Buying a House With High Interest Rates in Texas: How to Lower the Cost in 2026

If you were pre-approved last spring, run the numbers again this month and the payment probably won’t look the same. Rates rose week after week in September, and the headlines haven’t been kind to anyone hoping to buy a home in Texas this fall.

Here’s what those headlines leave out. A higher rate changes the math, but it isn’t the only number you can move. Texas sellers are negotiating again, Texas’s two statewide homebuyer programs, run by TSAHC and TDHCA, still offer down payment help, and one federal tax credit actually gets more valuable as rates climb. Put together, they can lower the cash you need and, in some cases, the payment itself.

This guide covers buying a house with high interest rates in Texas: where rates stand, what a higher rate does to a Texas payment, and the specific ways buyers are lowering the cost right now, with the trade-offs of each. If you’re still sorting out the basics, start with our guide for first-time home buyers in Texas.

Four assumptions worth a second look before you wait it out

“I should wait for rates to come down.” They might. Nobody can promise when. The Federal Reserve’s September 16 statement raised its benchmark rate rather than cutting it, and the CFPB’s consumer handbook on adjustable-rate mortgages tells buyers not to count on being able to refinance before their payment rises. Waiting can be the right call, but it’s a bet, not a plan.

“State assistance programs always come with a below-market rate.” Not automatically. Taking assistance usually raises the rate a little in exchange for the help, and program rates have climbed along with the market. One option is worth a look, though: on TDHCA’s October 9 rate notice, the bond-financed option of My First Texas Home was listed at 6.75% with no assistance, below Freddie Mac’s 7.40% average that week. It isn’t a like-for-like comparison, since those are FHA, VA, or USDA loans with first-time-buyer and income limits, but it shows why it pays to compare.

“The rate is the rate.” The rate on your loan depends on discount points, seller-paid buydowns, the loan type, your credit score, and the lender you choose. Two buyers with the same income can leave the closing table with very different payments.

“Higher rates mean I won’t qualify.” A bigger payment does squeeze your debt-to-income ratio. But a Mortgage Credit Certificate can add to the income a lender counts, and a seller-paid permanent buydown lowers the rate you qualify at. (A temporary buydown eases the first years, but lenders still qualify you at the full rate.) If one of these has kept you on the sidelines, the sections below show the actual numbers.

Where mortgage rates stand in Texas in fall 2026

The national average most news reports quote comes from Freddie Mac’s Primary Mortgage Market Survey, published every Thursday. It climbed every week from late August into October. On October 8, 2026, the 30-year fixed averaged 7.40% and the 15-year fixed averaged 6.73%. The last time the 30-year average was that high was November 2023, and as recently as late February 2026 it sat at 5.98%.

Why the jump? Mortgage rates tend to move with the 10-year Treasury yield, and that yield rose above 5.3% in early October, its highest level since 2002, according to the U.S. Treasury’s daily yield curve rates. On September 16 the Federal Reserve raised its target range by a quarter point, to 3.75% to 4%, saying inflation “remains elevated.”

Lenders saw it too. The Mortgage Bankers Association’s weekly survey put its average 30-year conforming rate at 7.49% for the week ending October 2, with purchase applications 15% below the same week a year earlier.

Freddie Mac’s figure is a national average. Texas buyers borrow in the same national market, so rates here generally move with it, but the rate you’re offered depends on your credit, down payment, loan type, points, and lender.

What a higher rate does to the payment on a Texas home

A one-point rise in the rate doesn’t sound like much until you see it in a monthly payment. Here’s principal and interest on a $300,000, 30-year fixed loan at the rates buyers have seen over the past year.

Another way to see it: to keep the same principal and interest you’d have paid on a $300,000 loan at 6.30%, you’d need to borrow about $268,200 at 7.40%, roughly $31,800 less in loan amount for the same payment.

