Question 1

The seller has no flood insurance. Do I need to budget one anyway?

Accepted Answer

On a Houston file, usually yes. Only about 1 in 7 Harris County households carries an NFIP policy, across roughly 262,391 active policies averaging $931 a year, so "no policy" tells you about the mandatory-purchase rule that applied to the seller, not about the property's flood risk. The proposed MAAPnext maps would more than double the number of Harris County properties in the 100-year floodplain, from about 158,500 to about 330,000, and those maps still face months of review before approval. If your property lands in that group and you carry a federally backed mortgage with no flood coverage, the purchase requirement is triggered and the cost is real, likely $1,000 or more a year. We would rather see that premium in the expense stack on day one than watch it break the ratio in year two. Get the current and proposed map status during diligence, and price the coverage into your DSCR.

Question 2

If the flood map changes, does my premium go up?

Accepted Answer

Those are two separate questions, and Houston investors mix them up constantly. Risk Rating 2.0 is fully in effect, which means FEMA prices each property on more than 30 property-specific factors, including flood exposure, replacement cost, distance to water and elevation, rather than mainly on its mapped flood zone. So being redrawn into the 100-year floodplain does not by itself reprice most existing policies. What the map change does is flip the mandatory-purchase switch for federally backed mortgages. Put plainly: the map drives whether you must buy, and the rating engine drives what you pay. Properties in the 500-year floodplain carry no mandatory-purchase requirement at all, which is not the same as carrying no risk. Underwrite both questions separately, and get a bound quote rather than an estimate before you lock your assumptions.

Question 3

How much does a MUD district add to my property tax line?

Accepted Answer

Enough to change the ratio, and it is the line out-of-state buyers miss. Most newer Houston-area subdivisions in Katy, Cypress, Fort Bend and Montgomery County sit inside a Municipal Utility District, a special-purpose taxing district that finances water, sewer and drainage and levies its own ad valorem tax on top of county, school district and city rates. Combined rates inside Houston city limits run roughly 2.1% of taxable value on 2025 rates, while a MUD subdivision can carry a total rate closer to 3%. MUD rates generally decline over time as the original bonds amortize, so a district that has been paying down for 15 years is a different expense than a brand-new one. Do not take a published rate on faith. Pull the specific district's rate from the Texas Comptroller special-district data or the district's own site, and give it to us with the file. Run the effect on your ratio with the DSCR calculator.

Question 4

Does the 20% appraisal cap protect my Houston rental?

Accepted Answer

For now, and it is scheduled to lapse at the end of 2026. Texas Tax Code section 23.231 caps the annual increase in appraised value on non-homestead real property at 20%, plus the value of new improvements, for properties at or below a threshold that indexes each year, which was $5 million for tax year 2024. It took effect January 1, 2024 and expires December 31, 2026 unless the Legislature extends it. The 10% homestead cap never applied to investment property in the first place. For a 30-year hold in a metro where property tax is the largest controllable expense and Texas collects no state income tax, that is a live planning question rather than a footnote. We underwrite to the go-forward assessed bill, not the seller's. Talk to your CPA or property tax counsel about your own position.

Question 5

What rent should I underwrite in Houston as of mid-2026?

Accepted Answer

A flat one, stressed downward, not a growth curve. Median Houston single-family asking rent was about $1,918 in July 2026, flat month over month and down slightly year over year. On the apartment side, Q2 2026 occupancy was 88.1% against 88.6% a year earlier, average asking rent slipped to $1,368 from $1,380, and 13,066 units were under construction with 4,719 delivered in the quarter alone. Those apartment numbers matter to a single-family file because lease-up concessions at a new building are what your prospective tenant compares your house against. Note also that HAR's separate Q2 2026 measure of the average rent payment, $2,150, counts a different thing than median asking rent, so do not blend the two. Underwrite the rent the property collects, and treat any rent recovery as upside rather than as the reason the deal works.

Question 6

Can I qualify a Houston short-term rental on nightly income?

Accepted Answer

Inside Houston city limits, only with a valid registration, and in some suburbs the answer is no. The City of Houston's short-term rental ordinance took effect January 1, 2026, covering any dwelling unit rented for periods of less than 30 consecutive days. Registration opened October 1, 2025 and requires owner and property information, an emergency contact, tax documentation, proof of completed training, a signed authorization form and a fee, renewed annually. From January 2027 the city intends to direct platforms to delist units without a valid registration number, which makes registration a revenue question rather than paperwork. Outside the city, the rules diverge: Pearland stopped allowing short-term rentals in residentially zoned areas as of February 2026, grandfathering the 19 listings active at adoption, and Sugar Land does not permit them. Texas has no statewide preemption, so each city writes its own rules and outright bans are possible. Settle the jurisdiction question before we size the loan, and confirm the current requirements with the city itself.

Question 7

What is a DSCR loan, and how do I qualify without tax returns?

Accepted Answer

A DSCR (debt service coverage ratio) loan qualifies on the property's rental income instead of your personal income, so there are no W-2s or tax returns required. We compare the rent, from a signed lease or the appraiser's market-rent estimate, against the monthly payment. A DSCR of 1.00 means the rent covers the payment, and we lend with a DSCR as low as 0.75.

Question 8

What rate and terms can I get on a rental loan?

Accepted Answer

Our rental program starts around 5.50% interest-only, with 30-year fixed and 5/7/10-year ARM options, for a single property or a whole portfolio. The lowest pricing goes to strong credit, lower leverage, and a DSCR above 1.20; your quote depends on the file and is subject to underwriting.

Question 9

How much can I borrow, and what is the maximum LTV?

Accepted Answer

We finance up to 80% loan-to-value on a purchase, with rate-and-term and cash-out refinances available, on loan amounts from $100K to $3M. Cash-out leverage is typically a little lower than purchase. The property's cash flow and your credit set your final leverage.

Question 10

What credit score do I need for a DSCR loan?

Accepted Answer

We start at 640, and the best pricing goes to strong credit. Because the loan qualifies on the asset, your score affects your rate and leverage more than whether you are approved.

Question 11

Can I get a DSCR loan on a short-term rental (Airbnb)?

Accepted Answer

Yes, short-term rentals are considered. We can underwrite using market or projected rents, and the property still needs to meet our DSCR. Tell us how the property is operated so we can structure it correctly.

Question 12

Is there a prepayment penalty?

Accepted Answer

Long-term rental loans usually carry a prepayment penalty, commonly a step-down such as 5/4/3/2/1. We offer flexible prepay structures, including buying down to a shorter penalty for a slightly higher rate, and we will lay out the options on your term sheet.

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