How to Buy a House in Texas: A Homebuyer’s Guide
Updated: March 1, 2024
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The average price of a home in Texas is approximately $315,815. That's 17.7% higher than last year. Despite the increasing prices over the years, it is significantly lower than the national average of $357,810.
The increase may seem high, but Texas is still an affordable place to live in due to its low cost of living and lack of income taxing. Additionally, its moderate weather allows skipping extra features like tornado or snowstorm protection, making house construction much cheaper.
A thorough review of your property options, available mortgage programs, homebuying process and requirements can help set you up for a relatively painless and debtless investment. MoneyGeek compiled the essential pointers such as choosing the best location, preparing for your mortgage, conducting home inspections and more for Texan homebuyers.
Choose an Ideal Location
Many factors come into play when determining the value of a real estate property. The location has the most significant effect on prices, but neighborhood culture, crime rate and available amenities are also important factors. The ideal location depends on your unique circumstances.
Calculate Mortgage Rates
When looking at mortgages in Texas, you must understand how different mortgage options work and what rate you can expect from them. The best mortgage option for you will depend on your profile and needs.
Ensure you consider the individual factors that will determine the level of mortgage you can qualify for, including your income, credit history and debt-to-income ratio. It also helps to compare lenders to find the best mortgage rates in the state.
Prepare Down Payment Requirements
The down payment amount is a big factor in determining the total cost of your loan. Generally, the more you can put down, the less you'll pay each month.
Again, it's not uncommon for a mortgage company to ask for a 20% down payment, though it varies from lender to lender and from property to property.
Get Pre-Approved for a Mortgage
When you want to know how much it costs to buy a home in Texas, it's best to get pre-approved for a mortgage beforehand. Some sellers will require this proof of your financial expertise before letting you see their property, so don't turn up empty-handed.
A pre-approval is different from a prequalification. The former indicates the amount your lender has agreed to lend you, whereas the latter is not binding. A prequalification only states that you qualify for a loan (which is the case for all consumers), but it doesn't commit the lender to give you the loan.
Conduct a Home Inspection
Home inspections are one of the most critical steps in buying a house. An inspector will look at the entire house — top to bottom, inside and out —to tell you about any problems that need to be fixed before you buy.
If there's a problem with crucial parts of the house, you could end up paying for repairs or even losing your down payment and having to walk away from the deal.
Close Your Mortgage Loan
Once you've selected your dream home and chosen to buy it, your next step is to close on the mortgage loan. It's a big decision, so you should be fully prepared before closing your mortgage loan. There are also costs that you have to be aware of.
Texas Homebuying Details
Although there are specific steps you should take beforehand, the process will vary based on your state of residence. Before diving into the process of buying your first home, it's wise to do thorough research on the state of Texas.
The Homes for Texas Heroes Program is for anyone working in a profession that helps people daily, such as teachers, firefighters, police officers and nurses. If you belong to this group, this program provides you with a mortgage loan and funding for your down payment.
Texas has no income taxes, meaning that the average Texas resident enjoys a higher take-home pay than residents of other states.
Frequently Asked Questions About Buying a Home in Texas
Buying a home in Texas is a big investment. Indeed, you'll have a few questions in your mind. MoneyGeek answered the most frequently asked questions about how to buy a house in Texas to help you take your first step toward homeownership.
Before buying a home, you should first answer the following questions:
- What type of mortgage programs are you eligible for?
- What location can you afford that best meets your priorities?
- Does your income match or exceed your chosen area's average cost of living?
- How much money do you have for a down payment?
Texas is a good option if you're looking for a job and a home because of its growing employment rate. The Texas employment forecast estimates that jobs will increase by 4.5% this year. Besides having an affordable cost of living, Texas also has no income taxes, which allows its constituents to enjoy their salary.
Property prices in Texas have slowly been increasing yearly — 17.7% from last year — which can be good if you want to invest.
It depends on the area you want to live in and the mortgage program you can get. Lenders usually expect a 20% down payment to avoid requiring PMI.
On average, Texas has a 1.66% property tax amounting to $2,098. Texas belongs to states with high property taxes, but the lack of income tax can offset it.
In Texas, the cheapest cities to purchase a home are Wichita Falls, Beaumont-Port Arthur and Midland.
sources
- Federal Reserve Bank of Dallas. "Texas Employment Forecast." Accessed October 22, 2022.
- Missouri Economic Research and Information Center. "Cost of Living Data Series." Accessed October 22, 2022.
- Tax Foundation. "Taxes in Texas." Accessed October 22, 2022.
- Texas Real Estate Research Center. "Texas Housing Affordability Index (THAI)." Accessed October 22, 2022.
- Texas State Affordable Housing Corporation. "First Time Home Buyer Grants in Texas." Accessed October 22, 2022.
- U.S. Bank. "Today's mortgage rates in Texas." Accessed October 22, 2022.
- USDA Rural Development. "Single Family Housing Direct Home Loans in Texas." Accessed October 22, 2022.
- Zillow. "Mortgage rates." Accessed October 22, 2022.
- Zillow. "Texas Home Values." Accessed October 22, 2022.
- Zillow. "United States Home Values." Accessed October 22, 2022.