Your payment usually goes up after you buy a new build in Texas because your first escrow was set using a tax bill for the lot or a partly built house. Texas appraises property as of January 1, so the next January the appraisal district values the finished home, your taxes rise, and your lender raises your escrow payment to cover it, sometimes with a shortage on top. Here’s how it happens, when to expect it, and how to plan for it before you close.
Brock Bremmer | U.S. Air Force Reserves Veteran | Real Estate Agent | eXp Realty | San Antonio Metro Area
New Construction Specialist
Also see: Property Taxes in San Antonio | Builder Lenders vs Outside Lenders | VA Loans on New Construction
Why Is the First Tax Bill on a New Build So Low?
Texas Tax Code Section 23.01 says taxable property is appraised at its market value as of January 1. Whatever was on your lot that day is what gets taxed for the whole year.
- Bare lot on January 1: The year’s bill covers land only, even if you move in by summer
- Partly built on January 1: The appraisal district values what was there, often a slab or a frame
- Finished but unsold: Tax Code Section 23.12 treats a never-occupied home that a builder holds for sale as inventory, appraised as part of the builder’s business
Your lender sets your first escrow payment from the best tax figure it has at closing, which is often that low lot-based number or an estimate. The payment on your closing disclosure can look smaller than what you’ll pay a year or two later.
When Does the Payment Jump?
Here’s a common timeline for a home that closes mid-year:
- Closing: Taxes for the current year are prorated between you and the builder. TREC’s New Home Contract says the parties adjust the proration when actual tax statements come out
- October to January: The tax bill for your closing year arrives, still based on January 1 value. Under Tax Code Section 31.02, taxes are generally delinquent if not paid before February 1 of the next year. Your lender pays this from escrow
- The next January 1: The finished house is appraised for the first time
- Spring and summer: You get a notice of appraised value with the full home value
- Annual escrow analysis: Your servicer recalculates your payment for the higher bill
What Is an Escrow Shortage, and How Do You Repay It?
Federal Regulation X (12 CFR 1024.17) controls how servicers handle escrow accounts. Your servicer has to run an escrow analysis at the end of each 12-month computation year and send you an annual statement.
Two things can happen at once when taxes jump:
- Higher monthly escrow: Your payment rises to cover the new, higher annual bill going forward
- Shortage: If the account didn’t collect enough to pay the last bill, you owe the difference
Under Regulation X, if the shortage is one month’s escrow payment or more, the servicer can either let it stand or spread it over at least 12 months in equal payments. If it’s less than one month’s payment, the servicer can also ask you to repay it within 30 days. Some owners prefer to pay the shortage in one lump sum to keep the monthly payment lower. Ask your servicer whether it accepts that.
How Much Can the Increase Be?
Here’s an example using a hypothetical $350,000 new home in New Braunfels on the Guadalupe County side. The 2025 official rates (per $100) are 0.2784 for Guadalupe County, 0.408936 for the City of New Braunfels, and 1.0377 for New Braunfels ISD. Your actual taxing units, value, and exemptions will be different.
| Item | Lot-Only Year | Finished-Home Year |
| Example appraised value | $60,000 | $350,000 |
| School taxable value | $60,000 | $210,000 (after $140,000 homestead exemption) |
| Estimated annual taxes | About $1,035 | About $4,585 |
| Monthly tax escrow | About $86 | About $382 |
In this example, the tax part of the payment rises by about $296 a month, before any shortage. That doesn’t count the lateral road tax, any MUD or PID, or local-option exemptions, which can change the result either way.
How Does the Homestead Exemption Help?
The Texas Comptroller says school districts must give a $140,000 homestead exemption. A home worth $300,000, for example, is taxed for school purposes as if it were worth $160,000. Some cities, counties, and districts offer an extra local-option exemption of up to 20%.
- When to file: File Form 50-114 with your appraisal district. The regular window runs January 1 to April 30, and late filing is allowed in many cases
- Buying mid-year: The Comptroller says a buyer can get the exemption for the part of the year they own the home if the prior owner didn’t receive it. A builder holding the home for sale wouldn’t have had a homestead exemption on it
- The 10% cap: Tax Code Section 23.23 limits yearly increases in a homestead’s appraised value to 10%, starting the year after you first qualify. New improvements, like a house finished on a lot that was taxed as land, are added on top of the cap. That’s why the first full-value year can jump by much more than 10%
How Do You Plan for It Before Closing?
- Ask your lender to escrow on the finished value: Ask whether your lender can estimate taxes on the full price instead of the lot bill. Your payment starts higher, but you can avoid most of the shortage
- Get the full tax rate for your lot: Ask the builder for every taxing unit, including any MUD or PID, and check it with the appraisal district
- Budget for the jump: Set aside the monthly difference from day one
- Protest if the value looks high: Your notice of appraised value explains the protest deadline
I walk through what to expect at closing in What Actually Happens on Closing Day When You Buy New Construction in San Antonio on my YouTube channel.
Frequently Asked Questions: Escrow and Taxes on a New Build
Why did my escrow go up so much the second year in my new home?
Texas appraises property as of January 1. If your lot was bare or partly built on that date, your first tax bill was based on that lower value. The next year the finished home is taxed, so your servicer raises the escrow payment and may add a shortage.
Do I have to pay an escrow shortage all at once?
Usually not. Under federal Regulation X, if the shortage is at least one month’s escrow payment, the servicer can let it stand or spread it over at least 12 months. Ask your servicer whether you can pay it in a lump sum to lower the monthly payment.
Ready to Buy a New Build Without Payment Surprises?
Brock Bremmer with eXp Realty is a U.S. Air Force Reserves veteran who has helped buyers and sellers close 120+ homes across the San Antonio metro. He helps new construction buyers check lot-specific taxing units, compare builder and outside lender offers, and plan for the first full-value tax year.
- 📞 Call or text: 210-501-5088
- 📧 Email: [email protected]
- 📅 Schedule a free consultation
Also see: Guadalupe County Property Taxes | Property Taxes in New Braunfels | Property Taxes in Boerne | New Construction Inspections
Sources: Texas Tax Code Chapter 23 (Sections 23.01, 23.12, and 23.23); Texas Tax Code Chapter 31 (Section 31.02); Texas Comptroller, residence homestead exemptions; Texas Comptroller, valuing property; CFPB, Regulation X 1024.17 escrow accounts; TREC New Home Contract (Incomplete Construction), Paragraph 13; Guadalupe County tax rates (2025); New Braunfels ISD (2025 adopted tax rate); City of New Braunfels (2025 tax rate).