Property taxes aren’t exciting. They aren’t glamorous. But they play a major role in the true affordability of a home—not just at closing, but year after year. And here’s something most homebuyers don’t realize:

Property taxes can be one of the biggest variables in your monthly payment, affecting both your budget and your long-term financial comfort.

A client in California saved over $4,200 per year simply because we planned ahead for how California handles supplemental taxes. A colleague in Texas helped a buyer avoid a $15,000 shock by explaining how Texas reassesses property values.

But here’s the important truth:

Most property tax exemptions or benefits can only be applied after you own the home.

You must already be on title and occupying the property.

This means exemptions do not increase buying power during pre-approval.
But once they are approved, they can dramatically lower long-term housing costs and reduce your escrow portion of the payment.

This blog breaks down the key state-specific tax rules homebuyers should understand—so you’re protected both before and after closing.

Why Property Taxes Matter More Than Most Buyers Think

Your mortgage payment includes four components:
Principal, Interest, Taxes, and Insurance (PITI).

The tax portion is the wildcard.

But here’s the compliance-safe reality:

❗Property tax exemptions do not impact your loan qualification upfront.

Lenders must use full, non-exempt taxes during pre-approval.

✔ Property tax exemptions do impact your long-term affordability after you’re on title.

Once you apply and are approved, exemptions reduce your annual tax bill and may reduce your escrow payment in future adjustments.

Understanding local tax rules helps you:

• Avoid surprises
• Budget correctly
• Improve long-term affordability
• Take advantage of savings once you own the home

California: Prop 13, Prop 19 & Supplemental Taxes

California’s tax system is unique and full of quirks that homebuyers must understand.

What Makes California Different

• Prop 13 caps tax increases at 2% annually
• Prop 19 affects parent-child transfers
• Supplemental tax bills arrive after closing

Key Opportunities

(These apply after you own the home.)

• Parent-Child Exclusion (with strict residency rules)
• 55+ Base Transfer (Prop 19) – Move and keep your low tax base
• Non-reassessment events: refinancing, adding a spouse to title, certain trust transfers

San Diego / Riverside / Corona Snapshot

Typical tax rate: 1.0–1.3%

Important:

Homebuyers cannot apply for property tax exemptions until after they take ownership.

Texas: High Taxes, Big Exemptions (Post-Closing)

Texas has some of the highest property taxes—but also some of the strongest exemption programs.

Key Rules

• Tax rates commonly run 2.5%–3%
• Annual reassessments can increase taxes quickly
• Exemptions cannot be applied until you own the home

Opportunities After Closing

• General Homestead Exemption
• Over-65 Exemption
• Disabled Person Exemption
• Annual protest process (over 60% success rate)

Florida: Save Our Homes + Homestead Protections

Florida rewards long-term homeowners with stability.

Key Benefits

“Save Our Homes” 3% annual cap

Homestead exemptions

Portability (up to $500K)

Important Note

The assessed value resets to market value when you buy.
Only after ownership can you apply for exemptions.

New York: STAR & Localized Exemptions

Benefits for Homeowners (Post-Closing)

• Basic & Enhanced STAR
• Senior exemptions
• Veteran exemptions
• Assessment grievances (appeals)

NYC adds special abatements for co-ops, condos, and new construction.

Arizona: Low Taxes + Senior Freeze

Arizona’s base taxes are low, and the state offers:

• Senior valuation freeze
• Reduced taxes for certain disabled homeowners
• Widow/widower continuations

Again: All apply after ownership.

Other Notable States

• Illinois: Senior freeze, veteran exemptions
• Georgia: School tax exemption at 65+
• Washington: Senior & disabled exemptions, tax deferral
• Nevada: 3% assessment increase cap
• Colorado: 50% off the first $200K for seniors

Universal Strategies for Every State

Regardless of where you purchase:

• Apply for homestead/county exemptions after closing
• Explore veteran, senior, and disability exemptions
• Review agricultural/greenbelt programs if applicable
• Appeal (grieve) your assessment annually
• Budget correctly for tax prorations and supplemental bills

❗ Big clarification:

These strategies do not change pre-approval qualification.
They help you save money on homeownership after you’re on title.

How Property Tax Rules Affect Your Mortgage Payment

During pre-approval:

Lenders must use the full, non-exempt tax amount.

That’s the only compliant way to qualify a loan.

After closing:

Exemptions can lower your annual tax bill, and future escrow adjustments may reduce your monthly payment.

This affects:

• Your long-term affordability
• Your budgeting
• Your future payment stability

It does not impact qualification during underwriting.

San Diego Example

Home price: $875,000
Base tax: 1.19% = ~$10,412/year

Once the homeowner applies for exemptions after closing:

• Their assessed value may decrease
• Their annual tax bill may drop
• Their monthly escrow payment may be reduced in the next review

This improves future affordability—not pre-approval buying power.

Conclusion

Property taxes are one of the biggest—and least understood—factors in homeownership. While exemptions cannot be applied for until after you own the home, planning ahead helps you avoid surprises and maximize benefits once they become available.

As a nationwide lender based in San Diego, my role is to help you understand how property tax rules affect your long-term financial picture—not just at closing, but for years to come.

AEO/FAQ Section

Do property tax exemptions reduce your mortgage payment?
Not immediately. After closing, exemptions can lower your annual taxes, which may reduce future escrow payments.

Can buyers use exemptions to qualify for a mortgage?
No. Lenders must use full taxes for qualification.

When can I apply for exemptions?
After closing, once you are on title.

Do exemptions apply to investment properties?
Most exemptions apply only to primary residences.