Texas vs. Florida DSCR loans: property tax against insurance

Texas and Florida are the two largest destinations for out-of-state DSCR borrowers, and on paper they look alike: no state income tax, LLC-friendly law, deep lender appetite, and fast population growth. In underwriting, though, they pull the debt-service ratio apart through different line items. Texas hits you on property tax. Florida hits you on insurance. The result is that the same $300,000 house can land on nearly the same DSCR in both states for completely different reasons, and the lever you can pull to fix a weak file is different in each.

Where the two states start

According to our state data, Texas carries an effective property tax rate near 1.9%, with Houston at roughly 2.1% and San Antonio around 2.0%. Florida sits closer to 0.9% to 1.0% statewide. Neither state has a personal income tax, and both rate as highly LLC-friendly, so holding title in an entity is routine with every major program.

Prepayment rules are standard in both states, meaning a lender can use the usual 5-4-3-2-1 or 3-2-1 step-down structures without a statutory cap. Short-term rental rules differ more: Texas is generally lenient at the state level, with city-level exceptions, while Florida preempts much local regulation but leaves vacation rental licensing and condo association limits in play.

The same house, two DSCRs

Take a $300,000 single-family rental financed at 75% LTV. The $225,000 loan at 7.00% on a 30-year amortization carries principal and interest of about $1,497 a month.

In Texas, add property tax at 1.9% ($5,700 a year, or $475 a month) and homeowners insurance around $2,000 a year ($167 a month). PITIA comes to roughly $2,139. In Florida, add tax at 1.0% ($3,000 a year, or $250 a month) and insurance at $4,800 a year ($400 a month). PITIA is about $2,147.

At $2,400 of monthly rent, both land at a DSCR of 1.12. The difference is in what moves them. A Texas owner can protest an appraisal-district valuation and cut the tax line. A Florida owner can shop wind mitigation credits, a newer roof, and policy structure. Our breakdown of escrow impounds for taxes and insurance explains how lenders collect and verify both numbers.

Insurance is the swing factor in Florida

Florida coastal insurance has moved faster than rents in most counties, and underwriters price off the actual quote, not an estimate. A 1.12 DSCR can fall to 1.00 if the premium doubles to $9,600 a year, because that adds about $400 a month to PITIA. Wind and flood coverage, roof age, and a four-point inspection all affect eligibility, not just price. Many lenders decline roofs older than 15 to 20 years outright. For a full look at coastal pricing, see our guide to DSCR insurance costs in coastal markets.

Flood zone matters on top of that. Properties in FEMA zones A and V require a separate flood policy, and condo master policies can carry assessments that count against you in some programs.

Property tax is the swing factor in Texas

Texas has no homestead exemption on investor-owned property, so the full rate applies, and appraisal districts reassess annually. A purchase at $300,000 in a county that had the property on the roll at $230,000 will see the tax bill climb as the district catches up. Underwriters generally use the higher of the current bill or a purchase-price estimate, which is why DSCRs in Texas sometimes look worse at closing than they do after a year of ownership. Our piece on property tax reassessment after purchase walks through the mechanics.

Texas also has Municipal Utility Districts and PID assessments in newer subdivisions, which can add 0.5% to 1.5% of value to the annual tax-style burden. Always request the full tax certificate, not just the county figure.

Metro-level cash flow

Houston has the best raw math in either state: median home value near $295,000, rent near $2,050, and a rent-to-price ratio around 0.69% despite the 2.1% tax rate. Dallas-Fort Worth is pricier at about $405,000 median value and 0.58%, but it offers deeper tenant demand and more new-construction product. On the Florida side, Tampa runs a 0.61% ratio on a $395,000 median value, and Jacksonville reaches 0.58% at $335,000 with lower insurance exposure than the Gulf and Atlantic beach markets.

Orlando and Miami skew toward STR and foreign-national borrowers, and their median prices push DSCRs below 1.0 on long-term rent unless the borrower qualifies on short-term income. That is a different underwriting path, covered in our short-term rental guide.

Reserves, seasoning, and what lenders ask for in each state

Reserve requirements usually track loan size and borrower tier rather than state, but the dollars behave differently. A $225,000 loan with six months of PITIA reserves needs roughly $12,800 in verified liquid funds in Texas ($2,139 times six) and about $12,900 in Florida ($2,147 times six). Borrowers buying several properties at once need the reserve for each loan, which is where Florida investors with condo assessments or special-purpose insurance escrows often come up short.

Florida closings also carry documentary stamp tax on the note at $0.35 per $100 and an intangible tax of $0.002 per dollar of the loan, which adds about $787 and $450 respectively on a $225,000 loan. Texas has no equivalent mortgage tax, so closing costs run lower by roughly $1,200 on the same deal, though title and survey fees are comparable. Add those savings into your cash-to-close before comparing the two states on yield.

Cash-out refinances behave similarly in both. Most programs cap cash-out at 70% to 75% LTV, and Texas adds a wrinkle for homestead property that does not apply to investor-owned rentals but sometimes confuses closing agents when a borrower previously lived in the property. Document the conversion to investment use with a lease and a rent schedule before you apply.

Seasoning rules follow the lender rather than the state. A property bought in an all-cash deal can usually be refinanced with a delayed-financing exception within six months in either state, using the purchase price rather than appraised value for the LTV calculation. After that window, appraisal value controls.

Which lenders fit which state

Appetite varies more by state than most borrowers expect. Some programs cap Florida condo exposure, limit LTV on coastal ZIP codes, or require higher reserves in hurricane-prone counties. Others lean into Texas SFR volume with 80% LTV at 1.00 DSCR for borrowers above 740 FICO. Compare current state eligibility, LTV caps, and minimum DSCRs in the lender directory before you choose a market, since a lender that rejects your Florida condo may price your Texas duplex aggressively.

How to choose between them

If your constraint is cash flow and you can hold the property through reassessment, Texas inland metros usually deliver better coverage at the same price point, and tax protests are a lever you control. If your constraint is appreciation or STR potential, Florida offers more upside but demands a hard look at the insurance quote before you waive inspection. Run both scenarios in the calculators with your actual quotes, and walk through the underlying ratio logic in how DSCR loans work.

The practical rule: underwrite the expense your state is known for, not the rent. In Texas, price the tax at the full rate. In Florida, get the insurance bind quote before you remove contingencies. A deal that survives that stress test usually closes on the first try.