Searching tips for first-time home buyers in Texas can help you learn the process of home buying, save money and get approved. With proper guidance and support from your mortgage lender, you dream of home ownership can be achieved as simple and smooth as possible.
At Bayway Houston, we can help make your dream of home ownership possible, regardless of your starting point.
Below are the quick steps to follow as you prepare for buying your first home in Texas.
- Firstly, one of the most important tips for first-time home buyers in Texas is to make sure that finances are in order. This means that you must have already paid off your debts and set aside an emergency fund.
- Make research and learn about the available loan types in Texas. This way, you can compare each loan terms and determine what suits your needs.
- Apply for a mortgage loan in Texas and get pre-approved. This will help you get an idea as to how much you will spend in buying your first home.
- Look up and compare different real estate agents. A good real estate agent will guide you through the home buying process and the details of closing the deal.
Buying Preparation Tips for First-time Home Buyers in Texas
Save Early
Buying a home requires a huge amount of spending for different costs. For instance, the down payment, closing costs and move-in expenses.
Down Payment – The required down payment varies depending on the type of mortgage and the mortgage lender. Among the available loans, first-time home buyers aim at qualifying for conventional loans due to their 3% down payment requirement for those with excellent credit. However, small down payments can still be challenging to save.
Let’s say the value of the home is $300,000, and you are required to put down 3%. Your down payment will be $9,000.
Closing Costs – Typically, the closing costs range from 2% – 5% of the loan amount. Closing costs sum up the fees and expenses in finalizing your mortgage. By shopping around, you can save on other expenses like home inspections and just ask the seller to pay a portion of your closing costs.
Move-in Expenses – Home expenses don’t end after you close the home purchase deal. Earlier, we mentioned that it’s necessary to set aside some cash for emergency funds. You can use these funds for home improvements and repairs, upgrades, and furnishings.
Determine Your Affordability in Buying Your Home
Before shopping around, decide how much you can afford to spend on a house. Online calculators are available to help you set a price range depending on your actual income, debt, down payment, credit score and the place you are planning to live.
Check and Strengthen Your Credit
Credit scores help determine your mortgage qualification. It also affects the interest rates mortgage lenders will offer.
The following are tips for first-time home buyers to strengthen credit scores:
1 – Request copies of your credit reports and dispute errors that could negatively impact your credit score. You may request from any of the three credit bureaus – Equifax, TransUnion, and Experian.
2 – Settle your balances on time. Also, keep your credit card balances as low as possible.
3 – Your current credit cards should be kept open. Otherwise, it will increase the portion of available credit you use, thus lowering your credit score.
Once found out that you took another loan or line of credit, and it increased your credit balance or started making late payments, then you are risking your final approval.
4 – Keep track of your credit score.
Selecting Mortgage Loan Tips for First-time Home Buyers in Texas
Explore Your Mortgage Options
Several options are available for the mortgage loans in Texas. The type of loan you choose determines your down payment, the type of home you can buy and more. Below are some of the common ones:
FHA Loans – First-time home buyers and repeating home buyers can enjoy several benefits from the FHA loans. As compared to other loan options in Texas, FHA requires only a 580 FICO credit score and a minimum of 3.5% down payment. It also comes with flexible qualifications related to employment and income. Down Payment Assistance is also allowed, making this type of loan even more attractive to home buyers.
More tips for first-time home buyers – down payment may come as a gift from your employer or relative.
Conventional Loans – Works best for home buyers with excellent credit score and can afford to put a larger down payment. The minimum requirement for down payment ranges from 3% to 5%.
Conventional loans typically offer better loan terms than FHA loans with no mortgage insurance needed to pay upfront.
VA Loans – Guaranteed by the Department of Veterans Affairs, VA loans offer 100% financing for active-duty military members and veterans.
Usually, it doesn’t require down payment, and the interest rates are often lower than most of the loans.
USDA Loans – The U.S. Department of Agriculture guarantees USDA loans for rural home buyers. The areas are often seen outside the boundaries of major cities, suburbs, and other rural smaller communities in Texas.
USDA loans are also offered to low income to moderate income borrowers – generally with no required down payment.
Jumbo Loans – Also known as jumbo mortgage, jumbo loan in Texas is a type of financing that exceeds the limits set by the Federal Housing Finance Agency (FHFA). These cannot be guaranteed, purchased, or securitized by Fannie Mae or Freddie Mac.
This loan type is designed for luxury properties and houses in highly competitive local real estate markets. Therefore, they have different set of underwriting requirements and tax implications.
