It is no longer news that purchasing a home in any state necessitates a significant financial and time commitment. And, of all places in the country, Texas appears to draw the most prospective house buyers. Is buying a house in Texas, however, worth the stress and financial investment?
With a monthly mortgage payment of $1,443, Texas has one of the lowest in the country, even lower than the national average of $1,500. Furthermore, with reduced mortgage rates and some areas in Texas experiencing constant increases in property and rent prices, purchasing a home in Texas may be worth the risk in the long term.
That is not the only reason to purchase a home in Texas. Overall, Texas offers property purchasers a lower cost of living, a warmer environment, and a plethora of job options. Here are some recommendations for buying a property in Texas, whether you are ready to buy a house now or are still considering it.
How To Buy A House In Texas
Whether you are ready to buy a house right now or are just starting to think about it, there are a few steps you can do to get started when buying a home in Texas.
1. Evaluate Your Financial Situation
2. Get Pre-Approved for a Mortgage
3. Find a Local Real Estate Agent
4. Sign a Buyer's Rep Agreement
5. Choose the Right Neighborhood
6. Discuss What You Want Before You Start Looking
7. Start House Hunting
8. Make an Offer on the House of Your Dreams
9. Sign the Contract
10. Apply for a Mortgage
11. Schedule a Home Inspection and Appraisal
12. Get Homeowners Insurance
13. Finalize and Close on the House
1. Evaluate Your Financial Situation
Key Takeaway: Before you begin the home-buying process, we recommend paying off debt and saving up three to six months of expenses in an emergency fund.
Buying a property may be the largest financial decision you'll ever make, so make sure your finances are in order before you take the plunge.
Using a home affordability calculator can assist you in determining your budget by taking into account your income, debts, location, and down payment amount. You'll be able to see how your monthly mortgage payments can pile up and how your finances would appear as a homeowner. This can help you keep your ambitions in check. You might be able to qualify for a large mortgage, but that doesn't imply you want to devote so much of your income to housing.
Also, check your credit score. A higher credit score is the single most effective technique to obtain a reduced mortgage interest rate. Understand your credit score's mortgage alternatives. If your credit score might need some work, it may be worth delaying homeownership to see what you can do to improve it.
Credit Score to Buy a House In Texas
Checking your credit score is one of the first things to take when trying to buy a house in Texas, especially if you're a first-time home buyer. To qualify for a conventional loan, you must have a FICO® score of 620 or greater.
However, in order to qualify for an FHA loan, you must have a median credit score of 580. The VA does not demand a certain credit score in order to purchase a home with a VA loan, but lenders are free to create their own regulations. In terms of credit score, Texas has a low average credit score of roughly 692, making it one of the few states with a low average credit score.
Future Mortgage Payment
If you can't afford to pay cash for a home, you'll almost certainly need a mortgage. And you're not alone: according to the National Association of Realtors, 87 percent of homebuyers will need to finance their house purchase in 2021. (NAR). Before you apply for a mortgage, you must determine if you can afford the monthly payments in the future.
The size and term of the loan are the two most important criteria in setting your monthly mortgage payments. The size of the loan is the amount borrowed, and the term is the amount of time you have to pay it back. In general, the longer the period, the lower the monthly payment. As a result, 30-year mortgages are the most common.
For instance, let’s say you are buying a $400,000 house with a 20% down payment and 5.63% interest rate, on a 30-year mortgage term. This is what your mortgage payments will look like:
Now let’s say you are buying a $400,000 house with a 10% down payment and 5.63% interest rate, on a 15-year mortgage term. This is what your mortgage payments will look like:
A mortgage calculator is an easy way to compare mortgage rates and your possible mortgage payments over the life of the loan. Remember that certain mortgage parameters like mortgage insurance and property taxes can influence the amount you pay over the life of the loan.
Debt-to-Income Ratio
Credit cards, school loans, auto loans, and personal loans are all taken into account by lenders. This information is used to determine your debt to income ratio (DTI), which is your entire monthly debt (including any potential mortgage) divided by your gross monthly income. While some lenders will issue mortgages for buyers with DTIs as high as 43%, it is preferable to maintain your DTI at around 36%.
