Texas
DSCR loans in Texas
No income tax, endless inventory, real landlord law — and a property-tax line that decides every ratio. Here's the Texas math, including the cash-out truth most investors never hear.
The Texas trade: no income tax, heavy property tax
Texas runs the mirror image of Florida's trap. There, insurance eats the ratio; here it's property taxes — commonly around 2% effective, among the heaviest in the country, and investors get no homestead exemption to soften them. Worked example: a $400,000 rental at 25% down and 7.25% carries about $2,047 in principal and interest. Add ~$667/month in taxes(2%) and $180 insurance, and the payment is roughly $2,894 — so at $3,000 rent you're at 1.04. The same price and rent with Tennessee's tax line would ratio near 1.16. Texas deals aren't worse; they just demand the real tax number on day one — a national-average placeholder will lie to you by a full tier.
The cash-out myth that costs Texans equity
Say "Texas cash-out" and half the industry recites the homestead rules — the 50(a)(6) restrictions, the 80% cap, the once-a-year rule. Here is the part that matters for investors: those rules govern your homestead, not your rentals.A true investment property refinances under normal program guidelines — DSCR cash-out on a Texas rental works like DSCR cash-out anywhere, subject to the program's own LTV and seasoning rules. Investors get told "Texas doesn't really do cash-out" often enough that correcting it is practically a public service. If someone quoted you homestead rules on a rental, get a second opinion — you may have equity you were told you couldn't touch.
The protest habit
Texas reassesses with the market and investment property has no cap protection, so your tax line — and therefore your ratio on any future refinance — drifts upward unless you push back. Protesting your assessment annuallyis standard operating procedure for Texas landlords: it's inexpensive, frequently successful, and compounding. Think of it as defending your DSCR one May at a time.
Markets and short-term rentals
DFW, Houston, San Antonio, Austin — four of America's dozen biggest metros, each with distinct math: Houston and San Antonio still offer genuine cash-flow submarkets, DFW runs the spread, and Austin behaves like a growth market with growth-market ratios. On the STR side, Texas has no statewide ban, but city rules diverge hard— registration and zoning regimes differ across Austin, Dallas, Fort Worth, and San Antonio and keep evolving. Many DSCR programs count STR income (commonly near 75% of documented revenue, 12-month history) — verify the city's current rulebook before the revenue enters your math.
What Texas investors need to qualify
The national core applies: 20–25% down, credit floors near 620–640, 1.0+ ratio with sub-1.0 and No-Ratio doors, 3–12 months reserves, LLC vesting standard — full detail on the DSCR requirements guide. Texas-specific advice in one line: bring the county's real tax number to the ratio, protest it every year after, and never let anyone apply homestead rules to your rentals.
Run the Texas numbers with the real tax line.
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Texas DSCR FAQ
What are DSCR loan requirements in Texas?
The national core: typically 20–25% down, credit floors around 620–640, a DSCR of 1.0+ (with sub-1.0 and No-Ratio options), and 3–12 months of reserves. Texas's twist is the tax line: with effective property taxes commonly around 2%, the T in PITIA is doing double duty here — run the ratio with the real tax number, not a national average.
What are DSCR loan rates in Texas?
DSCR pricing is built per deal — ratio, LTV, credit, property type, prepay structure — not posted by state. Texas isn't priced differently as a state; its fingerprints show up in the payment through property taxes. A free DSCR Analysis shows what your scenario supports (we don't quote rates on this site).
Can I do a cash-out refinance on a Texas investment property?
Yes — and this is the most misunderstood rule in Texas lending. The famous Texas cash-out restrictions (the 'Texas 50(a)(6)' rules, 80% LTV cap and all) apply to your homestead — your primary residence. A true investment property isn't your homestead, so DSCR cash-out refinances on Texas rentals follow normal program guidelines, not the homestead rules. Plenty of investors have been told otherwise; it costs them equity access for no reason.
Why is my Texas DSCR lower than the same price would be elsewhere?
Property taxes. At roughly 2% effective, a $400K rental carries about $667/month in taxes — versus around $250 in Colorado or Tennessee. That difference lands entirely inside the payment your rent must cover, and it's why a Texas deal at the same price and rent ratios notably lower than the identical deal in a low-tax state. No state income tax gives some of it back on the profit side, but the DSCR is measured on the payment.
Should I protest my Texas property assessment?
Yes — annually, like changing smoke-detector batteries. Texas assessments move with the market and investors don't get homestead caps, so an unprotested assessment ratchets your tax line (and quietly erodes your DSCR on future refinances). Protesting is cheap, often successful, and in Texas it's simply part of operating a rental.
Can I use Airbnb income for a Texas DSCR loan?
Often yes — many programs count STR income, commonly near 75% of documented revenue with a 12-month history. Texas has no statewide STR ban, but rules vary sharply by city: Austin, Dallas, Fort Worth, and San Antonio each run their own registration and zoning regimes, and enforcement changes. Verify the city's current rules before counting nightly revenue.
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