Hard money lenders in Texas: usury, licensing, foreclosure speed and costs

Texas is the archetypal hard money state — first-Tuesday trustee sales about two months after notice, no redemption, no transfer tax — tempered by a usury ceiling and penalty regime that make sloppy fee structuring genuinely dangerous for lenders. Here is the rulebook behind that sentence.

Foreclosure process	Non-judicial
Typical time to sale	2 to 3 months from first notice or filing
Post-sale redemption	Texas provides no right of redemption after a foreclosure sale under a deed of trust.
Deficiency judgment	Allowed, with limits
Usury	Texas usury law is detailed: the general ceiling is 18% (with higher optional ceilings for larger commercial loans, published weekly by the Consumer Credit Commissioner), and usury penalties are severe; business-purpose hard money lenders stay within the applicable ceiling and treat fees carefully, because Texas courts have treated some fees as interest.
Transfer tax	Texas has no real estate transfer tax and no mortgage tax; only recording fees apply.
Median home price (approx.)	$300,000 · property tax about 1.68%

Interest rate limits in Texas

Texas usury law is detailed: the general ceiling is 18% (with higher optional ceilings for larger commercial loans, published weekly by the Consumer Credit Commissioner), and usury penalties are severe; business-purpose hard money lenders stay within the applicable ceiling and treat fees carefully, because Texas courts have treated some fees as interest.

Treat the cap and exemptions as a map, not as advice: exemptions depend on the borrower’s form, the loan size and the stated purpose, and penalties for getting it wrong can include loss of interest. Confirm with state counsel.

Do hard money lenders need a license in Texas?

Texas requires a residential mortgage loan company license for loans secured by residential property made to consumers; business-purpose loans to entities on investment property are generally exempt, and the Department of Savings and Mortgage Lending administers licensing. Texas home equity (cash-out) rules do not apply to investment property. Our guide on finding and vetting hard money lenders lists the questions to ask and the red flags; NMLS Consumer Access shows licensing history.

If the deal fails: the Texas foreclosure path

Ask any hard money lender what they underwrite after the collateral and they will say the exit — and after the exit, the time it takes to get the property back. Texas runs a non-judicial process: For a standard Texas purchase-money deed of trust, the lender sends a notice of default and intent to accelerate giving the homeowner at least 20 days to cure, then accelerates and sends a notice of sale at least 21 days before the sale, which is also filed with the county clerk and posted at the courthouse. Sales occur on the first Tuesday of the month. Home equity loans, reverse mortgages and certain tax liens instead require an expedited court order under Rule 736 before the trustee may sell. Expect 2 to 3 months to a sale in an ordinary case.

Texas provides no right of redemption after a foreclosure sale under a deed of trust. The homeowner must cure within the 20-day period or pay off before the sale.

After a standard Texas foreclosure, the lender may sue for the deficiency, but the borrower may ask the court to offset the debt by the property’s fair market value at the sale rather than the sale price. Texas home equity loans (Article XVI, Section 50(a)(6)) are non-recourse by constitution: no deficiency may be pursued against the borrower personally. See what happens when a hard money loan defaults and the Texas foreclosure process for the complete timeline.

Transfer taxes, property taxes and closing costs in Texas

Texas has no real estate transfer tax and no mortgage tax; only recording fees apply. Budget the transfer cost at purchase and again at sale, then Texas’s property tax at about 1.68% a year ($5,040 on the $300,000 median) prorated for the months you hold.

Texas closings run through title companies with state-regulated title premiums; buyer closing costs of about 2% to 3% are modest, but the property tax escrow — Texas has one of the highest effective rates in the country — is large.

Texas investor markets

Dallas–Fort Worth, Houston, San Antonio and Austin are all top-tier national investor markets, with El Paso, Corpus Christi, Lubbock and the Rio Grande Valley as secondary options; DFW and Houston lead the nation in flip volume in many years, and build-to-rent is a large Texas niche.

Investor activity data (ATTOM and similar) shifts yearly; verify with current local comps before committing capital.

Frequently asked questions

Is hard money lending legal in Texas?

Yes. Texas usury law is detailed: the general ceiling is 18% (with higher optional ceilings for larger commercial loans, published weekly by the Consumer Credit Commissioner), and usury penalties are severe; business-purpose hard money lenders stay within the applicable ceiling and treat fees carefully, because Texas courts have treated some fees as interest. Texas requires a residential mortgage loan company license for loans secured by residential property made to consumers; business-purpose loans to entities on investment property are generally exempt, and the Department of Savings and Mortgage Lending administers licensing.

How fast can a hard money lender foreclose in Texas?

Typically 2 to 3 months from the first formal notice or filing to the sale, under a non-judicial process. Texas provides no right of redemption after a foreclosure sale under a deed of trust.

What does a typical hard money loan cost in Texas?

Market-wide, roughly 9% to 14% interest and 1 to 4 points; on a loan of $255,000 (85% of the state’s rough $300,000 median) at an illustrative 11% with 2 points, nine months costs about $26,142 in interest and points before fees. See rates, points and LTV.

Hard money guides

Also for this state: first-time home buyer programs in Texas · foreclosure in Texas.

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