How to Calculate Your Debt-to-Income Ratio
Divide your monthly debt by your gross monthly income to get your DTI. For example, if your monthly debts (credit card minimum payments, loan payments, and so on) are $2,000 and your gross monthly income is $6,000, your DTI is $2,000/$6,000, or 33%. Your lender will compute your DTI based on the debts listed on your credit report.
Down Payment
Your down payment is a significant, one-time investment made toward the purchase of a home. Many lenders want a down payment because it reduces the risk of loss if a borrower defaults on their mortgage.
Many home purchasers assume that a 20% down payment is required to buy a property. This is not correct. Furthermore, a down payment of that size is out of reach for many first-time home purchasers. According to the National Association of Realtors, the typical first-time homebuyer's down payment is roughly 7% of the purchase price.
Fortunately, buyers who cannot afford a 20% down payment have various options. A conventional loan, for example, can be obtained with as little as 3% down. A 3.5 percent down payment is required for Federal Housing Administration (FHA) loans. Loans from the Department of Veterans Affairs (VA) and the United States Department of Agriculture (USDA) even allow eligible and qualifying borrowers to put down 0%.
However, there are advantages to paying a bigger down payment. For one thing, it usually means that you'll have more mortgage possibilities. It also usually means a cheaper interest rate and a smaller monthly payment. Furthermore, if you put down at least 20% on a conventional loan, you will not be required to pay for private mortgage insurance (PMI).
Closing Costs
You'll also need to save money for closing costs, which are the fees you pay to receive the loan. There are numerous factors that influence how much you'll spend on closing costs, but it's usually a good idea to budget for 3 - 6 percent of the home's worth. According to a 2020 research report by The Ascent, the average closing cost in Texas is $3,744 for a property priced at $274,163, which is 1.37 percent of the home sale price.
Closing expenses vary depending on the loan type, lender, and location. Almost all homeowners will pay for things like appraisal costs and title insurance. When you get a government-backed loan, you'll usually have to pay an insurance premium or a financing charge upfront.
Before you close on your loan, your lender will provide you with a document called a Closing Disclosure, which includes all of the closing costs you must cover and how much you must pay at closing. Before you close, go over your Closing Disclosure thoroughly to understand what to expect and to detect any problems.
2. Get Pre-Approved for a Mortgage
Key Takeaway: To get pre-approved for a home loan, mortgage lenders analyze your entire financial condition, including total income, personal debt, and cash reserves. Most lenders will ask that your debt-to-income ratio, including your prospective mortgage, be less than 36 percent.
Contrary to popular opinion, being pre-qualified for a loan does not guarantee that you will be able to acquire one. Furthermore, not all qualifications are equivalent. When you get prequalified in the traditional sense, lenders merely estimate your finances based on the information you supply.
However, getting preapproved for a loan necessitates a thorough study of your finances, which involves validating your income, assets, and credit rating. When you get preapproved for a loan, you are guaranteed that you will be able to obtain the loan, presuming your finances do not change between preapproval and closing on the home, as well as receiving an appraisal at a high enough value to make the loan work.
A pre-approval is useful since it shows you exactly how much the lender is ready to offer you and lists the fees of acquiring the loan. Being pre-approved also shows the seller that you're serious about buying, which can make a difference if you end yourself in a bidding war.
Compare Interest Rates
Qualification standards, interest rates, and closing expenses vary widely amongst lenders, making it critical to do your study. When comparing interest rates, request a Loan Estimate from each one, which will detail the loan conditions, estimated payments, and closing fees for your potential mortgage. This form is typically supplied, allowing you to easily compare lenders.
Choose a Lender
It is critical to shop around for the finest mortgage lender for you. Investigate several mortgage lenders, including banks, online lenders, and credit unions, among others. Knowing all of your options can assist you in making the best selection.
Find a lender who is simple to work with, knows the area you want to buy in, answers all of your questions, and keeps you informed about the home buying process every step of the way—especially if you are a first-time homebuyer.
