Buying your first home is one of the most exciting and significant financial decisions you will ever make. If you are looking to buy in Texas, you are in luck - the Lone Star State offers incredible value, no state income tax, and some of the best first-time buyer programs in the nation. This comprehensive guide walks you through every step of the process.
Step 1: Assess Your Financial Readiness
Before you start browsing listings, take an honest look at your financial situation. Lenders will evaluate three key factors: your credit score, your debt-to-income ratio (DTI), and your available savings.
Credit Score Requirements
- Conventional Loans: Minimum 620, but 740+ gets the best rates
- FHA Loans: Minimum 580 for 3.5% down, or 500-579 with 10% down
- VA Loans: No official minimum, but most lenders want 620+
- USDA Loans: Minimum 640 for automatic approval
If your credit score needs work, start by paying down credit card balances below 30% of their limits, dispute any errors on your credit report, and avoid opening new accounts for at least 6 months before applying for a mortgage.
How Much Can You Afford?
The general rule of thumb is that your total monthly housing cost (mortgage, taxes, insurance) should not exceed 28% of your gross monthly income. Your total debt payments should stay below 36%. Use our affordability calculator to get a personalized estimate.
Step 2: Get Pre-Approved (Not Just Pre-Qualified)
Pre-approval is different from pre-qualification. Pre-qualification is a quick estimate based on self-reported information. Pre-approval involves a full review of your finances including tax returns, pay stubs, bank statements, and a credit check. A pre-approval letter tells sellers you are a serious, qualified buyer.
Documents you will need for pre-approval:
- Last 2 years of tax returns (W-2s and 1099s)
- Recent pay stubs (last 30 days)
- Bank statements (last 2-3 months)
- Photo ID and Social Security number
- Employment history for the past 2 years
- List of all debts and monthly payments
Step 3: Understand Texas-Specific Loan Programs
Texas offers several programs designed to help first-time buyers. Take advantage of every dollar available to you.
TDHCA My First Texas Home Program
The Texas Department of Housing and Community Affairs offers 30-year fixed-rate mortgages through participating lenders, plus down payment assistance of up to 5% of the mortgage amount. This assistance comes as a 0% interest, deferred second lien that is forgivable after a set period.
My Choice Texas Home Program
Similar to My First Texas Home but available to repeat buyers as well. Offers down payment assistance up to 5% with competitive interest rates.
Homes for Texas Heroes
Designed for teachers, firefighters, police officers, corrections officers, and veterans. This program offers below-market interest rates and up to 5% in down payment assistance.
Texas Mortgage Credit Certificate (MCC)
This is a dollar-for-dollar federal tax credit equal to up to 20% of the annual mortgage interest paid. On a $280,000 loan at 6.5%, that could mean $3,640 in annual tax savings. The MCC lasts for the life of the loan as long as you live in the home.
Step 4: Find the Right Home
Now comes the fun part - but stay disciplined. Create a list of must-haves versus nice-to-haves. Consider commute times, school districts (even if you do not have children, they affect resale value), property taxes (which vary significantly by Texas county), and future development plans in the area.
Key factors unique to Texas home buying:
- Property Taxes: Texas has some of the highest in the nation (1.5-2.5% of appraised value). Factor this into your monthly budget. Use our property tax estimator to plan ahead.
- Flood Zones: Especially important in Houston, Austin, and San Antonio. Check FEMA flood maps and consider flood insurance costs.
- HOA Fees: Many Texas neighborhoods have HOAs with monthly fees of $50-$300+. Get a copy of the HOA rules and financials before committing.
- Foundation Issues: Texas clay soil can cause foundation problems. Always get a thorough foundation inspection.
Step 5: Make an Offer and Navigate the Texas Contract
Texas uses standardized TREC (Texas Real Estate Commission) contracts. Understanding key provisions will protect your interests:
- Option Period: Typically 7-10 days. You pay an option fee ($100-$500, credited at closing) for the unrestricted right to terminate the contract for any reason during this period. This is when you conduct inspections.
- Earnest Money: Usually 1-2% of the purchase price, deposited with the title company. This shows your commitment to the purchase.
- Survey: Texas requires a property survey. Expect to pay $350-$500. Sometimes the seller has a recent survey you can use.
- Title Insurance: In Texas, the seller customarily pays for the owner's title policy. The buyer pays for the lender's title policy.
Step 6: Inspections, Appraisal, and Closing
During the option period, schedule a comprehensive home inspection ($300-$500) and any specialty inspections (foundation, HVAC, roof, termite). Your lender will order an appraisal ($400-$600) to confirm the home's value supports the loan amount.
The closing process in Texas typically takes 30-45 days from accepted offer. At closing, you will sign a mountain of documents, wire your funds to the title company, and receive the keys to your new home. In Texas, the closing is typically handled by a title company rather than an attorney.
- Skipping the home inspection to save money
- Making large purchases (cars, furniture) before closing
- Not factoring in property taxes and insurance
- Choosing a home based on emotion rather than financials
- Not getting multiple mortgage quotes (rates can vary 0.5%+ between lenders)
Your Next Steps
Ready to start your homebuying journey? Here is your action plan:
- Check your credit score and start improving it if needed
- Use our affordability calculator to determine your budget
- Research Texas first-time buyer programs you qualify for
- Get pre-approved with 2-3 lenders to compare rates
- Contact us for a free consultation to discuss your goals