Navigating the real estate market as a homebuyer in the Dallas-Fort Worth (DFW) area can be exciting yet daunting. Understanding property taxes is crucial to making informed decisions.
We’ll explore the DFW real estate market and what it costs to purchase and own a home in Texas.
By carefully considering these financial factors, first-time homebuyers in the DFW area can better prepare for the responsibilities and expenses of homeownership.
Median Price of a Home in Dallas-Fort Worth
According to Zillow data, the median home sale price in DFW is just over $370k. Economic growth and urban development have made the area more attractive to buyers in the last few years. For example, many Californians have moved to Texas for lower housing costs and lower cost of living.
Beyond the purchase price, homebuyers should consider loan programs, closing costs, and ongoing homeownership expenses, including property taxes.
Financial Considerations for DFW Homebuyers
Mortgage Payment
Homebuyers who are looking to purchase a home will need to consider mortgage rates if they aren’t able to pay with cash.
At the time of writing, a 30-year fixed-rate mortgage is above 6%. Not as high as peak mortgage rates, but much higher than a few years ago.
Various mortgage options are available, catering to different needs and financial situations. For example, conventional loans typically require a higher down payment and credit score.
In contrast, FHA loans are more accessible to those with lower credit scores and offer down payments as low as 3.5%. However, there are FHA limits. For a single family home in DFW, the FHA limit is $563,500.
VA loans provide benefits for veterans and service members, often requiring no down payment.
Closing Costs
These are fees and expenses you pay to finalize your mortgage and those can include appraisal fees, title insurance, attorney fees, and loan origination fees.
On average, closing costs in Texas amount to 1.5% of the home’s purchase price. It’s essential to budget for these costs early in the home-buying process.
Home Ownership Costs
Home Insurance
Required by most lenders, home insurance costs can vary based on the property’s location, size, and other factors. It’s important to shop around and find a policy that offers adequate coverage at a reasonable price.
Utilities and Repairs
Owning a home means being responsible for its upkeep. It’s wise to budget 1% to 3% of the home’s purchase price annually for maintenance and unexpected repairs.
These can include electricity, water, gas, and waste disposal. Costs will vary depending on the home’s size, location, and efficiency.
Homeowners Association (HOA) Fees
If buying in a community with an HOA, monthly or annual fees may apply. These fees cover common area maintenance, amenities, and sometimes utilities or insurance. Understanding these fees and what they cover is important when budgeting for a new home.
Property Taxes
Property taxes are a major component of homeownership costs in Texas, with rates varying across different counties and municipalities. Texas doesn’t have a state income tax, so property taxes support government services.
Understanding property tax rates and how they apply to your home is vital, as it can impact home affordability. For example, a homeowner in Collin County (north DFW metro) will likely pay more in property taxes, as the county has the second-highest tax rates in the state.
Homeowners can pay property taxes directly or through an escrow account with their mortgage. An escrow account divides the annual tax payment into monthly installments, ensuring taxes are paid without a lump sum payment, offering convenience and financial stability.
Whether an escrow account is an option for you may be up to your lender.
Saving on Property Taxes
Property tax protests can reduce the tax burden for Texas homeowners. If a property’s assessed value is believed to be overestimated, homeowners can file an appeal with their local appraisal district. Successful protests can lead to lower property taxes.
Learn more about North Texas Property Tax Services. Our property tax protest services are available to homeowners in the Dallas-Fort Worth area, specifically Collin, Dallas, Denton, and Tarrant counties