Also, keep an eye out for rate and fee variances amongst lenders and include those costs into your budget. Rates and fees might vary between lenders, even for the same applicant, so browse around and compare your options before settling on one - even a 0.5 percent difference in interest rate can save you thousands of dollars over the life of the loan.
3. Find a Local Texas Real Estate Agent
Key Takeaway: Before hiring a real estate agent, find out about their track record, knowledge of your desired neighborhood and what their workload is like. You don’t want someone who is over-scheduled.
Real estate is a unique industry with its own vocabulary and changing regulations that can be hard to navigate. By selecting a REALTOR® to work with before you start looking at houses, you can begin your home search with an experienced industry professional to guide you and help protect your best interests through every step of the home buying process.
REALTOR® and Real Estate Agent Are Not the Same Things
A real estate agent is a state-licensed real estate professional who can assist you in the buying or selling of real estate. A REALTOR is a licensed real estate agent who is also a member of the National Association of Realtors and is bound by their strict code of ethics.
REALTORS also belong to boards on the state and local level, affording them greater access to market data and the multiple listing service (MLS), which is a local database of all available properties.
By opting to work with a REALTOR, you are selecting an individual who is held to the highest industry standards and has the best access to information about potential homes and market trends.
Don’t Be Afraid to Interview Your REALTOR®
Your REALTOR® will be your guide through every step of the home buying process. Whether you find a REALTOR® through an online review, a referral from a friend, or look them up on homecity.com, it is important to select a person you feel comfortable working with as you will be spending a good deal of time communicating with them in the coming months.
Meet your potential REALTOR® face to face or via video conference to make sure it is a good fit for all parties before you make a final decision. Asking a few preliminary questions will help you determine if they have the experience and expertise you need and if your personalities are a good match.
Questions you could ask include:
* How many years have you been in real estate?
* Do you represent more buyers or sellers?
* What areas of town do you work in the most?
* What is your go-to communication method - email, phone, or text?
* Do you work alone or are you part of a team?
* Do you have any reviews I can see?
* What price range do you typically work in?
It’s perfectly acceptable for you to interview a few different REALTORS® before deciding which one to move forward with. Just make sure that you let each one know that you are talking to other REALTORS® as a professional courtesy.
Also, don’t work with multiple REALTORS® simultaneously as this will cause confusion and potential issues down the line. It is much better to pick your preferred agent before you begin looking at homes.
4. Sign a Buyer Representation Agreement
While it may appear to be simply another piece of paper to sign, a buyer representation agreement provides you with client privileges that you would not otherwise have. If you haven't signed a buyer representation agreement with your real estate agent, you're a customer, not an approved client, and your real estate agent's legal obligation is to the seller.
A buyer representation agreement creates a legal relationship between you and your realtor. It will clearly clarify all expectations and safeguard your client's rights. When you sign an agreement, you are under no obligation to buy anything, the conditions are always flexible before you sign, and you can cancel at any moment with simple written notice. Signing a buyer representation agreement is a low-risk strategy to ensure that your best interests are protected.
5. Choose the Right Neighborhood
Key Takeaway: While you can transform your home, you may not be able to transform the neighborhood. Spend time researching your potential home location and what it offers.
Whether you are a first-time home buyer or relocating to a different part of the country, it is critical to look not just at the homes for sale but also at your potential future town and neighborhood. We have idealized, preconceived views about how our ideal home will be, therefore it is critical to pay attention to everything that surrounds your dream home.
Set aside some time to conduct some online research. Your realtor's website could be a great source of information about your potential area and everything it has to offer, as well as information on the schools and their performance and rating in the state. Also, if your neighborhood has a website, check it out.
Average Home Values
When looking to buy a house in a neighborhood or area, it is important that you consider the average value of homes in the area. One of the best ways to find the average value of homes in a specific area is by making use of comp data. Comp data allows you to find the sale prices of similar homes in your neighborhood that have sold recently.
Another way is to find out the price predictions of homes in the neighborhood. Ask your real estate agent about the changes in the price of homes in the neighborhood over the last 10 years. This should give you insight into how fast home values appreciate or depreciate in the area.
