Volume Builders Are Behind the Boom in Underwater Properties in New Braunfels and the Texas Hill Country

We're starting to see something interesting in the data across New Braunfels, San Marcos, and the greater Texas Hill Country, and it's a trend that should concern both homebuyers and real estate agents throughout Comal County, Guadalupe County, and Bexar County.

When I look at the latest numbers on underwater FHA loans—mortgages where the homeowner owes more than the home is currently worth—there's a clear pattern emerging in our local markets. The lenders tied to big national builders have the highest concentration of underwater FHA loans by far, and this trend is particularly visible in the rapid-growth areas of New Braunfels, San Marcos, and surrounding communities.

Let me show you what I mean and how it's affecting homebuyers right here in the Texas Hill Country.

The Numbers Don't Lie: Builder-Affiliated Lenders in New Braunfels and Beyond

Take a look at some of the top lenders on that list. Lennar Mortgage has nearly 27.5% of their FHA loans underwater. KBHS Home Loans (tied to KB Home) sits at 26.6%. Velocio Mortgage, which works with several large builders active in Comal County and Guadalupe County, is at 25.8%. DHI Mortgage Company (D.R. Horton's lending arm)—a major player in New Braunfels and San Marcos—shows 18% underwater.

Compare that to lenders who primarily work with resale homes in New Braunfels, San Marcos, and throughout Bexar County. Many of them are in the 10-13% range—still not great in this market, but significantly better than the builder-affiliated lenders operating across the Texas Hill Country.

This isn't a coincidence. There's a specific reason why builder loans are ending up underwater at such higher rates in Comal County, Guadalupe County, and beyond, and it comes down to how builders have been incentivizing sales over the past few years in these high-growth markets.

The Builder Incentive Game in New Braunfels and San Marcos

Here's what's been happening throughout New Braunfels, San Marcos, and the surrounding Texas Hill Country communities. Many builders have been advertising "discounted" rates to attract buyers to new developments in Comal County, Guadalupe County, and Bexar County. You've probably seen the ads along I-35 or in local New Braunfels and San Marcos publications: "Buy now and get a 4.5% interest rate!" or "Special financing available in New Braunfels—rates as low as 4%!"

Sounds great, right? In a market where rates have climbed to 6% or 7% across Texas, getting something in the low 5s or high 4s seems like an incredible deal, especially for first-time homebuyers in New Braunfels or San Marcos.

But here's the math that matters for Texas Hill Country homebuyers, and it's math that most buyers in Comal County and Guadalupe County don't see until it's too late.

FHA doesn't allow borrowers to finance discount points directly into their loan. However, builders operating in New Braunfels, San Marcos, and throughout the region can use seller concessions—up to 6% of the purchase price—to buy down the interest rate on your behalf.

The catch? That 6% is already built into the sales price of that new construction home in Comal County or Guadalupe County.

Let me give you a real example from the New Braunfels market. Say you're looking at a new construction home in one of the growing subdivisions off FM 306 or near Creekside in New Braunfels that the builder lists at $350,000. To offer you that attractive 4.9% rate instead of the market rate of 6.5%, they need to buy down your rate using discount points. That might cost $15,000 or more, depending on the loan amount and rate environment in the Texas Hill Country.

Where does that $15,000 come from? It's baked into the $350,000 price tag. The home might actually be worth $335,000 in the current New Braunfels market, but you're paying $350,000 to get that lower rate.

When you close on the loan for your New Braunfels or San Marcos home, you owe $350,000 (minus your down payment). But if the market slows down in Comal County, rates stay elevated, or home values level out in your Guadalupe County neighborhood, you could quickly find yourself owing more than the home is worth.

Why Resale Homes in New Braunfels and San Marcos Are Different

Now let's compare that to a resale home in New Braunfels, San Marcos, or anywhere across the Texas Hill Country—an existing home sold by a homeowner, not a builder.

Resale homes in Comal County and Guadalupe County are priced by the market, not by a builder's marketing department. If a home in the Gruene area of New Braunfels or near Texas State University in San Marcos is listed at $335,000, that price has been set based on comparable sales in the neighborhood, the condition of the home, and what buyers are actually willing to pay in the local Texas Hill Country market.

You might still use seller concessions to help with closing costs or even to buy down your rate slightly on your New Braunfels or San Marcos home purchase. But you're not starting from an artificially inflated price point. The seller isn't a corporation with a finance division designed to maximize profit on both the home sale and the mortgage.

