🏦 Houston Mortgage Affordability Calculator

No Income Tax, High Property Tax: The Texas Trade-Off

Texas levies no state income tax, which directly boosts take-home pay. A Houston household earning $100,000 keeps roughly $6,000–$9,000 more per year than the same household in California or New York. But Texas recovers that revenue through property taxes. Harris County's combined effective rate — including county, city, school district, and special district levies — runs approximately 2.0–2.2% of assessed value for properties inside the city of Houston. On a $330,000 home, that translates to $6,600–$7,260 per year before exemptions.

The $100,000 Homestead Exemption

Texas homeowners who designate a property as their primary residence receive a $100,000 homestead exemption on the school-district portion of their tax bill. On a $330,000 home, this reduces the taxable value to $230,000 for school taxes (the largest component), saving roughly $870 per year. Additional exemptions exist for seniors (65+), disabled veterans, and surviving spouses. The homestead exemption also caps annual assessment increases at 10%, limiting tax-bill surprises when values spike. Model your scenario with our Texas statewide Affordability Calculator or check take-home pay with the Texas Paycheck Calculator.

MUD Districts: Houston's Hidden Tax Layer

What MUDs Are and Why They Matter

Much of suburban Houston lies in Municipal Utility Districts (MUDs) — special taxing entities that fund water, sewer, drainage, and road infrastructure in newer developments. MUD tax rates typically add $0.30–$0.60 per $100 of assessed value, but some districts exceed $1.00 — pushing total effective rates well above 2.5% in parts of Cypress, Katy, and Spring. On a $400,000 home in a high-MUD area, the additional $1,200–$4,000 in annual taxes reduces your affordable purchase price by $15,000–$50,000 compared to a non-MUD neighborhood.

MUD vs. Inner Loop

Older neighborhoods inside the 610 Loop — Montrose, the Heights, Museum District — generally fall outside MUD districts. Property taxes still run 2.0–2.2%, but there are no MUD add-ons. The trade-off is higher per-square-foot prices and older housing stock that may need updates. Buyers should compare total annual cost (mortgage + tax + MUD + insurance + maintenance) rather than sticker price alone. This calculator includes property tax as an input; adjust it to reflect your target neighborhood's combined rate.

Flood Insurance: A Non-Negotiable for Many Houston Buyers

Why Houston Floods

Houston sits on a flat coastal plain with clay soils that absorb water poorly. More than 300,000 homes in the greater Houston area are located in a FEMA-designated floodplain. Hurricane Harvey (2017) demonstrated that flooding is not limited to floodplains — roughly 70% of Harvey-flooded homes were outside mapped zones. Standard homeowners insurance does not cover flood damage.

Cost and Coverage

NFIP flood insurance in Houston averages roughly $821 per year, but premiums vary widely by flood zone. Properties in high-risk zones (AE, AH, VE) pay $900–$1,200 more than those in moderate-risk zones. Private flood insurers have entered the Texas market, sometimes offering lower rates for well-elevated homes. For affordability calculations, even a $70/month flood premium reduces your qualifying home price by roughly $8,500. If your target neighborhood flooded during Harvey, Imelda (2019), or the May 2024 storms, budget for flood coverage regardless of FEMA zone designation.

Homeowners Insurance in the Hurricane Belt

Texas homeowners pay an average of approximately $4,176 per year for a $300,000 dwelling policy, well above the national average. Houston's proximity to the Gulf Coast drives higher wind and hail premiums. Hurricane deductibles — typically 1–5% of the insured dwelling value — mean you absorb $3,300–$16,500 out of pocket before coverage kicks in on a $330,000 home. Wind mitigation features (impact-resistant roofing, hurricane straps, storm shutters) can reduce premiums by 10–25%.

Houston's Economy and Income Landscape

Energy, Healthcare, and Aerospace

Houston's economy is anchored by the energy sector (ExxonMobil, Chevron, ConocoPhillips, dozens of midstream/service companies), the Texas Medical Center (the world's largest, employing 106,000+), and NASA's Johnson Space Center. The metro's median household income sits near $67,000 — lower than the national figure — but high-paying energy and medical roles create a wide income spread. Engineers, geologists, and medical professionals earning $120,000–$200,000 can comfortably afford the metro median, while service-sector and hospitality workers at $35,000–$45,000 face a significant affordability gap.

No Zoning and What It Means for Buyers

Houston is the only major US city without formal zoning laws. The practical effect: residential, commercial, and industrial properties can exist side by side. For buyers, this means thorough neighborhood research is essential. A quiet street today could have a commercial development next year. Deed restrictions in master-planned communities (Sugar Land, The Woodlands, Pearland) provide the most predictable neighborhoods but often carry HOA fees of $100–$400/month. For a deeper look at Houston's financial landscape, see our Texas financial hub.

