Fix and Flip Loans in Texas: Why the Homestead Law Doesn’t Touch Your Deal, and What Actually Does

A $320,000 flip in Dallas County and a $320,000 flip in a state with a 1% property tax rate run on identical fix-and-flip terms — up to 90% of cost for an experienced investor on light rehab, 75% of after-repair value, 620 minimum FICO. The loan program doesn’t know what state the house sits in. The exit does. Texas carries three features that change a deal before and after the rehab is done: a homestead law new investors keep asking about and usually don’t need, a foreclosure process that moves in weeks rather than years, and a property tax bill that can take a point and a half off your DSCR the day you refinance into a hold. None of the three shows up in the loan terms. All three show up in the math.

The Homestead Law That Doesn’t Apply to Your Flip

Texas Constitution Article XVI, Section 50 is the most misquoted piece of real estate law among new Texas investors. It caps home equity borrowing against a homestead at 80% of value, limits fees to 2% of the loan, and imposes a 12-day waiting period before closing. New investors occasionally ask whether Section 50 limits what a private lender can advance on a flip. It doesn’t, because Section 50 governs a homestead — the home a person actually occupies as a principal residence. A vacant or tenant-occupied investment property purchased and held in an LLC or other business entity for resale is not a homestead under the Texas Constitution. Business-purpose fix-and-flip financing funds at up to 90% of cost for an experienced investor on a light rehab (85% with some experience, 80% for a new investor), capped at 75% of ARV — the Section 50 ceiling never enters the underwriting. The one case worth a call to title before closing: buying from a seller who is still living in the house. That doesn’t convert your acquisition loan into a homestead loan, but it’s worth confirming who’s titled where before you’re at the table.

A Foreclosure Timeline Measured in Weeks

Texas forecloses non-judicially. Under Texas Property Code Section 51.002, a lender posts and files a notice of sale at least 21 days before the sale date and mails notice to the borrower by certified mail in that same window — no court filing, no judge, no multi-year docket. In a judicial-foreclosure state, that process alone can run 12 to 24 months before a lender has clear title to resell. It’s one reason private lenders underwrite Texas business-purpose deals comfortably at standard leverage: if a deal goes wrong, the exposure window is months, not years. It cuts the other way for a borrower, too — 21 days of notice is not much runway to refinance, sell, or bring a loan current once it’s triggered, so a workout conversation belongs well before a payment is missed, not after the notice is posted.

Title Insurance Without the Shopping

Texas is one of a handful of states where the Texas Department of Insurance sets title insurance premiums by promulgated rate — every underwriter charges the same filed premium for the same coverage on the same sale price. In a state where title premiums are negotiable, two quotes on the same deal can land on different closing costs depending on which title company is involved. In Texas that variable disappears: the title line on your closing disclosure is the same number regardless of underwriter, which makes comparing two loan quotes cleaner since title cost isn’t doing any of the work.

The Property Tax Bill That Shows Up on the Refinance

Texas has no state income tax, and the state makes up the difference through property tax — effective rates of roughly 1.6% to 2.2% of assessed value are routine once county, school district, and municipal utility district levies are stacked, among the highest in the country. That doesn’t touch the fix-and-flip loan itself, but it reshapes the DSCR math for an investor who refinances the flip into a long-term rental hold instead of selling it.

Same loan, same rent, same rate — the tax line alone moves DSCR from 1.27x to 1.11x. The DSCR program here qualifies rentals down to a 0.75x floor, so this deal still clears with room, but an investor penciling the hold off a national rule of thumb for property tax will overstate their coverage by more than a tenth of a point before they’ve touched the actual county and school district rate. Pull the specific tax bill for the property’s taxing jurisdictions, not a statewide average, before deciding whether the refinance works.

When This Is the Wrong Call

If the deal only clears at the 90% experienced-investor tier and the deal history to qualify for it isn’t there yet, purchase prices in Dallas-Fort Worth or Austin can make the 80% new-investor cash requirement unworkable on a first flip — a lower-priced Texas market or a smaller first deal is usually the better move than forcing a high price point on deal one. If the exit plan is a cash-out refinance into a DSCR rental rather than a sale, run the actual tax bill for the property’s specific county and school district before assuming a flip that pencils also pencils as a hold — the gap above is not small. And if the 21-day foreclosure notice period reads like a cushion, that’s backwards: it’s a reason to line up a realistic sale or workout plan long before a payment is missed, since there’s little time to react once the notice is posted.

Texas fix-and-flip terms are on the fix-and-flip loan program page, the DSCR exit option described above is on the DSCR loan program page, current indicative pricing for both is on the rates page, and a specific Texas deal can be sized against these numbers by submitting it through the deal submission form.