal lines of credit.
For example, if your gross monthly income is $6,500, your housing expenses are $1,700, and you make $300 in payments on other debts:
- Your housing ratio is 26.1% ($1,700 ÷ $6,500), well within the 28% guideline.
- Your total expenses ratio is 30.1% ($2,000 ÷ $6,500), also very affordable under the 28/36 rule.
How Much House Can I Afford in Texas?
Using the 28/36 rule, you can spend up to 36% of your gross monthly income on housing and other debt. To calculate the maximum house price you can afford, work backwards from 36% of your gross income:
- Calculate 36% of your gross monthly income. This is your maximum comfortable total for housing and debt payments.
- Subtract estimated property taxes and insurance.
- The remainder is what you can spend on mortgage payments.
- Use a reverse mortgage calculator, entering the mortgage payment amount, projected interest rate, and loan term. This will give you your maximum loan amount.
- Add your down payment for the total home price you can afford.
Here’s an example of what you could afford using a gross monthly income of $6,500 and $300 in monthly debt payments:
- Maximum affordable housing cost = $2,040 ($6,500 X 36% – $300)
- With property taxes and insurance at $600 per month, your maximum mortgage payments are $1,440
- Using an online mortgage calculator, enter:
- Payments: $1,440
- Interest rate: 6%
- Term: 30 years
- Down payment: $100,000
- Your maximum loan amount would be approximately $340,000. Adding your down payment, you could spend $440,000 on a home.
Salary Requirements for Homes in Texas
House prices vary widely for homes in Texas. Here’s an overview of salary requirements for different price points based on these assumptions:
- 5% mortgage rate
- 20% down payment
- Property taxes of 1.6% annually and homeowner’s insurance of approximately $2000 annually
No HOA fees, no other significant debts
The salary figures above are minimums, so for a comfortable lifestyle, aim for 15% to 20% higher.
Salary Needs by Area in Texas
The answer to “How much house can I afford in Texas” depends largely on where you want to live.
Austin Metro Area
Austin is Texas’s most expensive city, with median home prices around $500,000. Austin is pricey because major tech companies are located there, which draws in high-salaried tech workers who can afford to spend more on housing. Expansion of the city into the suburbs is limited because Austin borders on Texas’s Hill Country.
Starter homes in the Austin metro area have been selling for $350,000 to $400,000, with prices rising higher in the suburbs. Minimum household income for a starter home is approximately $120,000, whereas the minimum salary for a median-priced home is approximately $160,000.
San Antonio
The charming city of San Antonio offers affordability, big city amenities, and diverse cultural attractions. With the presence of several military bases and a smaller tech sector than Austin, incomes in San Antonio are slightly lower than those in Austin, but employment is very stable.
Median home prices in San Antonio are between $275,000 and $325,000, with starter homes available for as low as $200,000. New construction suburbs feature homes ranging from $250,000 to $350,000. The minimum salary for a median home in San Antonio is $88,000 to $105,000.
Dallas-Fort Worth
Dallas-Fort Worth also offers more affordable options than Austin, while maintaining a strong job market. With a broad urban area and room to expand, Dallas-Fort Worth has both high-priced and moderately-priced suburbs, making it great for first-time buyers as well as professionals looking for luxury homes.
Median home prices in Dallas-Fort Worth are between $350,000 and $425,000. In affordable suburbs like Arlington and Grand Prairie, you can find homes for $250,000 to $350,000. The minimum salary for a median home in Dallas-Fort Worth is $110,000 to $135,000, although you can purchase a home in one of the city’s affordable suburbs for $80,000 to $110,000.
Secondary Markets in Texas
Smaller Texas cities offer lower entry points than larger metro areas. Some examples are:
- El Paso
- Median home price: $225,000 to $275,000
- Minimum salary needed: $72,000 to $88,000
- Lubbock
- Median home price: $200,000 to $250,000
- Minimum salary needed: $64,000 to $80,000
- Corpus Christi
- Median home price: $240,000 to $290,000
- Minimum salary needed: $77,000 to $93,000
- Amarillo
- Median home price: $210,000 to $260,000
- Minimum salary needed: $77,000 to $93,000
- Waco
- Median home price: $230,000 to $280,000
- Minimum salary needed: $74,000 to $90,000
Additional Costs of Homeownership in Taxes
When asking “how much house can I afford in Texas,” the cost of property taxes and homeowners’ insurance also needs to be considered. Texas has no state income tax, but property taxes are among the highest in the nation, averaging 1.6% of the home value annually. Rates vary by county and municipality, with some areas exceeding 2%. If you’re buying in Texas, research specific locations for current property tax rates and any upcoming legislation that may affect them.
Homeowner’s insurance is also more expensive in Texas than in many other states due to weather risks such as hurricanes along the coast, hailstorms, and tornadoes. Coastal areas, in particular, pay significantly more for homeowner’s insurance. Look into these costs in advance to avoid unpleasant surprises during the loan approval process.
How Much House Can I Afford in Texas?
The answer to “how much house can I afford in Texas” isn’t straightforward. With properties ranging from compact urban condominiums to expansive ranches, and cities with very different jobs and migration trends, Texas has real estate options at all price points. Working with a real estate agent who is deeply familiar with the area you’re interested in will help you find the perfect home for your income level.
