# Why Your Texas Mortgage Payment Isn't Just the Home Price

By Bond Peter Njoku (@bondpeternjoku) · Published 2026-10-26

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The price on the listing is not the payment you will write every month — and in Texas, that gap catches buyers off guard. Your monthly mortgage payment has **four co-equal parts** — principal, interest, property taxes, and homeowner's insurance, together called PITI — and in Texas the last two often rival the first two in size. Because Texas property taxes rank among the highest in the country, two homes with the identical sale price can carry very different monthly payments depending on where they sit and how much you put down.

#### Key Takeaways

-   Texas's average effective property tax rate runs near 1.4%–1.5% of a home's value each year — well above the national average of about 0.9%.
-   Principal and interest are only part of your payment; taxes and insurance can add hundreds of dollars a month.
-   County rates vary widely — Dallas County's effective rate is roughly 2.23%, while Collin County's sits near 1.75%.
-   The homestead exemption can trim your assessed value and lower your tax bill if you live in the home.
-   FHA loans carry mortgage insurance, which a conventional loan at 20% down avoids.

## What does PITI stand for?

PITI is the acronym lenders use for the four parts of a standard mortgage payment: principal, interest, taxes, and insurance. Each one carries real weight in your monthly bill. **Principal** is the part that shrinks your loan balance; **interest** is the charge for borrowing, largest in the early years; and **taxes and insurance** are funds your lender collects monthly and holds in escrow to pay your county and your insurer when bills come due.

**Principal** is the part of each payment that actually shrinks your loan balance. **Interest** is the charge for borrowing the money, and it makes up the largest share of your payment in the early years of a 30-year loan. These two together are what most online calculators quote as your monthly payment — and they are only half the story.

The taxes and insurance side is where Texas buyers routinely underestimate. Because Texas has **no state income tax**, local governments lean on property taxes to fund schools, streets, and services — and that burden can be as large as the loan interest itself. Texas's average effective property tax rate is about **1.40%** of a home's assessed value each year — well above the national average of about **0.9%** ([Texas Tax Protest](https://www.texastaxprotest.com/blog/average-property-tax-in-texas)).

![Texas property tax appraisal](https://convex.voce.com/api/storage/e619a48e-184e-4398-ace8-766b8c31c0a5)

## Why are Texas property taxes so high?

Texas has **no state income tax**, so cities, counties, and school districts lean on property taxes to pay for roads, police, schools, and municipal services. That combination pushes Texas's average effective property tax rate to about **1.40%** of a home's assessed value each year, against a national average around **0.9%** ([Texas Tax Protest](https://www.texastaxprotest.com/blog/average-property-tax-in-texas)).

The actual number varies sharply by county. Dallas County's average effective rate is about **2.23%**, Tarrant County runs near **2.16%**, and Collin County sits lower at about **1.75%** ([Ryan](https://ryan.com/tax-services/property-tax/us-property-tax/deadlines/texas)). A home in Dallas County can carry several hundred dollars more in annual taxes than the same-priced home in Collin County — a difference that shows up in your monthly payment before you even factor in the loan itself.

### The homestead exemption can soften the blow

The homestead exemption is a Texas tax break for the home you actually live in, and it reduces the assessed value your taxes are calculated on. County appraisal districts assess your property's value each year, and your tax bill is the product of that assessed value and your local tax rate ([Texas Tax Protest](https://www.texastaxprotest.com/blog/average-property-tax-in-texas)). Because the rate is set locally, the same-priced home can carry very different bills across counties and school districts.

Two protections matter for first-time buyers. First, **you can protest your appraisal** if you believe it does not reflect the property's value — the appeal is filed with your County Appraisal District, and many buyers successfully lower their bill this way. Second, **the homestead exemption also caps annual appraisal increases**, which keeps your escrow payment from spiking year over year. On top of that, Texas allocated **$51 billion for property tax cuts over the next two years**, with voters approving significant homestead exemption increases in November 2025 ([Ryan](https://ryan.com/tax-services/property-tax/us-property-tax/deadlines/texas)).

