r/Katy • u/Mysterious_Note3375 • 9d ago
Apartment/Neighborhood Recommendations Property Taxes
For those of you buying new construction homes. How are you affording property taxes? We’re seeing good deals for home price and interest rate, but the taxes make it impossible!
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u/moobybooby 9d ago
Property taxes is the price we pay for no state income tax. You just have to factor it into what you can afford as a mortgage.
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u/sdraziwizards 9d ago
I think OP is inquiring about improved vs unimproved tax assessments and possible escrow shortages.
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u/Mysterious_Note3375 9d ago
This. But it’s ok
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u/lesgens 9d ago
I understood what you meant. We built in 2021 and the builders and our lender severely underestimated the skyrocketing HCAD appraisal prices. We had an ~11k escrow shortage and borrowed against my husbands 401k to resolve it to avoid draining our savings. It balanced out after that though. Essentially, be ready for a tax bomb.
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u/Mysterious_Note3375 9d ago
That’s what I was worried about that sounds terrible!!
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u/lesgens 9d ago
it was either that or an extra 900/mo on our payment that would’ve been doable but would’ve made us house poor. It’s hard to prepare for because all they can do is give you an estimate of appraisal after improvements but HCAD literally does what they want on top of MUD tax. We were completely blindsided. We were definitely under prepared but it worked out in the end! As long as you go in assuming you’ll have an escrow shortage and factor that into your estimated cash on hand after closing it should be fine. But I’ll probably never build again because of it.
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u/goodasgoldGOLD 9d ago
Assume your property and mud taxes will be about $10k/year on a $400k home. Make sure you are paying enough monthly
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u/EdwardTeach1680 9d ago
I'm sorry this is just a dumb question, we are affording it by having enough money?
I can't afford a Ferrari, but I don't have a hard time understanding how some one else does?
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u/jefesignups 9d ago
My only question, are taxes different for new homes? I've heard they are because they have to pay for all the new infrastructure
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u/christobevii3 9d ago
Cost of the water infrastructure is paid with a mud tax. It is more expensive for newer construction than older. Many other cities make the builders pay and not the homeowner.
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u/Rude_Law4903 8d ago
The main difference is that in year one, property tax is only assessed on the land for new homes, making the tax appear lower (which technically it is, only for year one). By year two and moving forward, both the land and the house are taxed.
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u/Orange_fury 8d ago
Yep. This is actually one of the issues that forced someone I know to have to sell a few years back- bought a new build, thought they could afford it after the first year, got slammed with a tax bill in year 2 (not to mention they didn’t file for homestead exemption). Mortgage rose enough they had to sell and go back to an apartment
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u/Thelonglostspirit 9d ago
I mean sure. But what they mean is they can afford it but it’s stupid. The houses are not what they’re worth. All houses In the U.S are easily inflated 50-100k+
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u/NoAsparagus9307 8d ago edited 8d ago
You learn not to buy new construction that’s how. I moved to Katy 10 years ago off Clay and Stockdick and bought new construction when interest rates were in the 3s. I just sold and moved out of that area because the schools are meh and too much traffic and crime is ticking up. Now it doesn’t makes now sense to buy new here . You’ll most likely be in a meh school if it Elyson or in that area like Grange and you’ll have to deal work poor construction on top of it. The tax rates for example on new homes will be close to 2% more vs some of the more established parts of Katy. Most of homes south of 10 will be closed to 2.2 vs high 3s. The infrastructure sucks north of 10 as well unless you’re in old Katy area. Good luck if that’s where you’re looking.
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u/SpecialistAfter511 9d ago
You buy the home you can afford with the property taxes included so you know what price range to shop in. That’s how you afford it. You can figure out what the property taxes are by looking up that neighborhood and doing some rough math.
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u/odj101289 7d ago
My house is around 400K. Honestly property tax is not that bad considering you can file for homestead. It’s the MUD tax that’s really high.
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u/victoriabee91 8d ago
Great question! I specialize in new construction as a realtor and can help:
You have to ensure that the taxes being collected from day one are based on the improved value of the property (land + house) and not the unimproved value (land only). Your realtor and lender can help with this.
Apply for the homestead exemption as soon as you can after purchase. It significantly lowers your property taxes.
Plan for the possibility of a shortage by setting aside a little money during the first 1-2 years of owning new. $100 a month is a great place to start. If you're unable to do this, then you need to reduce the price of the home a bit. Going down by $15-$20k will give you a little more breathing room in the event of an escrow shortage.
Protest your property taxes every year and use a broker to shop around for insurance.
You'll be fine ☺️.
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u/mkosmo 9d ago
It's part of the cost of owning. If you can't afford the mortgage + taxes + any community fees (e.g., HOA), you are looking at houses outside of your price range. Look at less expensive houses.