Texas has been one of the fastest-growing U.S. states—and for good reason! Texas is a very popular state for young professionals and first-time homebuyers because of its strong job market, thriving cities, and ample space. Plus, mortgage interest rates are currently low, so you could potentially save on your monthly mortgage payments if you buy a house in the near future.
Of course, buying your first home is a huge decision, and it is important to know the nuances of Texas real estate before diving in. With that in mind, here is the process of buying a house in Texas, boiled down into eight simple steps.
1. Assess Your Financial Situation
Regardless of where you’re hoping to buy a home, the first step should always be to assess your financial situation and determine if now is a good time for you to buy. Lenders will primarily look at your credit score and debt-to-income (DTI) ratio when deciding whether to approve you for a mortgage loan, so it’s important to pay attention to those two numbers.
Your credit score should ideally be 620 or above, although there are loans with more flexible credit requirements, such as a Federal Housing Administration (FHA) loan. Your debt-to-income ratio is the amount of your monthly income that is used to pay debts (e.g., student loans or credit card bills), and you should aim for a DTI of 36 percent or less.
In addition to knowing your credit score and DTI, you should make sure you have enough savings for a down payment, closing costs, property taxes, and any home maintenance expenses that might arise. Note that Texas has no state income tax, but property taxes can be high. First-time homebuyers can put as little as three percent down with a conventional loan, although a larger down payment will typically result in lower monthly mortgage payments. Try using our mortgage calculator to get a rough estimate of what you can expect to pay.
If you realize you need help to afford your home, there are several assistance programs available to first-time homebuyers in Texas.
2. Get Pre-Approved
Getting pre-approved for a mortgage is a great way to figure out what your purchasing power could be. Plus, it’s almost essential in a hot real estate market like Texas. When sellers have several offers on the table, they’re more likely to go with the one that has been pre-approved because it shows they are a serious buyer who has the funds to purchase the property. Mortgage pre-approval is typically valid for 60-90 days, so you should aim to get approved only when you’re ready to start actively searching for a home.
The lender who grants you a pre-approval doesn’t have to be the lender you secure your official mortgage from. However, when selecting a lender, it’s important to not only consider the interest rates they can offer, but the level of service they can provide as well. You want to work with a lender who will walk you through the process and promptly send out pre-approval letters for any home you’re ready to put an offer on.
It is also important to note that once you’ve been pre-approved, you should be careful not to do anything that could jeopardize it, such as making a large purchase, opening new lines of credit, or quitting your job.
3. Select a Location
If you haven’t already settled on a location, now is the time to figure out which city and neighborhood in Texas you want to buy a home in. When deciding where to buy, consider these things:
- Home values: Take a look at what the homes in the area are selling for and compare current values with previous years to get an idea of appreciation rates.
- Local lifestyle: Determine what restaurants, shops, parks, and amenities are nearby.
- School district: Even if you don’t have kids, the quality of the schools in the district will impact home values.
- Commute time: See how long it takes to get to your workplace (if you have one) from the home.
- Crime rates: Go online and check the crime rates of the area to get an idea of whether or not it is safe.
You can get a fairly good idea of an area using the internet, but it’s always wise to walk around the neighborhood and chat with current residents to truly get a feel for the place.
4. Find a Real Estate Agent
An experienced real estate agent will be invaluable during the home search and buying process, and doesn’t cost you anything as a buyer. Be sure to shop around for your agent and consider their experience level, reviews, personal recommendations, and whether you get along with them. A real estate agent who has years of experience in the area will be more equipped to match you with your ideal property.
5. Go House Hunting
Before you begin searching for a home, make a list of what you’re looking for, including “must-haves” and “nice-to-haves.” Clearly express your wishes to your agent, and work with them to find a home that contains all your must-haves and a few of your nice-to-haves.
6. Make an Offer
Once you find a home you love, you can put in an offer. In a competitive market like Texas, you may need to act fast. The average time a house is on the market in Texas is around 42 days.
Your offer should include your offer price, any contingencies you want to include (e.g., a home inspection), and an offer letter. If you’re up against several other prospective buyers, you may want to waive contingencies to make your offer more attractive. You can also set your offer apart with a thoughtful, handwritten offer letter.
7. Get an Inspection and Appraisal
You should always include an inspection contingency in your offer letter if possible because the last thing you want is to move into your new home only to find there are serious structural issues. Hire a licensed inspector to thoroughly look over the property and make sure the roof, foundation, electrical, HVAC, and plumbing are in good shape. It’s also a good idea to have someone check for termites and radon. After the inspection, you should receive a report within a few days, and if there are serious issues, you will likely want to renegotiate with the seller.
When the home is under contract, your lender will order an appraisal of the property to determine whether the price matches the home’s value. If the appraisal comes back low, you may need to renegotiate the price with the seller or offer a larger down payment to make up the difference.
8. Close on the Home
The closing process involves the buyer, seller, and both of your agents and real estate lawyers (if you both have one). Prior to closing, conduct a final walkthrough of the home to make sure everything looks right, and have a real estate lawyer (or your agent), look over the contracts and explain anything you don’t understand.
On closing day, you will sign all the paperwork, make any necessary payments (such as your down payment and closing costs), and receive the keys to your new home.
Learn More About How to Buy a House in Texas
You should now have a solid overview of the home-buying process, but if you’re looking for a more in-depth guide to buying a home in Texas, check out our Texas First-Time Homebuyers Ultimate Guide.