Whether it’s a home appraisal or a comparative market analysis done by an agent, it is important that you find out the average home values in the neighborhood to avoid buyer remorse.
Local Lifestyle and Amenities
Once you've located a property you like, look around the neighborhoods to make sure it meets your lifestyle and everyday needs. Drive past the house in the evenings and on weekends to ensure that the street isn't too loud while everyone is home.
If feasible, park close and walk around the neighborhood with a buddy or your dog to get a sense of the neighborhood. To acquire genuine information from neutral sources, strike up a conversation with people you encounter and ask them what they think about living in the area.
You can also look at commute times to crucial areas like work or your parent's residence. Locate vital amenities for you, such as the nearest grocery store, park, library, gym, or coffee shop. If you have school-aged children, make sure you drive them there as well.
Checking over the neighborhood will give you a good idea of the lifestyle you will live there. It is simple to fall in love with a house and make an emotional decision without considering the surroundings. The backyard may be fantastic, but long commutes, nasty neighbors, or limited access to the things you enjoy might rapidly sour the image of your gorgeous new home.
6. Discuss What You Want Before You Start Looking
Key Takeaways: Make a list of everything you desire in a house and rank them in order of importance. This will assist you in distinguishing between "must-haves" and "nice-to-haves."
It’s a good idea to sit down and write out a list of all your “must-haves” and “deal breakers” as a first step. If you are buying with a spouse or partner, make separate lists and compare notes to come up with a top two in each category.
The rest of your lists can go on a wish list for reference. Honing in on what you want before you even start looking at houses will help you to narrow your search and prevent wasted time looking at properties that won’t meet your needs.
Keep in mind though that you probably won’t get everything on your wish list. Your price range and the current inventory of available properties may mean that there are things you have to compromise on. You will still be able to find a home that you love, it just may not have the wrap-around porch you were hoping for.
7. Start House Hunting
Key Takeaway: Start searching for a house once you have been pre-approved for a mortgage. Write out a list of neighborhoods, home styles, and features to help make your hunt easy.
Your real estate agent will assist you in finding homes in Texas within your price range. Make a list of your top priorities, some of which may vary depending on whether you're searching for a starter home or a lifelong home, as well as the style of house you want.
Here are some things to think about when looking for a home:
* Price
* Square footage
* Home condition and the possible need for repairs
* Access to public transportation
* Number of bedrooms
* Backyard/swimming pool
* Local entertainment options
* Local school district ranking
* Property value trends
* Property/real estate taxes
Rank your priorities in order of importance and show this list to your agent. Your agent will then show you residences that meet your requirements. You may need to spend some time looking for the perfect home, so don't be disappointed if it takes longer than intended.
Only you know which property is best for you. Make sure you look at a lot of houses before deciding which one to make an offer on. Much of the house-seeking process, like much of the home-buying process, may be done online. Once you find a property you like that fits your needs and budget, it’s time to make an offer.
Utilize Your REALTOR® to Find Homes
While it can be tempting to hop on the internet at 10 pm and start browsing through houses, keep in mind that the perfect home you are looking at may already be under contract or sold, as not all sites update regularly. There may also be potential issues with the home or area that you are not aware of.
The best way to look for homes is to sit down with your REALTOR® and discuss your “must-haves”, “deal-breakers” and wish list, as well as your price range and your lifestyle. They will then take that information and use the industry tools at their disposal to compile an accurate and up-to-date list of available properties that match your criteria.
If you see a home online that you love, you can absolutely ask your REALTOR® about it. They will be able to tell you if it is still on the market, and if there are any potential issues with the area, like a noisy street, higher crime or heavy traffic. Everyone likes to look at houses online, just be sure to primarily lean on your REALTOR® 's expertise.
When is The Best Time to Buy a House in Texas?
One approach to making buying a house easier is to start the process at the right moment. In Texas, home inventory, mortgage rates, and market trends change from month to month. In reality, the optimal time to buy a house is determined by your priorities and financial circumstances. According to a study by Ramsey Solutions, below are some of the best months to buy a house in Texas.
