Austin Buyer Guide
The down payment is the part everyone talks about. It is rarely the part that decides whether a purchase works.
The True Cost of Buying a Home in the Austin Area
Most buyers start by asking about the down payment, but the down payment is only one piece. To buy comfortably, you need to plan for three separate things: the cash it takes to buy, what the home will cost each month, and the savings you keep once you move in. Here is how to think about each one.
What follows covers what you need upfront, what ownership costs each month, and how much to keep in the bank, for 2026 buyers across Travis, Williamson, Hays, Burnet and Bastrop counties.
Section 01
How Much Money Do You Actually Need?
More than the down payment, and less mysterious than it sounds
The cash side of buying has two stages, and it helps to keep them apart.
Money you pay before closing. Once your offer is accepted, you put down earnest money and pay an option fee within a few days. You also pay for inspections. Earnest money and the option fee are paid early and credited toward the purchase at closing under the standard TREC resale contract. Inspection and other service fees pay for work performed. Count each expense once, whether it is paid before closing or appears on the closing statement.
Money you bring to closing. This covers the rest of your down payment and your closing costs, which include lender fees, title charges and prepaid items like your first year of homeowners insurance. Your lender's final paperwork adds everything up, subtracts the deposits you already paid and any credits, and shows one number called "cash to close."
Beyond the purchase, budget for moving and setup costs like movers, utility deposits and small repairs. Then decide how much savings you want left once the keys are yours. That cushion isn't a cost of buying, but it's part of a sound plan.
The Short Version
Total cash to plan for = down payment + closing costs + inspection and other purchase expenses not already included in closing costs + moving costs. Keep your after-closing savings separate from that total, and don't count your earnest money or option fee twice. They are part of what you pay, not in addition to it.
Section 02
Down Payments and Mortgages, Explained
You probably need less than 20% down. The tradeoff is in the monthly cost.
Many loans allow much less than 20% down. The catch is that a smaller down payment usually means a bigger loan and mortgage insurance, which protects the lender and adds to your monthly cost. A larger down payment lowers the payment but uses more of your savings.
| Loan | Often a fit for | Down payment | The main tradeoff |
|---|---|---|---|
| Conventional | Buyers with solid credit and steady income | As little as 3% for eligible buyers | Private mortgage insurance with less than 20% down, which can usually be removed later as you build equity |
| FHA | Buyers who want flexibility on credit or a smaller down payment | Typically 3.5% | An upfront premium of 1.75% of the loan, usually added to the balance, plus a monthly premium that often lasts the life of the loan |
| VA | Eligible veterans, service members and certain surviving spouses | Often none | No monthly mortgage insurance, but a one-time funding fee unless you are exempt |
| USDA Guaranteed | Income-eligible buyers in eligible rural areas | Often none | A 1% upfront fee and a 0.35% annual fee, and the home's exact address must qualify |
Program details from Fannie Mae, HUD, the VA and USDA Rural Development, reviewed September 2026. USDA can adjust its fees each fiscal year. Agencies update fees periodically, and your lender will confirm what applies to you.
HomeReady and Home Possible are two conventional loan programs from Fannie Mae and Freddie Mac for buyers whose income is at or below 80% of the area median income where the home is located. They allow 3% down and have lighter mortgage insurance requirements. If your income fits, ask your lender to price one alongside a standard loan.
Keep in mind that the home has to qualify too, and that gift money from family is allowed by many programs but needs paperwork, so talk to your lender before any money moves.
Interest Rate, APR and Rate Types
Your interest rate determines your monthly principal and interest. The APR, or annual percentage rate, folds in certain loan fees so you can compare the true cost of different offers. A loan with a slightly higher rate and low fees can cost less than one with a lower rate and high fees.
A fixed-rate loan keeps the same rate for the life of the loan. An adjustable-rate loan can change on a set schedule, within limits written into the loan. A fixed rate keeps your principal and interest predictable for as long as you have the loan.
