The DFW Math Problem Most Buyers Get Wrong
Every buyer at some point asks the same question: "Can I actually afford this?" The answer depends less on the home's list price and more on what your monthly payment looks like when you add in everything Texas requires you to pay — and there is more to add in Texas than most buyers realize.
The starting point for any serious buyer conversation is the 28/36 rule. Lenders want your total monthly housing payment (principal, interest, property taxes, and insurance — called PITI) to stay at or below 28% of your gross monthly income. They also want your total debt load — that housing payment plus car loans, student loans, credit cards, and any other recurring obligations — to stay at or below 36% of gross income. These two thresholds are called your front-end and back-end debt-to-income ratios (DTI).
Many buyers focus on the purchase price. Lenders focus on the payment. That distinction matters especially in Dallas–Fort Worth, where property tax rates run between 2.0% and 2.4% of assessed value annually — significantly higher than the national average of around 1.1%.
What Texas Property Taxes Do to Your Monthly Payment
Before we get to the income table, you need to understand how much property taxes inflate your monthly obligation in DFW. At a 2.2% effective rate — a realistic midpoint for cities like Frisco, McKinney, Grand Prairie, or Arlington — a $400,000 home carries roughly $8,800 per year in property taxes, or about $733 per month added to your base mortgage payment.
Add homeowner's insurance (typically $1,800–$2,400 per year in North Texas, or $150–$200 per month) and the gap between a principal-and-interest payment and a full PITI payment is substantial.
Income-to-Purchase-Price Table: Three DFW Price Points
The table below assumes a 20% down payment, a 2.2% annual property tax rate, and $175/month for homeowner's insurance. Three rate scenarios reflect the environment buyers have faced in recent years.
| Purchase Price | Loan Amount | Rate | Est. P&I | Taxes/Mo | Insurance/Mo | Total PITI | Income Needed (28% rule) |
|---|---|---|---|---|---|---|---|
| $300,000 | $240,000 | 7.0% (2023) | $1,597 | $550 | $175 | $2,322 | ~$99,000/yr |
| $300,000 | $240,000 | 6.5% (2024) | $1,517 | $550 | $175 | $2,242 | ~$96,000/yr |
| $300,000 | $240,000 | 6.0% (2025) | $1,439 | $550 | $175 | $2,164 | ~$93,000/yr |
| $400,000 | $320,000 | 7.0% (2023) | $2,129 | $733 | $175 | $3,037 | ~$130,000/yr |
| $400,000 | $320,000 | 6.5% (2024) | $2,023 | $733 | $175 | $2,931 | ~$126,000/yr |
| $400,000 | $320,000 | 6.0% (2025) | $1,919 | $733 | $175 | $2,827 | ~$121,000/yr |
| $500,000 | $400,000 | 7.0% (2023) | $2,661 | $917 | $175 | $3,753 | ~$161,000/yr |
| $500,000 | $400,000 | 6.5% (2024) | $2,528 | $917 | $175 | $3,620 | ~$155,000/yr |
| $500,000 | $400,000 | 6.0% (2025) | $2,398 | $917 | $175 | $3,490 | ~$149,000/yr |
These are estimates using standard amortization. Your actual rate will depend on your credit score, loan type, and lender. But these numbers give you a realistic floor to work from.
How Lenders Count Your Income — and Why It Matters
The income figures in the table above refer to qualifying income, which lenders define carefully — and differently depending on how you earn it.
W-2 employees have the most straightforward path. Lenders average your base salary over two years and can typically include overtime, bonuses, and commission if you have received them consistently for at least 24 months. If you recently received a raise, lenders may use your current salary rather than a two-year average, which can work in your favor.
Self-employed buyers face a different calculation. Lenders use your net taxable income from your most recent two federal tax returns — after write-offs. If your Schedule C or K-1 shows $80,000 in gross revenue but $50,000 in deductions, your qualifying income is $50,000. This is one of the most common surprises the team at EXL Realty Group sees when buyers who run their own business start the pre-approval process. The good news is that some lenders offer bank statement loan programs that use 12–24 months of deposits instead of tax returns, which can significantly close the gap.
Other income types — rental income, alimony, disability, Social Security — all have their own rules about how much of the payment can be counted and for how long it must have been received. Your lender should walk through each line item with you.
What to Do Before You Start Shopping
Run these three steps before you book a single showing:
1. Get a pre-approval, not just a pre-qualification. A pre-qualification is a ballpark based on self-reported numbers. A pre-approval means a lender has reviewed your W-2s, tax returns, bank statements, and pulled your credit. Sellers in DFW's competitive market will not take you seriously without it.
2. Know your back-end DTI. Pull your monthly obligations — car payments, minimum credit card payments, student loans — and add them to the PITI from the table above. If that combined number exceeds 36–43% of your gross monthly income, you may need to pay down debt or look at a lower price point before applying.
3. Account for closing costs. In Texas, buyers typically pay 2–3% of the purchase price in closing costs on top of their down payment. On a $400,000 purchase, that is an additional $8,000–$12,000 you need liquid before the transaction closes.
The income thresholds in this guide are not arbitrary — they represent real underwriting standards that lenders apply every day. Understanding them before you start looking gives you a clear target, keeps your search focused on homes you can actually close on, and puts you in a much stronger negotiating position when you find the right one.