8. Make an Offer on the House of Your Choice
Key Takeaway: Houses in Texas normally stay on the market for 60 days before getting under contract – more desirable homes may sell much faster! If you locate a home you like, don't be afraid to make an offer.
Once you’ve found a home you love, it’s important to make an offer right away to avoid missing your opportunity, particularly in fast-paced markets like Austin. It is a major decision, so take the time you need to be confident in your choice, but once you’ve made your choice let your REALTOR® know immediately so they can help you craft a winning offer.
Your offer will include your offered sales price, as well as any terms or concessions you’d like to ask for, the estimated closing date, and the amount of earnest money you will provide, among other details.
Consider the Current Market When Making An Offer
The current market conditions will dictate what your offer will need to look like. In a seller’s market, which is when there are more buyers than available homes for sale, your offer will need to be as attractive to the seller as you can make it.
If there are multiple offers being presented on each property, asking for too many concessions or trying to start too low could quickly put you out of the running and you will have to begin your home search again. If you are in a super hot market (in Texas or anywhere) buying a home with cash vs a loan could put your offer ahead of others.
If it is a buyer’s market, meaning there are more homes for sale than available buyers, you will have more leeway to ask the seller to help pay closing costs or to come down on the price.
Your REALTOR® will be able to walk you through the current market conditions and help you to decide on an offer that you are comfortable making and that will be attractive to the seller. They will then write up the offer and submit it on your behalf to begin the negotiation process.
Be Prepared for a Counter Offer
Once you submit an offer to the seller they have three options: they can accept the offer as is, reject the offer completely, or make a counter-offer. The counter-offer could increase the sales price, remove their contribution to closing costs or concessions you may have asked for, or even change the proposed closing date.
Once you receive the counter-offer, you have the same options. You can accept it and move forward with the contract, reject it and move on to another property, or present a counter-offer of your own. Real estate agents are skilled negotiators, so lean on your REALTOR’S® expertise to steer you through this stressful part of the process.
In a highly competitive seller’s market, it is also possible to get into a bidding situation against other buyers. If you find yourself buying in this type of market, it’s a good idea to have a final figure in mind so that you can quickly decide when it’s time to simply move on instead of continuing the negotiations. Talk to your agent as you are writing up the initial offer and decide ahead of time what your absolute, will-not-go-higher offer will be.
How Long You Have to Make an Offer
Once you’ve decided to buy a home and found one that you love, it’s time to get down to business (send an offer). And with the Texas housing market becoming extremely competitive, getting into a contract quickly is key.
However, sellers have no legal obligation to respond to your offer at all. It is possible (though unlikely if you made a great offer) that you won’t hear back. But it is common to get feedback on an offer within a couple of days — typically 48 hours.
Writing the Perfect Offer Letter
You may win a seller's heart—and home—with the appropriate home offer letter. A house offer letter is not prevalent in competitive markets when a house offer is made. Here's how to create the best house offer letter possible—and get that house.
* Personalize your opener as much as possible. Before you begin, consider your tone. A house offer letter should be warm and sincere. To establish a link, include the seller's name.
* Inform them about yourself. Many sellers prefer the thought of passing on their home to individuals who would look after it. A house offer letter is your opportunity to demonstrate the genuine person behind the offer paperwork.
* Highlight the house's features. If the seller has lived in their home for some years, chances are they are proud of it. Even if you think it's a fixer-upper, talk about what you like about it. Who doesn't like a compliment?
* Make a connection. Did you notice the same sort of eat-in kitchen that you grew up in when you were looking at the house? Mention what you noticed to make a connection.
* Even if your bid is low, explain why. You can now go from emotion to numbers, something more tangible. Be truthful, polite, and respectful, and use your house offer letter to contextualize your offer price.
* Close with lots of thanks. This is your final argument, and your last chance to flatter yourself. Thank them and let them know you're looking forward to hearing from them.
9. Sign the Contract
Key Takeaway: Always remember to read the fine print before putting pen to paper. Discuss the terms of the contract with your real estate agent and attorney.
When an offer is accepted, your real estate agent will draft the contract with the agreed-upon terms and have all parties sign it. Before you sign, go over everything with your agent. You will be officially "under contract" for your new house after the contract is signed.
