If you are looking to buy a home in East Texas right now, you’ve likely noticed that interest rates are the talk of the town. But here’s what most people don’t realize: it’s not just about the “rate” you get; it’s about how much house that rate lets you buy.
Quick Answer:
In the mortgage world, your “buying power” is the total amount of money you can borrow based on the monthly payment you can afford. As a general rule of thumb, every 1% increase in interest rates reduces your buying power by about 10%. This means if rates go up, you might have to look at homes with a lower price tag to keep the same monthly payment.
Let’s Break This Down: The “1% Rule”
Think of interest rates like a see-saw. When interest rates go up, your buying power goes down. When rates drop, your buying power gets a boost.
For example, let’s look at a typical family in Longview or Tyler looking at a $300,000 mortgage:
At a 6% interest rate: Your monthly principal and interest payment is roughly $1,798.
At a 7% interest rate: That same $300,000 loan jumps to roughly $1,995 per month.
To keep that original $1,798 payment at a 7% rate, you would only be able to borrow about $270,000. That 1% difference cost you $30,000 in “buying power.”
The East Texas Advantage: Property Taxes & Exemptions
If this were my family, here’s what I’d look at beyond just the rate. In Texas, our property taxes play a huge role in your monthly “all-in” payment.
The good news? For 2026, Texas has increased the school district homestead exemption to $140,000. This means the first $140,000 of your home’s value isn’t taxed by the school district, which can lower your monthly escrow payment and actually increase your buying power compared to other states. Whether you’re an oilfield worker in Kilgore or a teacher in Gilmer, these local tax breaks help balance out higher interest rates.
Common Mistakes to Avoid
Waiting for the “Bottom”: Many buyers wait for rates to hit 3% or 4% again. Experts forecast rates to stay in the 6% range through 2026. If you wait for a 1% drop but home prices in Tyler rise by 5% in that same year, you haven’t actually saved any money.
Focusing Only on the Interest Rate: Don’t forget insurance and taxes. A home in a high-tax mud district will have a much lower “buying power” than a similar home with a standard homestead exemption.
Ignoring Assistance Programs: Programs like TSAHC provide down payment assistance for East Texas heroes (teachers, police, EMS) which can help offset the impact of higher rates.
When This Strategy Makes Sense (and When It Doesn’t)
It makes sense to buy now if:
You find a home that fits your lifestyle.
The monthly payment fits comfortably in your budget today.
You plan to stay in the home for 5+ years (giving you time to refinance later if rates drop).
It might make sense to wait if:
A 0.5% rate increase would make you “house poor” or unable to save for emergencies.
Your credit score is currently in a spot where a few months of work could get you a significantly better rate.
Bottom Line
Interest rates are a tool, not a barrier. While a higher rate might mean a slightly smaller house today, waiting for a “perfect” market often leads to missed opportunities as home prices continue to climb. At EPIC Mortgage, we focus on finding the right “monthly comfort zone” for your family, regardless of what the national headlines say.
FAQ
Q: Will mortgage rates go down in 2026?
A: Most forecasts suggest rates will remain stable, averaging around 6.1% to 6.3% through the end of the year.
Q: Can I still get down payment assistance in East Texas?
A: Yes! Programs like TSAHC are active in East Texas and offer grants for teachers, veterans, and healthcare workers.
Q: How does the Texas Homestead Exemption help me?
A: It lowers the taxable value of your primary home, which reduces your monthly tax payment and increases the amount you can afford to borrow.
If you want help applying this to your situation, let’s talk.
Written by Laura Lea Blanks, Broker Owner, EPIC Mortgage, NMLS #2031656