Hi, I’m Dorota — Let’s Make Your Mortgage Payment Make Sense

If you’ve ever looked at your mortgage statement and wondered, “Why is my payment more than just the loan amount and interest?” you’re not alone. One of the biggest surprises for first-time home buyers in Texas is how property taxes and escrow accounts change the monthly payment. It’s not just principal and interest. In Texas—especially in the Houston and Katy areas—property taxes and insurance can add hundreds of dollars a month, and they also change over time. That can cause escrow shortages, letters from your lender, and sometimes a jump in your payment you didn’t see coming.

I’m Dorota Tyminski, a mortgage loan officer based in Katy serving families across Texas and the USA. I’ve helped first-time buyer Houston clients, Veterans using VA loans Houston TX, and homeowners refinancing understand their full monthly payment so they can budget with confidence. When you understand how property taxes and escrow really work, you can plan ahead, avoid surprises, and protect your cash flow. My goal is to make Texas home financing feel clear and manageable, whether you’re shopping rates, comparing loan programs, or already in your home and sorting out your mortgage escrow analysis.

This guide goes deep into how Texas property taxes are calculated, how escrow accounts work, how they affect your payment, and what to expect the first year you own your home. I’ll share real examples from Houston and Katy, common mistakes to avoid, and practical steps to keep your budget steady. If you’re new to the process, you can also check my Mortgage Basics Explained guide, but you’ll be fine starting here.

What You’ll Learn

• How property taxes work in Texas and why they’re higher than many states
• What an escrow account does and why lenders require it for most loans
• How taxes, insurance, and escrow change your monthly payment over time
• What to expect your first year (and why payments often adjust in year two)
• How to use exemptions, appeals, and budgeting to keep payments predictable
• Real homeowner examples from Houston and Katy
• Tips specific to mortgage loans Texas buyers use (FHA loans Texas, VA loans Houston TX, conventional, and jumbo)
• How mortgage pre-approval factors in taxes and insurance and why that matters to your home search
• When an escrow waiver might make sense and when it probably doesn’t

Let’s start with the core question: what exactly are you paying for each month?

Your Monthly Payment = PITI

Most Texas mortgages bundle four things into one monthly payment, often called PITI:

• Principal: the part of your payment that reduces your loan balance.
• Interest: the cost of borrowing the lender’s money.
• Taxes: your property taxes, collected monthly and held in escrow.
• Insurance: your homeowners insurance (and flood/wind if required), also collected in escrow.

When we talk about “Houston mortgage rates” or “Katy mortgage rates,” we’re usually referring to the principal and interest portion affected by the interest rate you lock. But the “TI”—taxes and insurance—can be just as important. In Texas, they are often the difference between a comfortable payment and one that feels too tight. The best mortgage lenders will help you stress-test your payment using a home loan calculator that includes property taxes, homeowners insurance, and any mortgage insurance if your down payment is under 20%.

Understanding Texas Property Taxes

Property taxes fund your local public services—schools, police and fire departments, roads, libraries, parks, and water and drainage districts. In Greater Houston, many neighborhoods also sit inside special districts like MUDs (Municipal Utility Districts) or PUDs (Public Utility Districts) that levy their own rates; those matter to your total.

Texas does not have a state income tax. That’s one reason property taxes here tend to be higher than the national average. Instead of paying a state income tax every paycheck, you’ll see the tax load show up in your annual property tax bill.

The basic math looks like this:

Annual Property Taxes=Taxable (Appraised) Value×Total Tax Rate

• Appraised value is determined by your county’s Central Appraisal District (CAD).
• The total tax rate is the sum of the taxing entities covering your address: city, county, school district, community college, MUD/PUD, and special districts.

For budgeting, convert annual taxes to a monthly escrow contribution:

Monthly Tax Escrow= Annual Property Taxes
12

A simple example: if your appraised value is $350,000 and your combined tax rate is 2.3%, your annual taxes are about $8,050. Divide by 12 and you get roughly $671 per month that your lender will collect for the escrow account.

Appraised Value vs. What You Paid

New homeowners often assume the county will base property taxes on what they just paid for the home. Not exactly. The county appraisal is separate from your purchase price, and it’s reassessed annually. That means your taxes can change even if your mortgage rate and principal don’t.

For new construction or recently remodeled homes, the appraised value sometimes lags the market for a year. Then it “catches up,” which is why some new owners see their escrow payment jump in year two after the lender runs the annual escrow analysis.