## What about mortgage insurance?

If you put down less than 20%, most buyers add a fifth cost to the monthly bill: **mortgage insurance**, which protects the lender if you stop paying. The two versions behave very differently, and which one you carry depends on the loan type you choose.

**FHA loans**, popular with first-time buyers because they allow as little as 3.5% down with a credit score around 580, require mortgage insurance for nearly everyone. You pay a one-time **upfront premium of 1.75% of the loan amount** at closing — usually financed into the loan — plus an **annual premium that runs 0.55% a year** for a typical 30-year loan with the minimum down payment ([Amerisave](https://www.amerisave.com/learn/fha-mortgage-insurance-premium-mip-in-complete-cost-breakdown-and-removal-strategies)). On a $300,000 loan, that annual premium works out to about $137 a month, and with less than 10% down it stays for the life of the loan ([Mortgage Info](https://mortgage-info.com/blog/fha-mip-chart-2026-mortgage-insurance-premiums)).

**Conventional loans** charge private mortgage insurance (PMI) when you put down less than 20%, but PMI drops off automatically once your equity reaches 22% — and it disappears entirely if you make a 20% down payment. FHA mortgage insurance, by contrast, does not price by credit score and cannot be canceled on equity alone; you typically refinance to a conventional loan to shed it ([Valley West Mortgage](https://valleywestmortgage.com/fha-mortgage-insurance-2026-mip-costs)).

For many first-time buyers, the choice between FHA and conventional comes down to credit score and down payment. As a mortgage loan officer, I routinely compare both side by side — FHA often wins for buyers still building credit, while conventional usually prices better for someone with a strong score and a larger down payment.

What's the difference between FHA MIP and conventional PMI?

FHA mortgage insurance is a one-time 1.75% upfront premium plus an annual premium of roughly 0.55% that lasts the life of the loan with less than 10% down. Conventional PMI applies when you put down under 20%, but it drops off automatically once you reach 22% equity and never applies at all with a 20% down payment.

## How much difference do taxes actually make?

To see the real impact, compare a $350,000 home in Dallas County versus Collin County using each county's average effective rate. On a 30-year loan with 3.5% down, the loan amount is about $337,750, and the annual tax bill scales with the rate.

County

Effective tax rate

Annual tax on $350K

Monthly tax escrow

Dallas County

2.23%

$7,805

$650

Tarrant County

2.16%

$7,560

$630

Collin County

1.75%

$6,125

$510

Those county rates come from average effective rates ([Ryan](https://ryan.com/tax-services/property-tax/us-property-tax/deadlines/texas)). The gap between Dallas and Collin is roughly **$140 a month in property taxes alone** on the same-priced home — before insurance, before mortgage insurance, before the loan itself. That is exactly why two identical listings can produce very different monthly payments.

Add homeowner's insurance, which in Texas typically runs several hundred dollars a year, plus mortgage insurance on a small down payment, and a buyer who budgeted only on principal and interest can land hundreds of dollars short every month.

#### Get your estimated monthly payment

I'm Bond Peter Njoku, a Mortgage Loan Officer with Mortgage Funding Solutions, licensed in Texas and other states. I've worked with FHA, VA, conventional, and USDA buyers — send me a few quick details and I'll run your estimated payment before you fall for a listing.

[Schedule a rate consultation](/@bondpeternjoku)

## Know your real number before you fall for a listing

The listing price tells you almost nothing about what you'll actually pay each month. In Texas, the property tax rate in your county, your down payment, and your choice of loan type can move your payment by hundreds of dollars — often more than the difference between two homes' sale prices. Budget on the full PITI picture, not just the sticker.

The fastest way to get your real number is to run the math with someone who knows Texas. I'm **Bond Peter Njoku**, a Mortgage Loan Officer with **Mortgage Funding Solutions**. I work with FHA, VA, conventional, and USDA loans, and I can show you how the county rates, homestead exemption, and loan options apply to your specific purchase — in Texas and in the other states where I'm licensed.

**Rates and terms are subject to change, and estimates aren't an approval or guarantee of a specific rate.** Tap the link above, answer a few quick questions, and I'll give you an estimated payment before you commit to a listing.