Once you are "under contract," you will have two business days to send the earnest money check to the title company for escrow, and three calendar days to provide a check to the seller for option money.
Don’t Forget About Earnest Money and Option Money
Earnest money, also known as a good faith deposit, is an initial deposit used to demonstrate the seriousness of your offer. It is normally 1% to 5% of the offered price. The title firm will hold the earnest money until closing and apply it to the closing charges. If you opt to cancel the transaction under the agreed-upon terms, your earnest money will be reimbursed to you. If you cancel for reasons that were not agreed upon, the seller may be entitled to a portion or all of your earnest money.
In Texas, the contract phase is followed by the option period. During this period, which is normally 5-10 days, you as the buyer will be able to have the home thoroughly inspected and will be able to further bargain or even terminate the contract depending on that examination.
In exchange, you will pay the vendor a non-refundable sum known as "option money." In exchange for this charge, which is normally between $100 and $500, they will remove the house from the market and allow you to inspect it. The amount of earnest and option money you will pay is negotiable and will be stated in the offer and contract.
10. Apply for Your Mortgage
Key Takeaway: A preapproval doesn’t mean you’re in the clear until a lender has given the final stamp of approval. Keep your finances and credit in good shape from pre-approval until closing day.
You know what property you want to buy and how much it will cost you. You'll now select a lender from which to obtain a mortgage (you can go with a lender that preapproved you, or start fresh with a different one). Even with an online-only lender, you'll frequently need to collaborate with a loan officer to complete the application.
This is a paper-intensive process, so plan on doing a lot of uploads. Here's what you'll most likely require:
* W-2 forms from the previous two years are required (perhaps more if you've changed jobs).
* Pay stubs within the last 30 to 60 days are acceptable.
* Evidence of additional sources of income (including documentation of any gift money).
* Tax returns from the previous two years are available.
* Bank statements from recent times (usually for the last couple of months).
* Long-term debt information, such as vehicle or education loans.
* Identification card with Social Security number
After you've completed your mortgage application, you'll be sent to underwriting. The lender makes a final judgment on whether to offer you the loan during this procedure - it's basically making sure there's nothing about the arrangement that's simply too hazardous.
Underwriting entails researching deep into your finances, so you may be required to provide more documentation. The lender will also do an appraisal on the home you've picked and order a title search.
11. Schedule a Home Inspection and Appraisal
Key Takeaway: To make sure the home inspector has enough experience, read online reviews, ask for past client references and look at their credentials. Look at the home inspection checklist to understand what is and isn’t covered.
Now that the contract is signed and all monies have been paid, you will enter the option period. During the option period, you can terminate the contract for any reason and your earnest money will be returned to you.
It’s important to use this time effectively to complete your inspection and negotiate as needed or decide to terminate. As always, your REALTOR® will walk you through this process and offer guidance on what you should ask for. They will also perform all necessary negotiations on your behalf.
Inspections
It may seem like a good way to save a little money to forgo the home inspection, but buyer beware. Even if the home you are buying looks to be well-maintained and is relatively new, skipping a home inspection is not advised. Buying a home is one of the most expensive purchases you will make in your lifetime, and it’s prudent to go into it armed with as much information as possible.
A home inspector will look at a home from the foundation to the roofing to ensure everything is up to code and to determine its current condition. Electrical and plumbing, HVAC components, safety features, windows and doors, insulation and more will be rigorously checked to make sure there are no unknowns.
Armed with the home inspection, you could request repairs, money for repairs, or even terminate the contract entirely based on what you find. When choosing your home inspector, always look for a certified and experienced inspector who is knowledgeable and accommodating. You should feel comfortable asking them questions and they should be forthcoming with any answers.
Depending on your contract and state of residency, you should have a home inspection completed 10 to 14 days after signing a purchase agreement. As a buyer, you're usually responsible for paying the home inspector, and while the rates might vary. On average, you may pay around $350 to $600 for a home inspection in Texas depending on the size of the house.
