Are you part of the great Texas migration? Or a native Texan first-time buyer? Here is the ultimate Texas home buying guide just for you.
In 2021, moving company U-haul investigated where people who rented their moving trucks went. You guessed it, most of them have gone to Texas. Almost half of these domestic migrants came from California – Elon Musk included.
Fortune 500 companies like Oracle and Hewlett Packard have moved HQs and built new plants in Texas as well. Many are saying that Texas is the next Silicon Valley.
Another study revealed that 82% of Texas-born residents still live in the Lone Star State.
There must be something in Texas water – that or the barbecue. But people swear it has to do with the high median income, low unemployment rates, pleasant weather, racial diversity, and affordable housing prices. Big businesses cite friendlier tax policies and regulations.
We’ve established why many have gone from California Dreaming to Dreaming of Dallas. Let’s now look at the things to know before buying a house in Texas.
Step 1: Assess Your Financial Standing
How Much Can You Afford?
The first step to buying a house in Texas is to evaluate your financial situation and see if you have saved enough for a downpayment. Another factor is if you can consistently make the monthly mortgage payments with a particular interest rate and still afford to live a comfortable life. The downpayment is commonly 20% of the purchase price.
A typical home in Texas has a market value of $289,252. That means you need to put away $57,850.40 for the downpayment alone. You may explore downpayment assistance programs such as the TSAHC Home Sweet Texas Home, My Choice Texas Home, and My First Texas Home if you need support affording the downpayment.
For instance, My Choice Texas Home offers eligible homebuyers down payment assistance of up to 5% of the loan amount.
Get Pre-Approved For A Mortgage
After sorting out the downpayment, it’s time to get pre-approved for a mortgage. Mortgage pre-approval is critical as many sellers won’t be willing to do home viewings without this.
Mortgage lenders will verify your employment history, current assets, credit score, and debt-to-income ratio (DTI) during the pre-approval process.
You can compute your debt-to-income ratio by adding all your recurring monthly debts (auto loans, student loans, credit cards) and estimated monthly mortgage payment, then dividing it by your gross monthly income. The lender will likely approve your mortgage loan if you have a DTI of 43% and below.
Step 2: Shop For A Home With A Realtor
What Kind Of Home To Buy?
With a mortgage pre-approval letter in hand, you can now move on to the fun part of buying a house in Texas: finding a home. List your preferences to narrow down your search. Take note of square footage, style, number of bedrooms, and even property taxes.
Do you need a pet-friendly house in Texas with a big yard? What color palette would you like?
Pick Your Desired Neighborhood
The three crucial considerations in buying a home in Texas are location, home value, and local lifestyle. For example, Montrose is the most inclusive neighborhood; Garden Oaks is perfect for young professionals with growing families. Maybe you would like to live close to the business district or favor a suburban lifestyle.
The standard market value of homes in Houston is $251,607. Are you willing to go higher than that, or do you prefer to go lower? If we’re looking at other cities, Plano, TX, is the most racially diverse, while Garland, TX, has the most affordable cost of living.
Submit An Offer
Write A Real Estate Offer Letter
Perhaps you’ve decided on purchasing a home in Houston’s East End (EaDo) community. You need the help of an expert real estate agent to lock in your dream home and a convincing real estate offer letter to boot.
The letter should include a brief personal background, what you love about the home, your bidding plan, and your vision for the future. Have an editor proofread the letter and your realtor check for a strong bidding plan to set yourself apart from other home buyers.
However, prepare for rejection and be ready to try again!
Part of the home buying process in Texas is the back and forth of your realtor with the seller’s agent. If the seller is still not keen to sell to you, your realtor will ask the seller’s agent if you can make a higher offer, increase the downpayment amount, adjust timelines, or switch mortgage lenders.
Another way to seal the deal is to offer to forego the home inspection or to cover all repair and payment closing costs. But we recommend not to do this lightly because of the possible risks and financial loss to you.
Home Inspection and Appraisal
Find A Certified Home Inspector
One of the other requirements to buy a house in Texas is the inspection and appraisal. A licensed inspector will be able to expose roof problems, a faulty foundation, water damage, poor drainage, clogged downspouts & gutters, poor ventilation, termite damage, asbestos, and HVAC, electrical, and plumbing issues.
An appraisal conducted by a licensed appraiser is usually the deciding factor for lenders to approve home loans ultimately. If the appraisal report is not consistent with the asking price, you may renegotiate with the seller until the sale price is satisfactory for you, the seller, and the lender.
Final Walkthrough and Closing
Your journey might have begun with you looking up how to buy a house in Texas. Now, buying a house is within arm’s reach. Think of the final walkthrough as the last stop you need to make before sitting down on the closing table. Here are the final checks that you should do: close and open windows, turn on the HVAC system, try all the keys, flush all toilets, run the water, test every appliance, light switches, and electrical system, and inspect the floors, walls, and ceilings.
You usually hold closings at the offices of title companies. Set aside up to 3 hours of your time to read and sign paperwork. Texas laws require a real estate attorney to be part of every home sale. Ensure you run the closing disclosure form by your attorney as well as the mortgage promissory note, the deed, and the final loan application.
After signing the documents, you will need to pay the title company the closing costs, including prepaid fees, title and escrow charges, lender, and other closing costs.