Let's say you're comparing two scenarios in the New Braunfels area:

Scenario 1: New Construction in Comal County with Builder Incentive

• Purchase price: $350,000

• Builder rate buy-down: 4.9%

• Built-in concessions: $15,000 (already in price)

• Appraised value in New Braunfels today: $335,000

• Equity at closing: -$15,000 (you're already underwater)

Scenario 2: Resale Home in New Braunfels

• Purchase price: $335,000

• Market rate: 6.2%

• Seller concession: $5,000 (negotiated, not inflated in price)

• Appraised value: $335,000

• Equity at closing: $0 (or positive if you negotiate well)

In Scenario 2, your monthly payment on your New Braunfels home might be slightly higher due to the interest rate. But you're not starting out in a hole. And here's the thing for Texas Hill Country homebuyers—you can always refinance later if rates drop. But you can't refinance your way out of being underwater on your Comal County or Guadalupe County home unless you bring cash to the table or wait years for the market to appreciate enough to dig you out.

The Long-Term Consequences for New Braunfels and San Marcos Homeowners

Being underwater on your mortgage isn't just a number on a spreadsheet, whether you're in New Braunfels, San Marcos, or anywhere in Bexar County. It has real consequences for Texas Hill Country homeowners.

If you need to sell your New Braunfels home because of a job relocation to San Antonio or Austin, a growing family, or financial hardship, you can't. Not without writing a check for the difference between what you owe and what the home will sell for in the Comal County market.

If your neighborhood in San Marcos or New Braunfels sees a dip in values—something we've seen happen in markets across the Texas Hill Country when builders overproduce in Guadalupe County and Comal County—you could be stuck for years waiting to break even.

And if you financed with a low down payment FHA loan (as many first-time buyers do in New Braunfels and San Marcos), you have very little cushion to absorb any market correction in the Texas Hill Country.

A Message to REALTORS® in Comal County, Guadalupe County, and Bexar County

If you're a real estate agent serving New Braunfels, San Marcos, or the greater Texas Hill Country, use this data as a teaching tool with your buyers. When a client is excited about new construction in a Comal County subdivision because of a rate incentive, help them understand the full picture.

Pull up comparable sales in New Braunfels or San Marcos. Show them what resale homes are selling for in Guadalupe County and Bexar County. Run the numbers on both scenarios—yes, the payment might be lower with the builder's rate for that new home off I-35, but what is the total cost? What's the risk to your client buying in the Texas Hill Country?

Existing homes in New Braunfels and San Marcos aren't just an alternative—they're often the safer, smarter play for your buyers. They offer negotiating room, established neighborhoods like Gruene or Hunter's Crossing in New Braunfels, mature landscaping, and prices set by market reality in Comal County rather than marketing teams.

A Message to Homebuyers in New Braunfels, San Marcos, and the Texas Hill Country

I get it. Builder incentives for new construction in New Braunfels or San Marcos look amazing on paper. A brand-new home in Comal County or Guadalupe County with a low interest rate sounds like the dream, especially with all the growth happening along the I-35 corridor.

But don't fall for "builder incentives" in New Braunfels or San Marcos that look good today but could cost you for years to come. That lower rate doesn't help you if you're trapped in a Comal County home you can't sell without taking a loss.

Ask questions when shopping for homes in New Braunfels, San Marcos, or anywhere in the Texas Hill Country. Request a market analysis from your agent covering Comal County and Guadalupe County sales data. Find out what comparable resale homes are selling for in the same area of New Braunfels or San Marcos. And most importantly, understand that the price you pay for your Texas Hill Country home matters just as much—if not more—than the interest rate you get.

The Bottom Line for Texas Hill Country Homebuyers

We're seeing these high concentrations of underwater FHA loans among builder-affiliated lenders in New Braunfels, San Marcos, and throughout Comal County, Guadalupe County, and Bexar County because of how the game has been played over the past few years. Builders inflated prices in Texas Hill Country markets to fund rate buy-downs, and now that the market has shifted, buyers in New Braunfels and San Marcos are left holding the bag.

This isn't about demonizing builders operating in Comal County or Guadalupe County—they're running a business. But as a mortgage professional who's been in the New Braunfels and Texas Hill Country market for years, my job is to help people in San Marcos, New Braunfels, and throughout the region make informed decisions with their eyes wide open.

If you're considering new construction versus a resale home in New Braunfels, San Marcos, or anywhere in Comal County, Guadalupe County, or Bexar County, let's compare the real math side by side. No hype, no sales pitch—just facts and numbers that show you the true cost of each option in the Texas Hill Country market.

Because at the end of the day, the best loan for your New Braunfels or San Marcos home isn't the one with the lowest rate. It's the one that puts you in a home you can afford in Comal County or Guadalupe County, in a neighborhood you love in the Texas Hill Country, with equity you can build on and a future you can count on.

That's the kind of mortgage I want to help you get, whether you're buying in New Braunfels, San Marcos, or anywhere across the beautiful Texas Hill Country.

Steve Tomaselli is a mortgage broker serving New Braunfels, San Marcos, and the entire Texas Hill Country, including Comal County, Guadalupe County, and Bexar County. He specializes in helping first-time homebuyers and existing homeowners in the New Braunfels and San Marcos areas navigate the complexities of home financing with transparency and integrity. Contact him for a no-pressure consultation and real math on your home purchase options in the Texas Hill Country.