Complete 2026 guide to DSCR loans in Texas — no state income tax, prepayment-penalty rules for investors, fast foreclosure, and the best lenders for Austin, Dallas, Houston.
Texas DSCR facts on this page
These figures are the published profile on this page. They are not a mortgage rate.
- Effective property tax: 1.60%
- State income tax: no
- Foreclosure: non-judicial
- Eviction timeline: 14-21 days
- Statewide rent control: no
- Prepayment penalty: no state ban on investor loans (homestead rule only)
The table on DSCR rates is the national DSCR index, not a Texas quote. Published program fields, not a ranking, are on best DSCR lenders.
A DSCR loan in Texas is an investment-property mortgage qualified on rental income (DSCR = rent ÷ PITIA), offered statewide with no state income tax, fast non-judicial foreclosure, and the same prepayment-penalty options lenders use in other states.
Texas is the country’s largest organic-growth real-estate market — net in-migration, pro-landlord rules, and the nation’s fastest statutory foreclosure timeline make it a baseline portfolio allocation for serious DSCR investors. The trade-off is property-tax exposure (~1.6% effective).
This guide covers the Texas-specific rules: the prepayment-penalty rule, franchise-tax thresholds, non-judicial foreclosure mechanics, eviction timelines, and the active DSCR lender set across Austin, DFW, Houston, and San Antonio.
Why Investors Choose Texas
Texas added roughly 470,000 net new residents in 2024 — more than any other state. Corporate relocations (Tesla, Oracle, Samsung, CBRE, Charles Schwab) have expanded the employment base across Central Texas and North Texas. There is no state income tax on wages, no estate tax, and no capital gains tax at the state level. The property-rights regime is strongly pro-owner: non-judicial foreclosure, 3-day eviction notice, no rent control anywhere in the state, and no statutory security-deposit cap.
For DSCR investors, Texas’s attraction is that almost any strategy works here — long-term rental, mid-term/corporate, STR, BRRRR, new-build, build-to-rent communities. The state’s BTR pipeline is the largest in the US; multiple national DSCR lenders now quote portfolio financing on Texas BTR pods.
DSCR Loan Rules in Texas
Prepayment penalties: Texas does not ban prepayment penalties on investor loans. Texas Finance Code §302.102 bars a PPP only on a loan for the borrower’s residential homestead when the rate is above 12%, and the home-equity rules in the Texas Constitution (Article XVI, §50) also apply to homesteads. A business-purpose DSCR loan on a non-homestead rental is outside both, so expect the usual choice of a step-down PPP or a no-PPP buy-up. Confirm the exact PPP terms with your lender.
Pick the PPP to match your hold period: a longer PPP usually buys a lower rate, while a no-PPP loan keeps a BRRRR refinance or early sale free of exit cost. See our prepayment penalty guide for the break-even math.
| Typical Texas DSCR Terms, 2026 | Range |
|---|---|
| Minimum DSCR | 0.75 - 1.25 |
| Max LTV (purchase) | 75% - 80% |
| Max LTV (cash-out refi) | 70% - 75% |
| Minimum FICO | 620 - 680 |
| Prepayment penalty | No state ban on investor loans (homestead rule only) |
| 5+ unit PPP | Allowed (commercial loan rules) |
Note: 5+ unit multifamily underwrites as a commercial loan and may carry a different PPP structure.
Taxes & Carrying Costs
No state income tax. Rental income flows to federal return only.
Franchise tax. Every Texas LLC files an annual franchise-tax report (Public Information Report) by May 15. The no-tax-due threshold for 2026 is roughly $2.47M in annualized revenue. Nearly all individual rental LLCs fall under that threshold and owe $0 in franchise tax, but the filing is mandatory — miss it and your LLC loses its good-standing status.
Property tax is the real carrying cost. Effective rate statewide is approximately 1.60%, among the highest in the US. County breakdowns: Travis (Austin) ~1.80%, Harris (Houston) ~2.00%, Dallas ~2.10%, Bexar (San Antonio) ~1.95%. Texas does not have a Prop 13-style permanent reassessment cap. Since SB 2 (2023, 88th Leg. 2nd C.S.), non-homestead residential and commercial properties valued at $5M or less have had a 20% annual appraisal-increase cap — the “circuit breaker” limitation under Tax Code §23.231. This has been a meaningful hedge for DSCR investors in Austin, Houston, and DFW where market-value increases routinely exceed 20%. Critically, the circuit breaker was enacted as a three-year pilot and is currently scheduled to sunset on December 31, 2026 unless the 89th Legislature extends or makes it permanent. Model year-2027 and later on the assumption the cap may lapse, and re-check before refinance.
No homestead exemption on investor property. The homestead exemption is owner-occupied-only. (For context: 2023 Prop 4 raised the school-district homestead exemption to $100K, and HB 9 / SB 23 in 2025 raised it again to $140K — but none of this flows through to investor-owned 1-4 unit property.)