Discount points are an upfront payment to lower your rate for the whole loan, and they pay off only if you keep the loan long enough. A temporary buydown lowers your payment for the first year or two, then it rises to the full amount, so make sure the full payment fits from day one. The simplest comparison: ask two or three lenders for a Loan Estimate on the same day for the same loan, and compare them line by line.
Section 03
The Costs Between Your Offer and Closing
What you pay, what it covers, and when it comes due
| Cost | What it covers | When it is usually paid |
|---|---|---|
| Earnest money | A good-faith deposit held by the title company. Credited toward your purchase at closing | Within three days after the effective date, subject to the contract's deadline rules |
| Option fee | Buys you a set number of days to back out for any reason. Credited to the price if you close, kept by the seller if you terminate | Within three days after the effective date, subject to the contract's deadline rules |
| Inspections | A general home inspection, plus specialists like foundation, sewer or septic if the home calls for them | During the option period |
| Appraisal | Confirms the home's value for your lender | Upfront or at closing, depending on the lender |
| Survey | Maps the lot lines. Sometimes the seller's existing survey can be used | At closing |
| Lender charges | Loan origination, underwriting and any points you choose | At closing |
| Title charges | Title insurance, escrow services and recording | At closing |
| Prepaids and escrow | First year of homeowners insurance, interest through month end, and a starting balance for future tax and insurance bills | At closing |
Deposit and option fee terms reflect the current TREC resale contract. New homes and condos use different contracts, so read the one you sign.
A few Austin-area details are worth knowing. Title insurance rates in Texas are set by the state, and when an owner's policy and your lender's policy are issued together, the lender's policy is usually just $100 plus any endorsements, under Texas Department of Insurance rules. Who pays for the owner's policy is negotiated in your contract.
Taxes are settled at closing, too. Texas property taxes are billed at year end, so the seller usually credits you for their share of the year. Other adjustments can go the other way, which is why your final number comes from the Closing Disclosure.
Your agreement with your agent. Before working with an agent, understand what your written agreement says about services, representation and compensation. Texas generally requires an appropriate written agreement before an agent working with a residential buyer shows a property, and some showing-only agreements do not establish representation, according to TREC. Compensation is negotiable, and there is no standard rate. A seller or builder may agree to cover some or all of it, and any amount your agreement leaves to you becomes part of your cash to close.
Seller Credits and Builder Incentives
A seller or builder may agree to pay eligible purchase costs, reducing the cash you need at closing. What they can pay, and how much, depends on the loan program and the type of expense. Have your lender confirm the proposed credit before you negotiate it, since different programs distinguish closing costs from other concessions.
Builder incentives often require the builder's preferred lender or title company. They can be valuable, but compare the whole package against a quote from an outside lender.
Not sure what a specific home would actually cost you?
We'll look up the taxes, MUD or PID charges, dues and insurance on the homes you're considering before you write an offer.
Schedule a ConsultationSection 04
What Ownership Costs Each Month
This is where Austin-area homes differ the most
Your monthly mortgage payment usually has four parts: principal (paying down the loan), interest, property taxes and homeowners insurance. Your lender typically collects taxes and insurance each month into an escrow account and pays those bills for you. If your loan has mortgage insurance, it's added to the payment too.
Outside that payment, you'll pay HOA dues if the home has them, utilities and maintenance, which is easy to forget and impossible to avoid. And a fixed rate fixes only principal and interest. Taxes, insurance and dues can change every year.
Property Taxes: Check the Specific Home
Every home is taxed by several local entities, such as the county, school district, city and sometimes special districts, each with its own rate. A few things to check:
- Your homestead exemption. If you live in the home, you can apply for a homestead exemption through the appraisal district. School districts must exempt $140,000 of a homestead's value, according to the Texas Comptroller, and other taxing units may offer their own. On a home appraised at $500,000, that alone means school taxes are figured on $360,000.
- The seller's bill isn't your bill. The seller may have an over-65 exemption or years of capped value that won't carry over to you. The homestead cap on value increases only starts after you've owned and lived in the home for a full calendar year, according to Travis Central Appraisal District.
