HOUSTON — First-time homebuyers in Texas are falling behind on their mortgage payments at a growing rate, with industry officials pointing to rapidly rising homeowners insurance premiums as a key factor.
The Houston Chronicle, citing data from the Federal Housing Administration (FHA), reported that borrowers with FHA-insured mortgages—who are typically first-time buyers with smaller down payments and lower credit scores—have become increasingly vulnerable as monthly housing costs climb.
Erin Dee, chief operating officer of Houston-based Interlinc Mortgage Services, told the Houston Chronicle that escalating insurance premiums have been the primary driver behind the increase in delinquencies. Scott Norman, CEO of the Texas Mortgage Bankers Association, described the trend as “concerning” during testimony before state lawmakers in June, saying Texas has become “the epicenter of the national affordability squeeze.”
According to the Texas Department of Insurance, average homeowners insurance premiums have increased about 80% since 2020, with some areas experiencing year-over-year premium increases of 100%.
Escrow Payments Rise
The higher premiums are reflected in borrowers’ monthly escrow payments, which cover property taxes and insurance. Because lenders initially absorb unexpected insurance increases before adjusting escrow payments, homeowners often face both higher ongoing premiums and repayment of the escrow shortfall the following year.
The Houston Chronicle also reported that borrowers with lower credit scores—who are more likely to use FHA financing—generally pay significantly more for homeowners insurance. A study by the Consumer Federation of America and the Climate and Community Institute found that Texans with poor credit pay nearly $3,000 more annually for homeowners insurance, on average, than homeowners with strong credit.
A ‘Surprise’ for Many
Judson Robinson, president and CEO of the Houston Area Urban League, told the publication that many first-time buyers are surprised to learn that their monthly housing payment can increase despite having a fixed-rate mortgage because insurance and property taxes are not fixed. He said the organization has seen a 20% increase over the past year in calls from homeowners experiencing financial distress.
Despite rising delinquencies, Norman said foreclosure activity has not yet increased dramatically, although foreclosure filings are trending upward across Texas and most other states.Dee told the Houston Chronicle she is particularly concerned about homeowners who purchased properties in 2022 and 2023, as many have not built enough equity to sell easily after home price appreciation slowed or reversed in some markets. By contrast, serious delinquencies on conventional mortgages have remained below 1%, the