Foreclosure & Eviction Landscape
Texas is a non-judicial foreclosure state. Under Texas Property Code §51.002, a lender exercising a deed-of-trust power-of-sale can complete foreclosure in as little as 41 days: 20 days’ notice of default, then 21 days’ notice of sale posted at the county courthouse. Foreclosure sales happen on the first Tuesday of each month. This is the fastest residential foreclosure regime in the country. In practice, servicer timelines extend it to 90-180 days, but the legal floor is 6 weeks — which is why DSCR lenders price Texas so competitively.
Eviction is equally quick. A 3-day notice to vacate for non-payment, filed in JP court. Typical timeline from first missed rent to writ of possession is 14-21 days in uncontested cases, a bit longer in Harris or Travis counties with busier dockets.
Landlord-Tenant Law
No rent control. Texas Local Government Code §214.902 preempts municipal rent control. Austin’s periodic rent-stabilization studies have never resulted in an enforceable ordinance.
No security deposit cap. Texas sets no statutory maximum. Landlords commonly collect 1 month; some charge 2 for lower-credit tenants. The deposit must be returned (with itemized deductions) within 30 days of move-out.
Late fees must be “reasonable” but are not capped; most leases charge $50-$100 + $10/day. Notice to terminate a month-to-month tenancy is 30 days (party terminating).
Overall, Texas is one of the three or four most landlord-friendly states in the country alongside Georgia, Tennessee, and Kentucky.
Top Texas Markets
Austin. The most-covered investor story of the 2020s. Tech relocation surge pushed 2020-2022 prices up 60%+, followed by a 10-15% correction in 2023-2024 as supply caught up. Rents softened to reflect reality. Entry-price SFR investing still works in 78744, 78752, and northeast submarkets; STR inventory is heavily regulated under the STR-1/STR-2/STR-3 framework.
Dallas-Fort Worth. The most diversified Texas market — corporate HQs (AT&T, ExxonMobil, American Airlines, McKesson, Toyota NA), largest single-family new-construction pipeline, aggressive BRRRR submarkets in Arlington, Mesquite, Garland, and Fort Worth east side. Highest property-tax drag of the four majors but strongest tenant base. DFW multifamily is under heavy supply pressure: median apartment rent is approximately $1,400/month, roughly 97,000 units are in the construction pipeline, and approximately 40% of listings are offering concessions. Focus DSCR underwriting on stabilized SFR or well-leased small multifamily rather than newly delivered apartment product.
Houston. Largest absolute-dollar DSCR market in the state. Energy-sector recovery, Medical Center employment anchor, and cheap entry prices (sub-$300K SFR remains achievable in Pasadena, Humble, Cypress, Spring). Flood risk is the underwriting variable; post-Harvey, DSCR lenders require elevation certificates in a growing list of ZIPs. Houston median rent stands at approximately $1,905/month as of Q1 2026, down roughly 5.7% year-over-year amid heavy multifamily construction pressure (multifamily vacancy ~11.6%). Single-family rents have held up better than the apartment segment; underwrite conservatively on multifamily cash flow.
San Antonio. Slower-appreciation but strongest-yield Texas major. Military (JBSA), healthcare, and tourism anchor demand. Riverwalk STR is a niche; Alamo Heights and Stone Oak are classic long-term SFR markets.
El Paso / Rio Grande Valley. Lower price points, cross-border logistics demand, Fort Bliss tenant base.
Special Considerations
The PPP decision. Texas investors get the same PPP lever as investors in other states. If you plan to BRRRR or season and sell within 3-5 years, a no-PPP or short PPP keeps the refinance free of exit cost; on a long hold, a 5-year step-down can lower the rate. Run both with the prepayment penalty analyzer.
Texas Series LLC. Texas recognizes Series LLCs, which allow a single parent LLC to hold multiple “protected series” each with its own assets and liability shield. DSCR lender acceptance is mixed — some (Kiavi, Visio) fund into individual protected series, others require a standalone traditional LLC per property. Expect more underwriting friction with a Series structure.
Chapter 113 real-estate broker disclosure. Investors who act as their own property manager across multiple properties may need to review Texas Real Estate Commission (TREC) licensing rules; managing rentals for third parties generally requires a broker’s license.
Entity Formation
Form directly in Texas if you plan to hold Texas property. $300 filing fee, online through SOSDirect, one-time — no annual report fee. You do file an annual franchise-tax PIR by May 15, typically with $0 tax due under the $2.47M no-tax threshold.
If you want anonymity, a Wyoming holding LLC as the member/manager of the Texas LLC is the common structure. This keeps your name off the Texas SOS filing, since the Texas LLC reports the Wyoming LLC as its manager rather than an individual. Our entity-structure guide walks through the hybrid structure.
How to Get Started
Texas is a rate-competitive DSCR market — the winning shop strategy is to compare 3-4 lenders on rate, points, reserves, and PPP structure. Our free matching tool at /get-matched sends your Texas scenario to lenders that are (1) actively funding in the county, (2) offer the PPP structure that fits your hold period, and (3) fit your asset type (SFR vs. 2-4 unit vs. BTR).
Sanity-check your ratio with the DSCR calculator, review current rates, then compare the top lenders at /compare/best-dscr-lenders. Investors building multi-state portfolios typically pair Texas with Florida, Tennessee, or Georgia.