- MUD and PID charges. Many suburban neighborhoods sit in a municipal utility district (MUD) or a public improvement district (PID), which adds a tax or assessment. Find out whether it applies, how much it is and how it's billed.
- New construction. A new home's last tax bill may reflect only the land. Estimate taxes on the finished home's value instead.
Insurance: Compare More Than the Price
Get quotes on the specific home and compare deductibles and coverage, not just the premium. Some policies have a separate wind and hail deductible. Standard policies don't cover flooding, which requires its own policy. The Texas Department of Insurance has helpful guides for comparing quotes.
Section 05
An Example With Real Math
One purchase, followed from contract to move-in
About This Example
Every figure here is an illustrative assumption chosen to make the math easy to follow. None is an Austin average, a quote or an offer of financing. Your real numbers will come from your contract, your lender's Loan Estimate and the specific home.
Say you buy a $500,000 home with 5% down ($25,000), a $475,000 loan, and closing costs of $15,000. That's 3% of the price, a planning assumption within the 2% to 5% range the Texas State Affordable Housing Corporation describes as typical. Here's how the cash actually flows.
| Item | Amount |
|---|---|
| Option fee | $300 |
| Earnest money | $5,000 |
| Home inspection | $600 |
| Paid before closing | $5,900 |
| Down payment | $25,000 |
| Closing costs, including prepaids and escrow | $15,000 |
| Credit for earnest money already paid | minus $5,000 |
| Credit for option fee already paid | minus $300 |
| Cash due at closing | $34,700 |
| Total cash to buy | $40,600 |
Notice that the total is simply the down payment, the closing costs and the inspection added together. The earnest money and option fee were paid early, then credited back, so they aren't extra. This simplified example excludes seller credits and prorations. Actual credits and transaction adjustments can change the cash due at closing.
Now add life around the purchase. With an assumed $3,000 for movers and setup, and $15,000 you decide to keep in savings afterward, this buyer would want $58,600 allocated by the time they complete the purchase and move in, with earlier payments available when they come due: $40,600 to buy, $3,000 to move in, and $15,000 still in the bank on day one.
What About the Monthly Payment?
Your lender calculates principal and interest from three numbers: the loan amount, the interest rate and the loan term. Rather than guess at a rate, use the Loan Estimates you collect. Each one shows the monthly principal and interest, any mortgage insurance, and the estimated escrow for taxes and insurance. Add HOA dues, utilities and a maintenance allowance, and you have the true monthly cost of that home.
Section 06
Programs That May Help With Upfront Costs
Worth a look, as long as you read the fine print
A grant generally does not require repayment once its conditions are satisfied. A forgivable loan is canceled after you meet the program's requirements, which may include an occupancy period and restrictions on selling or refinancing. A deferred loan postpones repayment until maturity or another event specified in the agreement. Compare the assistance terms and the paired mortgage's costs before choosing. These are selected programs, and terms and funding change, so confirm details before you count on them.
TSAHC
Statewide, through participating lenders
The Texas State Affordable Housing Corporation offers up to 5% of the loan amount through its Homes for Texas Heroes program for teachers, first responders, veterans and other listed professions, and its Home Sweet Texas program for other eligible buyers. Depending on the loan, assistance may be a grant with conditions, a second loan forgiven in full after three years if its requirements are met, or a deferred loan repaid when you sell or refinance.
TDHCA
Statewide, through approved lenders
The Texas Department of Housing and Community Affairs pairs down payment assistance with a 30-year mortgage. My First Texas Home serves first-time buyers, with some exceptions for veterans and certain areas. My Choice Texas Home doesn't require first-time status. Homebuyer education is required. Ask an approved lender for current amounts and repayment terms.