And principal and interest is only part of a Texas payment. Property taxes and homeowners insurance go on top, and both run high here. The Texas Department of Insurance’s homeowners market overview shows an average annual homeowners premium of $3,489 for 2025 (a preliminary figure), roughly $291 a month. Texas has no state property tax, but local taxing units set their own rates, and once you file, the Texas Comptroller’s homestead exemption rules take $140,000 off your home’s value for school taxes.

How Texas down payment assistance rates compare to the market

TSAHC and TDHCA, which run Texas’s two statewide homebuyer programs, set their own rates, and both use 30-year fixed-rate loans offered through approved lenders. Not every lender is approved to offer them, which is one reason it helps to work with one that is. Here is TSAHC’s current rate table for Home Sweet Texas and Homes for Texas Heroes.

Within each loan type, the option with no assistance generally carries the lowest rate, and the rate rises with the amount of help. There are exceptions: on October 9, TSAHC’s bond-funded 5% option, a 30-year repayable second lien for first-time buyers at or below 80% of area median income, was priced at 7.25%, the same as its no-assistance government loan. TSAHC’s rate sheet isn’t listing grant pricing at the moment, so ask a participating lender which options are open on the day you lock. Our TSAHC rates guide explains each structure.

TDHCA publishes a separate rate notice for My First Texas Home and My Choice Texas Home. On its October 9, 2026 notice, the bond-financed option of My First Texas Home, which is generally for first-time buyers (no home owned and lived in during the past three years, with exceptions for qualified veterans and homes in targeted areas), was listed at 6.75% with no assistance and 7.125% with 3% assistance. My Choice Texas Home options ranged from about 7.5% to 8.75% depending on the loan type and the amount of help. Our TDHCA rates guide explains each option; check the current notice before you compare, because these rates change often.

Those bond rates aren’t directly comparable to Freddie Mac’s survey, which covers conventional loans, and bond loans carry first-time-buyer and income rules. Still, if you qualify, it’s worth putting a bond-financed option side by side with a standard loan before you choose.

Ask the seller to pay for a temporary rate buydown

A temporary buydown lowers your rate for the first year or two, paid for up front with money set aside at closing. In a 2-1 buydown, the rate is two points lower in year one and one point lower in year two, then returns to the full rate for the rest of the loan. Sellers and builders often pay for it as part of the deal, which is why you’ll see it advertised on new homes. If you’re buying a new home, our guide to new construction down payment assistance covers how builder incentives fit with Texas programs.

Two rules shape how far a buydown goes. First, lenders qualify you at the full note rate, not the bought-down rate. That’s spelled out in Fannie Mae’s temporary buydown rules (B2-1.4-04), the FHA’s HUD Handbook 4000.1, and the VA’s temporary buydown guidance. A buydown makes the early years easier, but you still need to afford the year-three payment. Second, a seller-paid buydown counts toward the loan program’s limit on seller contributions, which our guide to seller concessions in Texas breaks down by loan type.

The Texas programs have their own rules. Under the TSAHC program guidelines (section 3.1), permanent and temporary buydowns are allowed on its non-bond FHA, VA, USDA, and conventional loans, temporary buydowns are limited to 2-1, 1-1, and 1-0 structures, the money must come from the seller, builder, lender, or another interested party rather than you, and buydowns aren’t allowed on its bond loans. The TDHCA Lender Guide allows permanent buydowns only on My Choice Texas Home, not My First Texas Home, and says TDHCA’s assistance can’t pay for them (section 6.4). It also states that temporary buydowns are not permitted, so don’t plan on a 2-1 buydown with a TDHCA loan unless a participating lender confirms it in writing.

Action step: before you make an offer, ask a participating lender to price the loan two ways, with a 2-1 buydown and without one, so you know exactly what to request from the seller.

Use seller credits or discount points for a permanent buydown

A permanent buydown lowers the rate for the life of the loan. You, the seller, or sometimes the lender pay discount points at closing. As the CFPB’s explainer on discount points puts it, points lower your rate in exchange for paying more at closing, and one point equals 1% of the loan amount. How much a point lowers the rate depends on the lender, the loan, and the market that day.