Why the First Year Feels Confusing

In Texas, taxes are billed toward the end of the year (typically mailed in October and due by January 31 of the following year). At closing, taxes are “prorated” between buyer and seller based on the closing date. If the seller occupied the home part of the year, they usually credit you their share through closing costs, and then your lender pays the full tax bill out of your escrow when it’s due.

Important nuance for first-time buyer Houston and Katy clients: the seller may have had a homestead exemption that reduced their taxable value. If you close mid-year, the tax estimate used for your escrow setup might reflect that reduced bill. The following year, if you haven’t filed your homestead yet or if the county resets value, your taxes can rise—and your escrow analysis will adjust your monthly payment to catch up. Planning for that possibility helps avoid “escrow shock.”

What Is an Escrow Account (And Why Do You Have One)?

Think of escrow as a built-in savings account your lender manages for you. Each month, you pay one total mortgage bill. The lender separates the principal and interest (which they keep) from the taxes and insurance (which they hold). When your tax bill or insurance premium is due, your lender pays it directly on your behalf.

Why lenders like escrow: it helps ensure taxes and insurance are paid on time, protecting the property (their collateral) and keeping you compliant. For many loan types—especially FHA loans Texas and VA loans Houston TX—escrow is typically required. Some conventional loans allow an escrow waiver if you put 20% down and meet credit guidelines, but not always, and sometimes there’s a small fee for waiving escrow.

Escrow Cushion (Or “Reserve”)

Most lenders collect a small cushion—often two months of taxes and insurance—to make sure there’s enough in the account if bills come in higher than expected. That cushion is part of your upfront escrow setup at closing.
Annual Escrow Analysis

Once a year, your lender reviews what went in and what went out. If property taxes or insurance rose, you may see a shortage; if they dropped, you may have a surplus. You’ll receive a letter explaining:

• New estimated annual taxes/insurance
• Current escrow balance
• Whether you owe a shortage or are due a surplus
• Your new monthly escrow amount going forward

If there’s a shortage, you usually can either write a lump-sum check to fill the gap or allow the lender to spread it across the next 12 months on top of your new escrow payment. A small, planned monthly buffer in your personal budget can make these adjustments painless.

How Taxes and Escrow Shape Your Full Payment

Let’s build a realistic example using Katy numbers.

• Loan amount: $300,000
• Rate: 5.75%
• Principal & interest: about $1,750/month
• Annual property taxes: $7,200 → $600/month escrow
• Annual homeowners insurance: $1,800 → $150/month escrow

Total monthly payment (PITI) is roughly $2,500—about $750 more than principal and interest alone. This is why mortgage pre-approval in Texas must include accurate estimates for taxes and insurance. When we prepare your pre-approval, I’ll run multiple addresses through a home loan calculator with actual tax rates and insurance estimates so you see your real monthly number before you make an offer.

Key Texas Exemptions That Lower Your Tax Bill

Exemptions reduce your taxable value, which lowers your bill. Filing the right exemptions is one of the easiest ways to keep your payment steady.

• Homestead Exemption: For your primary residence. Lowers taxable value and caps how much your appraised value can increase year over year (generally up to 10% on the homestead portion). File after you move in; the application window typically starts January 1.
• Over-65 & Disabled Exemptions: Provide additional reductions and can freeze certain tax elements in many jurisdictions.
• Disabled Veteran Exemptions: Significant reductions, potentially up to full exemption depending on disability rating. If you’re using VA loans Houston TX or are a Veteran homeowner, this is critical to explore.

If you’re moving from out of state or from renting, set a reminder to file your Homestead Exemption as soon as you’re eligible. I remind my clients each January because it’s that important.

New Construction, Builder Estimates, and Supplemental Bills

When you buy new construction in Houston or Katy, your first-year tax assessment might reflect the land only or a partially complete improvement value (“partial assessment”). In year two, once the county appraises the finished home, the tax bill can increase significantly. Lenders don’t control this; the escrow analysis will adjust to match the new reality.

Occasionally, buyers also receive a supplemental tax bill if the county reassesses within the same tax year. If that happens, the bill may not flow through your lender’s escrow automatically, so contact your servicer before paying to confirm how it should be handled. I coach my clients through these surprises so nothing falls through the cracks.

