Buying a home is a complicated process, and it can be made all the more so by local and state property and tax laws. Understanding your obligations as both a buyer and seller will help you make educated decisions about your property.
Home seller and buyer laws
Texas law requires sellers to fill out an extensive disclosure form regarding the condition and contents of the home. Mandatory disclosures include whether the seller is currently living in the house and, if not, how long it’s been unoccupied. Sellers are also required to note defects in the property, including foundational issues, problems with smoke detectors, broken appliances, pest issues and a range of other concerns of which buyers would want to be aware. The seller must also disclose whether the home is in a propane gas service area and whether there is a lead-paint risk in the house. Federal law mandates the latter for all homes that were built before 1978.
Although foreclosure may be the last thing on your mind when you purchase a home, it is important to understand Texas foreclosure law in case you should find yourself in such a situation. Texas allows both judicial and non-judicial foreclosures. If your mortgage contract gives your lender power of sale — meaning the lender can sell the home to settle the balance of your loan — you’ll likely go through a non-judicial disclosure. But if the lender does not have power of sale, the company will need to go to court before being granted the right to foreclose.
Texas is a community property state, so if you and your spouse divorce, you’re each entitled to half of any property you acquired while you were married. Therefore, you’ll need to negotiate regarding the sale of the house, since you both legally benefit from the proceeds. Bear in mind that because Texas is a community property state, you’ll need to account for your spouse’s debt, too, when buying a home. Even if you choose to apply for a mortgage solely in your name, the lender will factor his or her debt load into your application under community property law if you apply for a USDA, VA or FHA loan.
When you buy a home in Texas, you must work with escrow and title officers. As an escrow state, Texas law requires that you place the money you’re using to buy the property into an escrow account, where it will be held during the closing process. Your escrow officer’s firm cannot use the money in that account for any purpose other than completing your purchase, and the title officer will investigate any liens or potential obstacles to the property transfer. You do not need to hire a closing attorney in Texas, although you may choose to.
One perk of Texas real estate law is that you will not owe real estate transfer taxes when you buy or sell a home. However, if you are buying a home in Texas, make sure all past property taxes on the home are paid before you take ownership. Texas law stipulates that “taxes follow the property,” so you could be liable for any outstanding balances if you don’t verify that the seller has covered them.
Texas offers several property tax exemptions, including a $25,000 homestead exemption that reduces the value of your home for tax purposes. To qualify, the home must be your primary residence and you must have been living in it as of Jan. 1 of the tax year.
Homeowners who are 65 and older or have disabilities may be eligible for property tax exemptions that limit the amount of property taxes they must pay annually. Surviving spouses of homeowners who qualified for these exemptions may be able to claim these benefits, too.
Senior citizens and disabled homeowners can also apply for tax deferrals, under which they are not obligated to pay taxes while they live in their homes. The taxes become due when the home is sold.
Veterans who suffer from complete disabilities, as well as their surviving spouses, may qualify for a full exemption of their appraised property values. The benefit does not extend to a veteran’s surviving children.
Texas also offers partial exemptions up to $12,000 for veterans based on their disability ratings, as assigned by the VA. That benefit also extends to the veteran’s spouse and children. To qualify, the veteran must have a disability rating of at least 10%. Once the veteran turns 65, he or she will qualify for the full $12,000 exemption. Disabled veterans and their surviving spouses who receive homes through charitable donations may claim exemptions equal to their disability ratings.
The state also provides a full exemption for surviving spouses of military service members who died in action, provided that the surviving spouse has not remarried.
You can find out more about property tax exemptions in Dallas here.
Those exemptions are particularly meaningful in Texas, which has the third-highest property tax rate in the country, according to Tax-Rates.org. At 1.81%, it’s second only to New Jersey and New Hampshire. Dallas County residents pay a median of $2,827 in property taxes, which is slightly more than the statewide median of $2,275.00 and represents roughly 4.3% of their total annual income. The county isn’t the most expensive to live in, however. That honor goes to King County, where residents pay a median of $5,066 annually in property taxes.
Conforming loan limits
The conforming loan limit in Dallas County is $484,350, which became the statewide limit this year. That number represents the maximum loan amount you can borrow if you want a mortgage backed by government-sponsored entities Fannie Mae and Freddie Mac. For a larger mortgage, you’ll have to opt for a jumbo loan. Jumbo loans provide greater flexibility in spending power, but they often carry stricter lending criteria or higher down payment requirements.