The math that matters is the break-even point. Say one point costs $3,000 on a $300,000 loan, and the lender lowers the rate from 7.25% to 7.00% in return (an illustration, not a quote). Your principal and interest drops about $51 a month, so it takes about five years of payments to earn back the $3,000. If the seller pays the point, you get the lower rate without spending your own cash.

Points paid by a seller count toward FHA’s 6% limit on interested-party contributions, while the VA doesn’t count discount points that are normal for the market toward its 4% concession limit. On the Texas side, TSAHC prices permanent buydowns daily on its non-bond loans, separate from the 1% origination fee or discount point its guidelines (section 6.2) let lenders charge. TDHCA caps origination at 0.50% of the loan amount and allows permanent buydowns only on My Choice Texas Home.

Action step: when a lender quotes points, divide the cost by the monthly savings. If you’d likely sell or refinance before you reach that number of months, the points may not pay off.

Pair your loan with a Mortgage Credit Certificate

This is the one tool that gets better as rates rise. A Mortgage Credit Certificate turns part of the mortgage interest you pay each year into a dollar-for-dollar federal tax credit. On IRS Form 8396, the credit is your certificate rate times the mortgage interest you paid. The MCCs that TSAHC and TDHCA issue with their programs carry a 15% rate, so the more interest you pay, the larger the credit can be.

A few rules keep the numbers honest. The credit can’t be more than the federal income tax you owe, though IRS Publication 530 lets you carry an unused portion forward for up to three years. You also reduce your mortgage interest deduction by the amount of the credit if you itemize. The $2,000 annual cap you may have read about applies only to certificates with a credit rate above 20%, so it doesn’t apply to Texas’s 15% certificates.

An MCC can help you qualify, too. Fannie Mae’s Selling Guide (B3-3.4-10) tells lenders to add the MCC to your income rather than subtract it from your payment, and the FHA handbook also allows MCC income to count. On a $300,000 loan at 7.25%, that’s about $272 a month of added qualifying income, which can matter when a higher rate pushes your debt-to-income ratio up.

You don’t have to wait for your tax refund to feel it. IRS Publication 505 lists the mortgage interest credit among the credits you can use to lower your paycheck withholding through Form W-4. A tax professional can help you set the right amount.

Availability depends on the agency. TSAHC’s rate page says its MCC is now offered together with its down payment assistance and that the stand-alone MCC is no longer available. TDHCA offers an MCC paired with My First Texas Home and as a stand-alone certificate; its October 9 notice lists a $400 issuance fee for the combination and $1,000 for a stand-alone MCC, both waived for military borrowers. MCCs are generally for first-time buyers, with exceptions for qualified veterans and homes in targeted areas. A federal recapture tax can apply only if all three of these happen: you sell within nine years, your income has risen above the program’s limit, and you make a gain on the sale. Our MCC guide covers those rules.

Compare loan types, not just lenders

Rates and mortgage insurance vary by loan type, and the cheapest-looking rate isn’t always the cheapest payment. In the MBA’s survey for the week ending October 2, the average FHA contract rate was 7.14% with 1.36 points, compared with 7.49% with 0.84 points for a conforming conventional loan. Points differ, so they aren’t a perfect side-by-side, but the gap is worth knowing.

Our comparison of conventional vs. FHA loans in Texas and our guide to private mortgage insurance walk through the trade-offs in more detail.

Let down payment assistance protect your savings

Here’s the honest version: down payment assistance doesn’t lower your monthly payment, and it usually nudges the rate up a bit. What it does is cover the cash you’d otherwise drain from savings, so you keep a cushion for repairs, insurance deductibles, and the first few months in a new home. When rates are high and budgets are tight, that cushion matters.