Best Payment Options for Different Types of Loans
Some first-time home buyers in Texas choose a 15-year or 20-year loan. Not only because of the shorter term, but they might also be able to lock in a low rate.
On the other hand, a 30-year loan usually comes with a lower monthly payment. You may be paying in a longer term with a slightly higher interest rate, but the payments are usually more manageable.
Read About First-time Home Buyer Assistance Programs
Exploring first-time home buyer assistance programs joins the list of tips for first-time home buyers in Texas. It is also vital towards your journey to home ownership.
This includes down payment and closing cost assistance, special loans with lowered interest rates and more. Some first-time home buyer programs also offer tax credits.
Compare Texas Mortgage Rates and Fees
As recommended by the Consumer Financial Protection Bureau, first-time home buyers may request from various lenders the loan estimates for the same type of mortgage. Thus, home buyers can compare the overall costs which includes the interest rates and possible origination fees.
Buying discount points can make sense for those who have money on hand and plan to live in the house for a long time. These are the fees paid upfront by the borrower in order to lower the interest rate.
Get A Pre-approval Letter
A pre-approval letter for the mortgage is an offer by the lender to loan you a certain amount under specific terms. Your Texas mortgage lender will review certain documents to verify your income, assets, and debt.
You may apply for pre-approval from various lender to compare rates. This will not hurt your credit score as long as you apply for them within a limited time frame – for instance, 30 days.
Tips For First-time Home Buyers When Home Shopping
Carefully Select a Real Estate Agent
You may get referrals from other recent home buyers in Texas. At least interview them to know more about their experiences in helping first-time home buyers.
A good Texas real estate agent will search the market to find the perfect home that suits your needs and budget. More so, help you through the negotiation and closing process.
Choose a Suitable Type of House and Neighborhood
Look for a house that perfectly suits your budget and lifestyle. It could also help if you weigh the pros and cons of various types of homes. For instance, you can see that a condominium or townhouse may be more affordable compared to a single-family home. The downside about it though is you have shared walls with your neighbors – meaning less privacy.
Opting for condominiums and townhouses means you need to allot a budget for the homeowners association fees. It goes the same way too for the houses in planned or gated communities.
It is also worth considering buying a fixer-upper for your home improvements or repairs. Unlike move-in ready homes, the fixer-uppers sell lesser per square foot.
Renovation mortgage offers financing to both home price and improvements cost in a single loan.
Don’t forget to consider your long-term needs when buying a home. Weigh the pros and cons and think whether a starter home like condos or townhouses will meet your needs, or a forever home that works best to meet long-term needs.
Do a thorough check as well on you potential neighbors. Opt in for the one with amenities necessary to your lifestyle and test out its accessibility.
Don’t Forget About Your Budget
In some cases, a lender offers you more than what is affordable, and you might feel like pressured about it. We understand that sometimes this situation could be a little overwhelming and enticing. However, setting a price range based on your budget and sticking to it will help you avoid any financial stress.
Get The Best Out of Home Tours
Make the most out of home tours in person by paying attention even to small things. Look out for the condition of the home inside and out. You may also ask about the age and type of electrical and plumbing systems, as well as the roof.
Amid the COVID-19 pandemic, online 3D home tours became even more popular. These tours allow first-time home buyers to walk virtually through a home and observe house details that regular photos cannot exactly provide.
Home Purchasing Tips for First-time Home Buyers
Allot a Budget for Home Inspection
Home inspection is highly necessary when purchasing a home. It assesses the structure of the home and its mechanical systems.
Hiring professional inspectors means that you have the right eyes for potential problems. Thus, you can make a better decision whether you should still buy the property or not.
Make sure to keep these things in mind:
- The standard home inspections shouldn’t get mistaken by tests for things like molds, pests, and radon. Have a clear understanding on what comes with it and check other inspections you might need before buying the home.
- Ensure that every part of the house is checked by the home inspector.
- First-time home buyers, and even repeating buyers, traditionally attend the home inspection. If for any reason, you could not attend the inspection, just make sure to carefully review the report and do not be hesitant to ask any questions.
Negotiate With the Seller
Negotiating with the seller can help you save more money. For instance, you may ask the seller to cover the repair costs or lower the price instead to allot money for the repairs you’ll have to do later. Additionally, a portion of the closing costs can be asked to be paid by the seller. Just remember that mortgage lenders may limit the portion of closing costs the seller can pay.
Allot a Budget for Home Inspection
Prior to closing the deal, your lender will ask you to buy a homeowners insurance. This is responsible for covering the repair costs or replacing your home and belongings when damaged by an incident covered in the policy.
Homeowners insurance also provides liability insurance if you are held responsible for an injury or accident.
