The Texas 80 Percent Homestead Rule
Program and regulatory figures verified September 17, 2026. Details change; confirm your scenario with us.
Texas protects homestead equity more aggressively than any other state. For a homeowner trying to buy the next house first, those protections are also the obstacle. Here is exactly what the constitution says and what it does to the math.
Where does the 80 percent limit come from?
Not from a lender and not from Fannie Mae. It is written into the Texas Constitution. Article XVI, Section 50(a)(6)(B) permits a home equity extension of credit only where the principal amount, added to the aggregate total of the outstanding principal balances of all other indebtedness secured by valid encumbrances of record against the homestead, does not exceed 80 percent of the fair market value of the homestead on the date the extension of credit is made.
Two words in that sentence do the damage. Aggregate means your existing mortgage is inside the ceiling, not beside it. Homestead means this applies to the house you live in, which is exactly the house whose equity you were hoping to use.
What it does to a move-up buyer's math
Take an owner whose house appraises at a given value with a first mortgage at 68 percent of that value. The constitution allows total homestead debt up to 80 percent. That leaves 12 percent of the home's value, before any closing costs, as the absolute maximum that could come out. Most Texas move-up buyers discover that the number they had in mind is roughly double what the rule allows.
It is worth saying plainly: this is not a lender being conservative. No Texas lender can go past it, and no underwriting system can approve around it. Fannie Mae's guide says so in as many words, setting the maximum LTV and CLTV at 80 percent notwithstanding any conflicting provisions or any specific DU recommendation or finding.
The rule most people have never heard
Subordinate HELOC financing is prohibited behind a Texas Section 50(a)(6) loan. Fannie Mae mentions it almost in passing, noting that HCLTV ratios do not apply to these loans for that reason, but the consequence is large. In most states a homeowner short on a down payment opens a line behind the first mortgage. In Texas, once a 50(a)(6) loan is in place, that door is closed.
The timing rules
- Twelve days minimum. The loan may not close before the 12th day after the later of the date you submit the application or the date the lender delivers the notice required by Section 50(g).
- One per homestead per year. It may not close before the first anniversary of the closing date of any other Section 50(a)(6) loan secured by the same homestead, unless you request an earlier closing on oath during a declared state of emergency.
- Location is fixed. Closing may occur only at the office of the lender, a title company, or an attorney at law.
For someone racing a closing date on a new house, the twelve-day floor alone can decide the strategy.
What Texas gives you in return
The trade is real and it is in your favour on the downside. A Section 50(a)(6) loan is without recourse for personal liability against you or your spouse unless you obtained it by actual fraud. Fees to originate, evaluate, maintain, record, insure or service the loan are capped at two percent of the original principal, excluding a third-party appraisal, a state-licensed survey, and the state base title insurance premium. Texas decided homeowners should be hard to foreclose into personal bankruptcy and hard to nickel to death. The cost of that decision is flexibility.
So what do Texans actually do?
They stop trying to solve it with the old house. Once you accept that the equity is mostly locked until the sale closes, the question becomes how to carry the new house until then, and there are three workable answers on the structures page. The one that surprises people most is keeping the current home and renting it, which converts a timing problem into an income question.
If your next Texas home is above the conforming limit, the jumbo path works differently again.
Frequently asked questions
Does the 80 percent limit include my existing mortgage?
Yes. The constitution measures the new extension of credit plus the outstanding principal balances of all other indebtedness secured by the homestead against 80 percent of fair market value. Your first mortgage sits inside that ceiling, which is what makes the usable number so much smaller than owners expect.
Can a lender make an exception to the Texas 80 percent rule?
No. It is a constitutional limit, not a guideline. Fannie Mae states that the 80 percent maximum applies notwithstanding any conflicting provisions or any specific Desktop Underwriter recommendation or finding, so an automated approval does not override it either.
What does non-recourse mean on a Texas home equity loan?
It means the loan is without recourse for personal liability against the owner and the owner's spouse unless the credit was obtained by actual fraud. The lender's remedy is the property. That is a meaningful borrower protection and it is part of why the rules around these loans are so tight.
Why does a Texas home equity loan take at least twelve days?
Because Section 50(a)(6)(M)(i) says it may not close before the 12th day after the later of your application or the lender's required notice. It is a floor built into the constitution, so it applies at every lender equally.
Are the fees on a Texas home equity loan capped?
Yes. Fees charged to originate, evaluate, maintain, record, insure or service the loan may not exceed two percent of the original principal amount. A third-party appraisal, a state-licensed survey, and the state base premium for a mortgagee title policy sit outside that cap.
Mike Certo · NMLS #260555 · Cornerstone First Mortgage NMLS #173855 · Equal Housing Lender. Educational content about financing, not a loan commitment and not legal, tax, or real estate advice. Texas homestead lending rules, property tax treatment, and loan limits change and depend on your facts; your real estate agent handles the purchase paperwork and your CPA or a Texas attorney handles legal and tax questions. Loans are subject to borrower and property qualification.