Property taxes are an unavoidable responsibility every Texas homeowner needs to fulfill. Due to the state’s lack of personal income tax, the property taxes in Texas are used to fund local upkeep, maintenance, schools, and law enforcement – to name a few.
While every resident must pay property taxes, the amount will differ based on various factors, including appraisal value, where in Texas you live, and when you close on the sale of your home. When purchasing your first home, property taxes at closing may not be something you pay much attention to, but you may want to. Your lender will likely escrow for them at closing, and while the buyer is generally only responsible for a small cushion of the taxes in their escrow, the exact amount is dependent on how closing costs, property taxes, and other fees are calculated.
We’ve put together this guide to help first-time homebuyers understand how escrowed property taxes are handled at closing in Texas.
As property taxes are paid in arrears in Texas, a typical real estate transaction involves the buyer and seller only paying property taxes for the period of time each party owned the property. While it may seem complicated for sellers and buyers at first, dividing the tax burden at closing is quite simple.
To put it in simple terms, the seller will be responsible for the property tax balance that accrued from the beginning of the tax year until the date of closing, and the buyer will be responsible for property taxes that are due for the period after the closing date.
In cases where the seller has already paid the entire year’s taxes, the buyer is usually required to reimburse the seller. If the seller has not paid the property taxes, he or she should be charged their prorated share with the amount placed in escrow.
In Texas, the exact amount owed in taxes on a property is unknown until the home is appraised again and taxes become due in October. Therefore, when closing is completed before taxes are due, an estimate is used to determine the prorated amounts owed by each party. The previous year’s taxes are generally used as a guide to provide the estimated payment.
There are a lot of fees involved in the process of closing a home sale. The seller is responsible for some fees, but most of them are typically paid by the buyer. Closing costs include property taxes, which can be a significant sum of money. Since real estate purchases boil down to the contract, who pays the property taxes when a house is sold depends on the terms outlined in the agreement.
As mentioned previously, depending on the closing date and prorating, it can be challenging to determine the exact amount of property taxes due. Thankfully, your lender or title company will provide you with a “cash due at closing” document that considers all these numbers. Your lender will typically include a closing cost estimate with their bid on funding your loan.
American Finance & Investment Co., Inc. (AFIC) is an OCCC-registered property tax lender. We offer our clients an affordable, hassle-free way to manage their Texas property taxes. We can ensure that your account with the local government tax office is paid in full and will work out a manageable repayment plan for you. AFIC can provide you with an instant quote by completing the form on our homepage. For qualifying properties, we can help you pay off your delinquent taxes and offer you the following benefits:
We pride ourselves on finding solutions to suit the unique needs of our clients. If you would like to discuss our property tax loans and any additional advice on the requirements of your local tax authorities and the details of your property taxes, please contact our experienced team at AFIC today.
Rates as Low as 8.0% (8.51% APR*) $25,000 loan,
$750 in Closing Costs, 120 Monthly Payments of $303.32
Get your estimate in under 1 minute!
Fill out the form below to start your loan quote
Proudly Serving Austin (Travis County & Williamson County), Dallas (Dallas County), El Paso (El Paso County), Fort Worth (Tarrant County), Houston (Harris County, Fort Bend County, & Montgomery County), the Rio Grande Valley (McAllen, Pharr, Hidalgo County, & Cameron County), San Antonio (Bexar County), Waco (McLennan County) and the rest of Texas with Property Tax Loans.
APR between 8.0% and 25.0% for loan terms between 12 and 120 months. For example 8.5% APR, $25,000 loan, $750 in Closing Costs, 120 Monthly Payments of $303.32.
YOUR TAX OFFICE MAY OFFER DELINQUENT TAX INSTALLMENT PLANS THAT MAY BE LESS COSTLY TO YOU. YOU CAN REQUEST INFORMATION ABOUT THE AVAILABILITY OF THESE PLANS FROM THE TAX OFFICE.
If you are over 64 or disabled, don’t get a property tax loan, contact your tax office about a deferral.
OCCC License #159698 • NMLS #1778315, 2421751