Suburban Price Map: Katy, Sugar Land, Pearland, and The Woodlands

Katy: Best Value for Families

Katy's median near $208,000–$250,000 (depending on subdivision age) makes it the most affordable A+-rated school district in the Houston metro. New builds from Lennar and Perry Homes start in the low $300,000s with builder incentives. The catch is MUD fees: most Katy-area communities carry MUD rates of $0.40–$0.80 per $100, adding $1,300–$3,200 per year. Factor that into your total tax burden before comparing Katy's price to an inner-Loop home without MUD.

Sugar Land and Pearland

Sugar Land's master-planned communities (Telfair, Riverstone, Greatwood) offer medians around $350,000–$450,000, excellent Fort Bend ISD schools, and relatively moderate MUD rates. Pearland, straddling Brazoria and Harris counties, has a median near $375,000 with strong growth and easy access to the Texas Medical Center. Both cities have lower crime rates and better walkability scores than outer-ring suburbs, commanding a premium that reflects quality of life beyond the tax bill.

The Woodlands

The Woodlands — a master-planned community in Montgomery County — offers a self-contained live-work environment with medians around $400,000–$500,000. Conroe ISD and The Woodlands Township provide strong schools and extensive amenities. Property-tax rates in Montgomery County average 2.0–2.3%, similar to Harris County but without Houston's city millage. For families willing to commute 30–40 minutes to the Energy Corridor or downtown via I-45/Hardy Toll Road, The Woodlands balances suburban quality with metro accessibility.

Closing Costs: What Houston Buyers Pay

Buyer-Side Breakdown

Houston buyers should budget 2–5% of the purchase price for closing costs. On a $330,000 home, that is $6,600–$16,500. The largest components are lender origination fees (0.5–1% of the loan), prepaid property taxes and insurance held in escrow (2–4 months upfront), title insurance (the seller customarily pays the owner's policy in Texas; the buyer pays only the lender's policy, roughly $100), and appraisal ($450–$600).

Texas Advantage: No Mortgage Recording Tax

Unlike New York (1.8–1.9% mortgage recording tax) and several northeastern states, Texas imposes no mortgage recording tax. This saves Houston buyers $5,000–$6,000 on a $330,000 loan compared to a buyer in NYC. Combined with the seller-pays convention for the owner's title policy, Houston's upfront closing costs are among the lowest of any major US metro. As of March 2026, a 6.2% rate reduction on title insurance premiums further lowered costs.

Renting vs. Buying in Houston: The 2026 Math

The median Houston apartment rent is roughly $1,350–$1,500 per month (2026), while the full monthly cost of owning a median $330,000 home — principal, interest, taxes, all insurance, and PMI at 10% down — runs approximately $2,800–$3,100. Renting is $1,300–$1,600 cheaper on a pure cash-flow basis. But Houston's lack of income tax amplifies the wealth-building advantage of ownership: every dollar of principal paydown is effectively more valuable because it is not offset by state-level tax drag. After five years of payments, a buyer accumulates roughly $28,000–$32,000 in equity from principal reduction alone, plus any appreciation.

TDHCA Down Payment Assistance

My First Texas Home

The Texas Department of Housing and Community Affairs (TDHCA) offers the My First Texas Home program: up to 5% of the mortgage amount as a 30-year, 0%-interest second lien for down payment and closing costs. The loan may be forgiven after three years for qualifying borrowers. Requirements include first-time buyer or veteran status, a minimum 640 credit score, DTI below 45%, and income within program limits. A HUD-approved homebuyer education course is required.

Harris County Housing Finance Corporation

The Harris County HFC offers additional local programs combining below-market first mortgages with 3–5% DPA as deferred or forgivable second liens. These can stack with TDHCA programs in some cases. Income limits are tied to the Houston-The Woodlands-Sugar Land MSA median, and purchase-price caps apply. Check both TDHCA and Harris County HFC eligibility — a buyer qualifying for both maximizes upfront assistance.

What $2,500 Per Month Buys in Houston

At a $2,500 total monthly housing budget (28% of roughly $107,000 gross income), with 10% down, 6.4% rate, 2.1% effective property tax, $4,200 annual homeowners insurance, and $800 annual flood insurance, you can afford approximately $290,000–$310,000. That opens up neighborhoods like Alief, Sharpstown, portions of Northeast Houston, and newer builds in the Cypress-Katy corridor (add MUD fees). Move to 20% down (eliminating PMI) and the range shifts to $320,000–$340,000, reaching the metro median. Use our national Mortgage Affordability Calculator to compare Houston against other metros, or explore the Houston Mortgage Calculator for monthly payment details on a specific price.