Flood and Wind Coverage Considerations

In parts of Greater Houston, flood insurance is required if your home sits in a Special Flood Hazard Area. Along the Gulf Coast, separate windstorm (hurricane) coverage may be required. These premiums are escrowed just like homeowners insurance. If you’re comparing homes across different neighborhoods, we’ll include flood/wind estimates in your home loan calculator scenarios, because these can add meaningfully to your monthly payment.

HOAs, MUDs, and Special Assessments

• HOA dues are not typically escrowed. You pay those directly. Still, include them in your budget because they affect affordability.
• MUD/PUD taxes are part of your property tax rate; they are escrowed. Subdivisions with brand-new infrastructure often have higher MUD rates that fall over time as debt is paid down.
• Some neighborhoods have PIDs (Public Improvement Districts) with special assessments. Ask your agent and title company to confirm whether a property is in a PID, and we’ll plan accordingly.

Escrow Waivers: When They Might Make Sense

Some conventional loans allow you to waive escrow if you have at least 20% down and strong credit. Pros and cons:

• Pros: You control your tax and insurance payments directly, which can help cash-flow timing if you’re very disciplined.
• Cons: You must save for large annual bills yourself, and some lenders charge a small fee or add-ons for waiving escrow. Also, FHA loans Texas and many VA loans require escrow; waivers are rare on those programs.

For most first-time buyers, I recommend keeping escrow. It simplifies life and prevents missed deadlines. For seasoned homeowners with strong reserves, an escrow waiver can be reasonable if managing cash set-asides is your strength.

What Happens When You Refinance

Refinancing resets your escrow. Your new lender will collect fresh escrow deposits to pay future taxes and insurance. After your old loan is paid off, your previous lender typically refunds your prior escrow balance to you in a couple of weeks. Many homeowners use that refund to replenish savings or offset the new escrow setup they just paid at closing.

If you’re refinancing from FHA to conventional to remove MIP, or you’re shortening your term, I’ll show your new total payment and how the escrow component changes. And yes—if your insurance premium or Houston mortgage rates have moved, the payment changes too. We’ll use a home loan calculator to compare “today” vs “post-refi” side by side.

First-Year Budgeting Tips (So Nothing Surprises You)

• Expect change in year two. Plan for a potential escrow adjustment after your first annual analysis, especially if you bought new construction or the seller had a homestead exemption.
• Build a buffer. Set aside $50–$150 per month in a separate savings bucket as your “tax and insurance buffer.” If your escrow rises, you’re ready. If not, you’ve built emergency savings.
• Shop insurance annually. Premiums change. Review coverage and shop carriers at renewal; sometimes you can improve coverage and save money.
• File your Homestead Exemption on time. It’s the simplest way to keep assessed value increases in check.
• Track your appraisal notice. When your county appraisal notice arrives (often spring), review it. If you think the value is too high, consider protesting (next section).

Protesting Your Appraised Value

If you believe your appraised value is higher than comparable homes, you can protest. The process varies by county, but generally you:

• Review your appraisal notice for deadlines (often May).
• Gather evidence: comparable sales, photos, condition issues, repair estimates.
• File online or by mail, then attend an informal or formal hearing.

If successful, the county may reduce your value for that year, lowering your tax bill. Many homeowners in Harris, Fort Bend, Montgomery, and surrounding counties protest each year or hire firms to do it for them (they often charge a contingency fee based on savings). If you plan to protest, tell me; I can help you estimate potential payment impacts for your budgeting.

How This Impacts Your Mortgage Pre-Approval

When I prepare your mortgage pre-approval, taxes and insurance aren’t an afterthought—they’re central. Your debt-to-income (DTI) ratio uses your full projected payment (PITI), not just principal and interest. That’s why “low rate” headlines don’t tell the whole story for affordability in Texas.

We’ll compare multiple homes and neighborhoods with real tax rates and insurance estimates so your pre-approval stays accurate. If you’re using FHA loans Texas, VA loans Houston TX, or conventional with less than 20% down, we’ll also include mortgage insurance (MIP/PMI) in your payment. The goal is to give you a number you can live with comfortably—today and a year from now.

Real Texas Homeowner Examples

Houston First-Time Buyer Surprise
Emily bought her first home with an estimated payment around $1,950 per month. The next year, her escrow analysis showed a $1,200 shortage because property taxes rose more than expected. We walked through her options: pay the shortage in a lump sum or spread it out. She chose to spread it across the next 12 months and started putting aside an extra $100 each month going forward. No more surprises.