Home Appraisal
A house appraisal is a survey that determines the current market worth of the property you wish to purchase. Before you use a mortgage loan to purchase a home, you must get an appraisal.
Lenders demand appraisals because they cannot lend more money than the value of the residence. If the evaluated value is less than your offer, you may have difficulty obtaining financing. Consider your offer carefully and consider appealing the assessment results if you believe the evaluated value is too low. However, you cannot rely on an appraiser to agree with you.
In addition, home purchasers should include an appraisal contingency in their offer. Appraisal contingencies are frequently written into contracts to allow buyers to back out of a purchase (or negotiate a lower price) without losing their earnest money deposit if the home appraises for less than the offer price. Appraisal contingencies, like inspection contingencies, can vary, so be sure you understand the terms of your agreement.
Know Who Is Paying for the Survey
A survey will be required by your lender and title company in order to close the contract and complete the mortgage. A survey is a scale-drawn diagram of the property, including the land and all structures and improvements on it, and includes details like easements and encroachments.
Sometimes sellers have a previously done survey that is acceptable to the mortgage and title company. If that is the case, the existing survey can be used and no further money will need to be paid.
If there is no existing survey, or the existing survey is not accepted by mortgage and title, a new one will have to be completed. In that case, the title company will order a survey from a licensed survey company they do business with and the cost will be included in closing costs for either you or the seller.
The party paying for the survey will be determined in the contract, so make sure you discuss with your REALTOR® whether you or the seller will be paying for it. The cost for a survey is usually $300 - $800.
12. Get Homeowners Insurance and a Home Warranty
First and foremost, the two names do not mean the same thing. A house warranty, like a car warranty, is a renewable service contract that protects your home's systems and appliances from normal wear and tear. While homeowners insurance is a policy that protects a home and its contents from catastrophic disasters like fire, theft, or hail damage.
When looking for a house warranty, look for a provider that is a member of the National Home Service Contract Association, since they follow a higher industry code of ethics. Companies that have been in operation for a number of years are frequently a better choice than a new firm delivering gimmicks.
In Texas, the cost of a basic home warranty plan begins at about $400 per year and can rise depending on the size of the home and any optional coverage you choose. The first year of a house warranty is often covered by the seller at closing, but make sure to discuss this with your real estate agent.
To guarantee you're getting the greatest value on your homeowner's insurance, seek quotes from three separate firms. Bundling your house and auto insurance can save money, but compare coverage and deductibles as well as price before making a decision.
13. Finalizing and Closing the Deal
Key Takeaway: Ask your real estate agent to be there so they can act as a witness and help answer any questions. If repairs haven’t been addressed, have your agent communicate with the seller and your lender.
The final step in the process is to attend the closing. During the closing, which typically happens at the title company, the mortgage will be finalized, all required documents will be signed, all monies will be paid and the title will be transferred from seller to buyer. Once the mortgage funds, the keys will be handed over and you will be the owner of a new home.
Final Walkthrough
You're undoubtedly eager to be done at this point in the home-buying process, but don't skip the final walkthrough. A last walkthrough of the property might assist the buyer in determining whether something needs to be addressed by the seller before purchasing the home. Final walkthroughs are usually done a day or two before closing to check that all agreed-upon repairs have been performed.
Closing Your New Home
Your lender is required to give you your Closing Disclosure, which tells you what you need to pay at closing and summarizes your loan terms, three working days before closing. Examine the Closing Disclosure to ensure that the numbers do not differ significantly from your Loan Estimate, which you should have received no later than 3 business days after submitting your first application.
After you've reviewed your Closing Disclosure, it's time to attend your closing meeting. Bring your ID, a copy of your Closing Disclosure, and proof of cash for your closing expenses. Buyers in Texas typically pay 3-5% of the purchase price in closing costs. For a $308,600 home — the typical home value in Texas — that's between $9,258 and $15,430!
You'll sign a settlement statement, which details all expenditures associated with the house transaction. This is when you pay your down payment and closing charges. You'll also sign the mortgage note, which specifies that you commit to repay the debt. Finally, you'll sign the mortgage or deed of trust to secure the mortgage note. After closing, you are now a proud homeowner in Texas.
