Question 1

Does Texas having no state income tax actually improve my rental returns?

Accepted Answer

Yes, but narrowly, and the state takes it back on the property tax line. Texas does not have an individual income tax, so rent collected on a Texas rental is not reduced by a state income tax, which matters most to an out-of-state owner used to paying one. It does not change your federal tax. Texas instead runs a franchise tax on entities rather than a traditional corporate income tax, so if you title the property in an LLC, ask your CPA whether that entity has a Texas franchise filing obligation. The honest framing is a swap: no income tax, higher property tax.

Question 2

How should I budget Texas property taxes and insurance in the DSCR calculation?

Accepted Answer

The Tax Foundation puts the Texas effective property tax rate at 1.40% of value on owner-occupied housing for 2026, and the number varies by county, so plan on roughly 1.2% to 1.4% and confirm the actual all-entity rate at the address. Rates are set locally, the bill does not drop during a vacancy, and there is no cap protecting a non-homestead property from a rising assessment, so the go-forward number matters more than the seller's current one. Insurance is a real line too: Texas homeowners premiums rose more than 55% between 2019 and 2024, with average filed rate changes of 21% in 2023, 19% in 2024, and 4.3% in 2025. Get a bound quote before you lock assumptions, and run the deal yourself with the DSCR calculator. On a thin ratio, taxes and insurance decide the approval.

Question 3

Do the 2025 Texas homestead exemption changes lower the tax bill on my rental?

Accepted Answer

No. Homestead relief goes to owner-occupants, and a rental you do not live in is not a homestead. SB 4 raised the mandatory school district homestead exemption from $100,000 to $140,000, approved by voters as Proposition 13 in November 2025 and applying to the 2026 tax year, and SB 23 raised the additional exemption for owners 65 and older or disabled from $10,000 to $60,000. None of that reaches investment property, and neither does the 10% annual appraisal cap, which is a homestead-only protection. The 2025 business personal property relief covers equipment and inventory, not the real property itself. Underwrite the full unexempted bill, and take the assessment question to your tax counsel or CPA if you plan to protest.

Question 4

What rent number do you underwrite on a Texas rental?

Accepted Answer

What the property actually collects, not what the listing asks. Statewide average apartment rent was $1,452 as of July 2026, down 0.97% year over year, and the Dallas Fed reported that concessions are widespread across Texas metros, running six to eight weeks free and as much as 10 to 12 weeks in some submarkets, with the highest share of concession-offering properties in Austin and then Dallas. Those are professionally managed apartment figures rather than a single-family read, but they tell you what a Texas tenant can negotiate right now. Free months are money out of year-one cash flow, so effective rent is the correct input to the ratio.

Question 5

Can I qualify a Texas DSCR loan on short-term rental income?

Accepted Answer

Only where the city allows it, because in Texas short-term rentals are a city question, not a state one. Texas has no statewide short-term rental preemption statute, so cities can and do restrict them, and the rules differ from one municipality to the next. Deed restrictions and HOA covenants are a second layer on top of the city ordinance. Before we size a loan to nightly income, settle the local licensing and zoning question in writing for that specific address, and have your attorney read the restrictions on the title commitment. If the nightly plan is not permitted, we underwrite the long-term rent instead. See the DSCR program terms for leverage and structure.

Question 6

What is different about closing a Texas rental loan?

Accepted Answer

Two things: the title premium is set by the state, and sale prices are not public. The Texas Insurance Commissioner is required by statute to fix and promulgate title insurance rates, and Order No. 2025-9697 cut basic premium rates 6.2% effective March 1, 2026, so the premium on a given policy amount is identical at every title company in Texas. Shop escrow service and endorsements, not the premium. Texas is also a non-disclosure state, meaning no statute compels reporting a residential sale price to the county appraisal district and prices are not on the recorded deed, so off-market comps are genuinely harder to source here. That puts more weight on the appraisal supporting value, which is worth knowing before a cash-out refinance.

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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