ARM vs Fixed Rate in Texas
With Texas's median home at $310,000 and conforming limit at $726,200, choosing between an ARM and a fixed-rate mortgage comes down to your time horizon and risk tolerance. Austin saw extraordinary appreciation 2020-2022 (50-70%) followed by one of the nation's sharpest corrections in 2023. DFW, Houston, and San Antonio have been more stable, with moderate continued growth.
When an ARM May Make Sense in Texas
- You plan to sell or refinance within 5-7 years
- You're buying in a high-cost Texas market where even a small rate reduction meaningfully lowers payments
- Rates are at cyclical highs and expected to fall — ARM initial rates can be 0.5-1% lower than fixed
When Fixed Rates Win in Texas
- You plan to stay long-term (10+ years)
- Payment certainty matters more than short-term savings
- Texas's property taxes (1.60%, avg $4,660/year) add enough payment variability without adding rate risk
Closing Costs
Either product incurs similar closing costs (~$3,700 in Texas). Frequent refinancing to escape an ARM adds these costs repeatedly.
Frequently Asked Questions
Is an ARM or fixed mortgage better in Texas?
It depends on how long you plan to stay. Texas's median home of $310,000 with a 5/1 ARM can save on initial payments, but fixed rates offer certainty — especially important given Texas's property tax rate of 1.60% adds its own payment variability.
What are conforming loan limits for ARMs in Texas?
ARMs and fixed-rate loans both have the same conforming limit in Texas: $726,200. Most Texas counties are at the standard conforming limit. No Texas counties currently qualify for high-cost conforming limits, though Austin-Round Rock values approach the threshold.
How much can I save with an ARM in Texas?
ARM initial rates are typically 0.5-1% below 30-year fixed rates. On a $248,000 loan (20% down on Texas's median home), that's roughly $100-200/month in savings during the initial period.
What are closing costs for a mortgage in Texas?
Texas has no state transfer tax, which is a significant advantage. However, title insurance rates in Texas are state-regulated and can be higher than in unregulated states. Survey fees are standard requirements in Texas. Budget approximately $3,700 in total closing costs for either an ARM or fixed-rate mortgage in Texas.