Katy Veteran’s Homestead Win
A Veteran client closed on a $400,000 home in Fort Bend County using his VA benefit. After applying for both Homestead and Disabled Veteran exemptions, his taxable value fell significantly. His annual tax bill dropped by almost $3,000, lowering his escrow portion by roughly $250 per month. That’s a big, permanent improvement to his cash flow.

Cypress New Construction Catch-Up
A family closed on a new build where the first tax year reflected land-only value. In year two, the appraised value jumped to the full home value and the escrow analysis increased their payment. We had forecasted this and built a buffer into their savings plan. They used part of their buffer to cover the shortage and adjusted quickly.

Common Mistakes to Avoid

• Forgetting to apply for Homestead Exemption. This is the simplest way to reduce your taxable value and cap increases.
• Assuming taxes will stay the same. In growth markets like Houston and Katy, values often rise. Budget for it.
• Ignoring your escrow analysis letter. If there’s a shortage, waiting adds stress. Address it promptly and choose the repayment path that fits your budget.
• Relying on the seller’s tax number. If the seller had exemptions or a lower appraised value, your future bill may be higher. Always run your own estimates.
• Skipping flood and wind due diligence. Even if lenders don’t require flood, evaluate your risk. A few hours of research can save you years of worry.

FAQs

Can I pay my own taxes and insurance instead of using escrow?
Sometimes. Conventional loans may allow an escrow waiver with 20% down and strong credit. FHA and many VA loans require escrow. Even when allowed, waiving escrow means you must budget and pay large annual bills yourself, and some lenders charge a small fee to waive.

When do property taxes get paid in Texas?
Tax bills are typically sent in October and due by January 31 of the following year. Your lender will pay them from escrow if you have escrow set up.

Will my escrow payment go down if I refinance?
Possibly. If your new insurance premium is lower or if you reduce your loan amount or rate (changing the cushion needed), your overall PITI can drop. Refinances reset escrow; your previous escrow balance is refunded by your old lender after payoff.

What’s a good way to avoid escrow shortages?
Budget for a modest tax increase each year (even 5%–10% on the taxable value), shop your insurance at renewal, and keep a small monthly buffer in savings. File your Homestead Exemption and consider protesting high appraisals with supporting evidence.

Does mortgage insurance get escrowed too?
No. PMI (conventional) and MIP (FHA) are collected as part of your monthly mortgage payment, but they’re not held in escrow for annual bills like taxes/insurance. They’re part of the “P&I” servicing side of the payment.

How do HOA dues fit in?
HOA dues are typically paid by you directly (monthly, quarterly, or annually). They are not included in escrow, but we account for them in your pre-approval and affordability planning.

How do Houston mortgage rates and Katy mortgage rates play into this?
Rates determine your principal and interest. Taxes and insurance determine your escrow. Together, they create your full monthly payment. I’ll shop offers from the best mortgage lenders and show how each scenario changes your PITI using a home loan calculator.

Bringing It All Together: A Clear Plan You Can Trust

Understanding taxes and escrow turns a confusing line item into something you can control. Here’s how I help clients keep their payments predictable:

• During mortgage pre-approval, we use realistic tax rates and insurance estimates for the addresses you’re considering.
• When you go under contract, we build your loan estimate using the most current local data.
• After closing, I’ll send you a reminder about Homestead Exemption and how to watch for your county appraisal notice.
• Each year, when escrow analyses go out, I’m here to help you read the letter, choose the best shortage repayment option, and adjust your budget if needed.
• If you’re considering refinancing—perhaps to remove FHA MIP, drop PMI, or lower your rate—we’ll compare scenarios from multiple mortgage lenders in Texas and decide if a refinance improves your overall PITI and long-term plan.

If you’re looking at a specific home and want to know the true monthly payment, send me the address. I’ll run the numbers with current tax rates, realistic insurance assumptions, and your loan type (FHA loans Texas, VA loans Houston TX, or conventional). No guesswork—just clear numbers and honest advice.

Ready to make your mortgage payment make sense?

• Start your mortgage pre-approval (quick and secure)
• Use the home loan calculator to test neighborhoods and tax rates
• Ask me anything—there are no silly questions

Let’s make your Texas home financing simple, steady, and stress-free.