What Are the Current Mortgage Rates in Texas
According to Bankrate, Texas’s mortgage rates are in line with current national averages. As of July 2022, the current rates in Texas are 5.71% for a 30-year fixed, 4.91% for a 15-year fixed, and 4.38% for a 5/1 adjustable-rate mortgage (ARM). To see what type of rate you would be eligible for, we recommend reaching out to a mortgage provider.
How Much Is a Down Payment for a House in Texas?
You've probably heard the popular notion that you need to put down 20% to buy a home in Texas. That is sound advice when saving for a down payment because the more you put down, the lower your monthly mortgage payment will be.
Furthermore, by putting down at least 20%, you avoid having to purchase private mortgage insurance or PMI. This is because the more of the house you personally own, the more likely you are to pay your mortgage commitments. However, there are a number of different programs available to assist you to attain your home ownership aspirations in Texas with significantly less money down.
The Texas Department of Housing and Community Affairs, for example, has a number of programs available to qualified borrowers through a network of certified lenders. Consider the following three:
* My First Texas Home Program: If you are a first-time home buyer (or have not bought a home in the last three years) with a credit score of at least 620, you may be eligible for this program. On a 30-year, fixed-rate mortgage loan, you will receive down payment and closing cost help. You can also be eligible for first-time home buyer tax breaks.
* My Favorite Texas Residence: This program is open to all home buyers, not just first-time buyers, and includes many of the same advantages as the My First Texas Home Program, such as down payment and closing cost assistance on a 30-year, fixed-rate mortgage loan. A credit score of at least 620 is required, and the loan is subject to income and purchase price constraints, among other conditions.
* Texas Mortgage Credit Certificate Program: Another first-time home buyer program, this one gives additional possible federal tax savings. If you qualify, you can even combine it with the My First Texas Home Program to save even more money.
Keep in mind that each down payment assistance program (DPA) has its unique set of restrictions and advantages. You may discover that the one serving your area is better or worse than TSAHC.
Make sure to analyze all of the programs for which you are eligible and choose which one provides the best value. Of course, if you can put down 20% and have decent credit, you may not need any home buyer assistance at all.
What Credit Score Do You Need to Buy a House in Texas?
Texas has a highly competitive housing market as people travel to the state for its culture and a vast range of alternatives, from small towns to booming cities. As a result, competition might be fierce. But don't worry, you'll find a home in your price range.
Of course, the amount of money you need to buy a home in Texas is determined by your personal financial position, including your credit score. According to one survey, the average credit score required to buy a home in Texas ranges from 662 to 730. It's vital to remember that the higher your credit score, the more likely you'll qualify for the best mortgage rates.
FHA Loan
Most Texas lenders will require a credit score of at least 580 to grant a government-backed Federal Housing Administration (FHA) Loan.
USDA Loan
Borrowers wishing to buy a home in rural Texas may be eligible for the USDA's Single-Family Housing Direct Home Loan Program. While there is no stated minimum criterion, those with credit scores of 640 or higher are eligible for the USDA's automated underwriting procedure.
VA Loan
A VA Loan is another government-backed mortgage alternative. These are available to veterans as well as other qualified service members and spouses. However, most lenders prefer credit scores between 580-620. The Texas Veterans Land Board also provides a home loan to qualified veterans in the state. Lenders participating in this program normally require a minimum credit score of 620.
Conventional Loans
Unlike FHA, USDA, and VA loans, conventional loans are not backed by the government. These loans may offer more flexibility and possibilities, but they also have tighter credit score criteria. You'll most likely need a credit score between 620 and 640 to qualify for a conventional loan in Texas.
Conclusion
The processes involved in buying a home in Texas might add up to a lengthy process. We’ve broken down the homebuying process into 14 main steps: Call it a buying-a-house checklist. Each step includes choices to make and things to do. Some are stressful, some are pretty cool and some are, well, kinda annoying. But each gets you one step closer to your goal of homeownership.
Do you believe you're prepared to purchase a home? Contact BHGRE Homecity immediately to begin the home-buying process.