City of Austin
Austin full-purpose city limits only
The City's program offers up to $40,000 for first-time buyers, as the City defines them, earning up to 80% of median family income, on homes priced up to $440,000. It's a 0% interest loan that can be forgiven after an affordability period, according to the City's most recent posted application, and comes due if you sell, refinance, lease or transfer the home before then. Education and a participating lender are required.
Travis County
Anywhere in Travis County
The Travis County Housing Finance Corporation's Hill Country Home program provides assistance as a percentage of an FHA, VA, USDA or eligible Freddie Mac loan. It's a 0% interest second mortgage forgiven after 10 years. You don't need to be a first-time buyer, but you must live in the home and meet income limits. A lender fee may reduce the net amount.
Section 07
Choose Your Price Range and Build Your Plan
Start with what feels comfortable, not what you're approved for
A preapproval indicates that a lender is tentatively willing to lend up to a stated amount, subject to its conditions. It is not final loan approval or a recommendation to spend that much, and it doesn't know about your childcare costs or retirement goals. So work in the other direction: decide what you're comfortable paying each month, then find the homes that fit.
Four Numbers to Write Down
- 1. Comfortable monthly budget
- The total monthly cost of owning, including taxes, insurance, dues and upkeep, that still fits your take-home pay and goals.
- 2. Target price range
- The price band where homes you like land at or under that budget. Your lender and agent can help you translate one into the other.
- 3. Personal ceiling
- The most you'd pay for the right home while keeping your savings and priorities intact. It can be well below your approval amount.
- 4. Savings after closing
- The cushion you want in the bank on move-in day.
Then stress test it. If taxes rose, the AC failed or your income dipped for a few months, would it still work? If not, a lower ceiling may be wiser.
A Simple Preparation Timeline
- A year out. Check your credit reports for free at AnnualCreditReport.com and fix any errors. Make a plan for existing debts, and start separate savings for buying, moving and emergencies.
- Six months out. Pay every bill on time and hold off on new credit. If you're self-employed or earn commissions, talk to a lender early, since your paperwork may take longer. Look into assistance programs and education classes.
- Three months out. Gather pay stubs, W-2s or tax returns and bank statements. Get preapproved, ideally with more than one lender. Research taxes, dues and insurance in the areas you like.
- Ready to buy. Keep your finances steady until closing. Check with your lender before a job change, a big purchase or any new loan.
To set a monthly savings goal, subtract what you've already saved from your target and divide by the months you have. A buyer aiming for $58,600 who already has $22,600 and plans to buy in 18 months would save $2,000 a month.
And if the numbers say "not yet," that's a good outcome too. Renting a little longer while you build savings can put you in a much stronger position.
Section 08
Questions Buyers Ask Us
Do I really need 20% down?
No. Many loans allow 3% to 5% down, and VA and USDA loans can require none for eligible buyers. Less down usually means mortgage insurance and a higher payment, so compare both ways.
Are closing costs the same as cash to close?
No. Closing costs are the fees, prepaid items and initial escrow funding. Cash to close adds your down payment, then accounts for deposits you already paid, credits and other adjustments.
Do I get my earnest money back?
If you close, it's credited toward your purchase. If you terminate during the option period under the standard Texas resale contract, the earnest money is refunded but the option fee is not. Other situations depend on your contract.
Can the seller pay my closing costs?
Often, yes, up to your loan program's limits and only for eligible costs.
Is down payment assistance free money?
Sometimes. Grants generally don't require repayment once their conditions are met. Many programs are loans instead, canceled only after you meet the program's requirements or repaid when an event in the agreement occurs, such as selling or refinancing.
How much should I keep in savings after closing?
There's no single right number. Some loans require reserves, and your lender will tell you if yours does. Beyond that, keep enough to handle a major repair or a few lean months without stress.
Let's Plan Your Home Search Together
Bring your questions and a rough budget. We'll help you find a comfortable price range, look up the taxes, MUD or PID charges, dues and insurance for the neighborhoods you like, and coordinate with a licensed lender of your choice.
Ready to put real numbers on it?
Shipman Partners is a family-owned brokerage that has worked the Austin market since 1998.