Affordability is the first real question in any home purchase — and in Houston's market, it's one worth understanding specifically rather than relying on generic rules of thumb. The "spend no more than 28 percent of your income on housing" guidance was built around a different rate environment and doesn't account for how property taxes, insurance, and HOA costs compound your actual monthly payment in Texas.
Here's how lenders actually calculate what you can afford, and what the numbers look like at Houston's most common price points.
How Lenders Determine Affordability: DTI
Lenders don't use income alone to decide what you qualify for. They use your debt-to-income ratio — your total monthly debt payments divided by your gross monthly income.
Your DTI has two components. The front-end ratio is just your proposed housing payment (principal, interest, taxes, insurance, HOA) divided by your gross income. The back-end ratio adds all your other debt payments — car loans, student loans, minimum credit card payments, any other installment debt — to the housing payment before dividing.
Conventional loans generally allow a back-end DTI of up to 45 to 50 percent with strong credit. FHA allows up to 57 percent in some cases. This is the number lenders use, not the 28 percent rule. If your credit is strong, your reserves are solid, and you have a good employment history, lenders have flexibility on DTI.
What Your Payment Looks Like at Different Houston Price Points
The following estimates use approximate 2026 rates, property taxes based on Houston's typical 2.2 percent effective rate, and a $150/month homeowner's insurance estimate. These are illustrative — your actual payment will vary based on rate, exact tax assessment, and your specific insurance quote.
$250,000 purchase — FHA, 3.5% down, 6.0% rate:
Principal & Interest: ~$1,409/mo
Property Taxes: ~$458/mo
Homeowner's Insurance: ~$150/mo
FHA Mortgage Insurance: ~$105/mo
Estimated PITI: ~$2,122/mo
Approximate income needed: ~$5,500–$6,500/mo gross (~$66,000–$78,000/yr)
$350,000 purchase — Conventional, 5% down, 6.5% rate:
Principal & Interest: ~$2,108/mo
Property Taxes: ~$641/mo
Homeowner's Insurance: ~$175/mo
PMI: ~$90/mo
Estimated PITI: ~$3,014/mo
Approximate income needed: ~$7,500–$9,000/mo gross (~$90,000–$108,000/yr)
$450,000 purchase — Conventional, 10% down, 6.5% rate:
Principal & Interest: ~$2,561/mo
Property Taxes: ~$825/mo
Homeowner's Insurance: ~$200/mo
PMI: ~$85/mo
Estimated PITI: ~$3,671/mo
Approximate income needed: ~$9,000–$11,000/mo gross (~$108,000–$132,000/yr)
$600,000 purchase — Conventional, 20% down, 6.5% rate:
Principal & Interest: ~$3,033/mo
Property Taxes: ~$1,100/mo
Homeowner's Insurance: ~$250/mo
No PMI
Estimated PITI: ~$4,383/mo
Approximate income needed: ~$11,000–$13,000/mo gross (~$132,000–$156,000/yr)
The Texas Property Tax Reality
These numbers may look higher than estimates you've seen for other states, and Texas property taxes are a significant reason why. Texas has no state income tax, but property taxes are among the highest in the country — typically 2.0 to 2.5 percent of assessed value annually depending on the county and school district.
On a $350,000 home at a 2.2 percent effective rate, that's $7,700 per year in property taxes — $641 per month, escrowed and added to your mortgage payment. Buyers who move to Texas from California or the Northeast are sometimes surprised by this. Plan for it upfront.
What Lowers the Income You Need
Several factors reduce how much income you need to qualify at a given price point:
Lower existing debt: The less debt you carry going into the purchase — car payments, student loans, credit cards — the more of your income goes toward housing. Paying down a car loan or credit card before applying can meaningfully increase your qualifying purchase price.
Larger down payment: A bigger down payment reduces the loan amount, which reduces the monthly P&I payment and may eliminate PMI entirely. On a $400,000 purchase, the difference between 5 and 20 percent down is roughly $600 per month in payment reduction.
Down payment assistance: If you qualify for DPA programs in Texas, you may be able to purchase with minimal cash out of pocket while still qualifying at a competitive loan amount. Texas offers several state and local programs for first-time and qualifying buyers.
Lower rate through buydown: Buying down the rate at closing with discount points reduces your monthly payment. Whether this makes sense depends on how long you plan to stay in the home and what the breakeven period looks like for the upfront cost.
What Lenders Actually Pull When You Apply
When you apply for a mortgage, the lender pulls your credit report from all three bureaus and uses the middle score for qualification. They'll document all your income — pay stubs, tax returns or bank statements, W-2s — and verify your assets for the down payment and reserves. They calculate your DTI using your documented income and all credit-reported monthly obligations.
The number you qualify for on paper and the payment you're comfortable with may not be the same. Qualifying for $500,000 doesn't mean $500,000 is the right purchase for your budget. The qualification tells you the ceiling — your personal financial comfort determines where you actually want to be.
Get a Real Number, Not an Estimate
Online calculators are a starting point. A pre-approval is a real answer based on your actual income, credit, and debt. It takes 24 to 48 hours and positions you to move when you find the right property in Houston's competitive market.
Call or text Brandon at 832-997-1527 or visit brandonhuynh.net to get started. Brandon will walk you through what you qualify for and which loan program makes the most sense for your situation.
Get a Real Number, Not an Estimate
Online calculators are a starting point. A pre-approval gives you a real answer based on your actual income, credit, and debt. Takes 24 to 48 hours.
Start My Pre-Approval