The TSAHC program guidelines for Home Sweet Texas and Homes for Texas Heroes allow 2% to 5% of the loan amount toward your down payment and closing costs, as a grant, a 3-year forgivable second lien, or, on bond loans, a 30-year second lien that’s repaid when you sell or refinance. TDHCA’s programs offer up to 5% as a 30-year deferred second lien or a 3-year forgivable second lien. Which levels are open changes with each rate sheet: on October 9, TSAHC listed its forgivable lien at 2% or 3%, its 30-year repayable lien at 5%, and no grant pricing. Both agencies require a homebuyer education course before closing. Our guide to grants vs. forgivable vs. deferred loans explains which strings come with each, and our TSAHC income limits page shows the limits by county.

One thing to plan for if you’re counting on refinancing later: both agencies’ 30-year second liens are due in full when you refinance, and both agencies’ 3-year forgivable liens must be repaid if you refinance before the third anniversary. If you have an MCC, read how a refinance affects it in our MCC guide before you assume you can swap into a lower rate.

Shop lenders and compare Loan Estimates

Rates for the same buyer on the same day can differ from lender to lender. Once you apply, the CFPB says a lender must give you a Loan Estimate within three business days, and the standard format makes rates, points, and lender credits easy to compare.

For the Texas programs, the field is narrower, because only approved lenders can offer them, and program rules cap some fees. TSAHC lenders may charge a 1% origination fee or discount point, plus 0.25% on FHA, VA, and USDA loans for credit scores of 620 to 639. TDHCA caps origination at 0.50% of the loan amount.

Action step: ask each lender for a Loan Estimate on the same day, for the same loan type and down payment, and compare the rate, the points, and the total in the “Estimated Cash to Close” box.

What about an adjustable-rate mortgage?

More buyers are asking. Adjustable-rate loans made up 10.3% of applications in the MBA’s survey for the week ending September 25, the highest share since October 2025, with ARM rates running about 80 basis points below fixed rates, according to that week’s MBA release.

An ARM starts lower and can rise later. The CFPB’s handbook advises considering an ARM only if you could afford the payment at its maximum, and not counting on a refinance before it adjusts. If you’re planning to use Texas down payment assistance, the question is settled for you: both TSAHC’s guidelines (section 3.1) and TDHCA’s Lender Guide (section 3.5) require a 30-year fixed-rate first mortgage.

Should you buy a house in Texas now or wait?

There’s no universal answer, but the Texas market looks different from the rate headlines. In its September 2026 Texas Housing Insight, the Texas A&M Real Estate Research Center reported a statewide median sales price of $339,000 for July, unchanged from a year earlier, about 5.5 months of inventory, and a median seller price cut of $13,000. Homes that sold spent an average of 63 days on the market. That’s a market where buyers can negotiate.

If rates fall later, a refinance may be possible, but it isn’t guaranteed and it costs money. The safest plan is a payment you can carry as written.

High rates make buying harder, and nobody should pretend otherwise. But you don’t have to wait on the Federal Reserve to improve your numbers. You can ask the seller for help, pick the loan type that fits, use the assistance and tax credit Texas offers, and compare lenders before you lock. A participating lender can run those options side by side so you can see your real payment, not the headline rate.

Buying a house with high interest rates: FAQ

Buying a house with high interest rates: FAQ

† ShopDPA is The Texas Down Payment Assistance Marketplace, a home loan and down payment assistance referral service. We are not a mortgage lender, mortgage broker, or loan officer, and we do not originate, fund, or service loans. We connect Texas homebuyers with licensed mortgage professionals and with down payment assistance programs. We are not affiliated with Freddie Mac, Fannie Mae, the Federal Reserve, HUD, FHA, the VA, USDA, the IRS, TSAHC, TDHCA, or any government agency. Rates, payments, and tax figures shown are illustrations based on published averages and program notices, not a quote, an offer, or tax advice. Rates change daily, and program rules are subject to change and lender overlays. Confirm current terms with a participating licensed lender and your tax professional. Equal Housing Opportunity.