8 Steps to Buying a House in Texas

Thomas O'Shaughnessy

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Thomas O'Shaughnessy

October 1st, 2022
Updated October 1st, 2022

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8 Steps to Buying a House in Texas

Save for down payment | Find a real estate agent | Get preapproved for a mortgage | Choose your neighborhood | Go house hunting | Make an offer | Inspections and appraisal | Final walkthrough and closing

Buying a house in Texas is an exciting milestone, but the process can take some time. Several factors, like your financial situation, market conditions, and the local economy can affect both how long it takes you to find a home and how much it costs you.

For example, homes in Austin are hitting the market at $558,275 and selling within 51 days — 16 days faster than the state average! — so you'll need to move quickly if you want to beat out the competition.

The more you know about the home buying process and Texas's current real estate trends, the more prepared you'll be to navigate this complicated process as quickly and smoothly as possible.

No matter where you are in your home buying journey, Clever can connect you with local real estate pros who will help you purchase your Texas dream home!

The best part? When you buy with a Clever real estate agent, you could earn a cash-back refund worth up to 0.5% of the home price. On a qualifying $300,000 purchase, you'd get $1,500. That's real money back in your pocket!

» START: Buy with a top local agent, save thousands with Clever Cash Back

Step 1: Save for a down payment

🔑 Key takeaway:

Your down payment can be less than 20% of the purchase price — $62,967 for the typical home in Texas — but you'll have to purchase mortgage insurance and pay more interest over the life of your loan.

Your down payment is the first part of your home's purchase price that you pay at closing. Your mortgage lender will pay the remaining balance.

Typically, mortgage lenders in Texas want you to contribute 20% of the purchase price as a down payment. That would be $62,967 for a $314,837 home — the typical home value in Texas.

However, you have options to lower your down payment amount.

Government backed loans, like VA and FHA loans, allow you to contribute 0% and 3.5% of your home's purchase price respectively. Even conventional loans allow for down payments as low as 3-5% (though the minimum varies by lender).

Mortgage type
Minimum down payment (%)
Down payment ($)
VA Loan
0%
$0
FHA Loan
3.5%
$11,019
Conventional
3%
$9,445
Based on typical home values from Zillow (August 2022)

But making a down payment of less than 20% comes with some risks.

First, because you're borrowing more money, you'll have a higher monthly payment and pay more in interest over the life of your loan.

Down payment
Monthly payment
Total interest
Total Cost
5%
$1,683
$306,874
$621,711
20%
$1,417
$258,420
$573,257
Based on home values from Zillow (August 2022) and a 5.42% interest rate for a 30-year loan.

Second, you may have to purchase mortgage insurance.

Conventional loans require private mortgage insurance (PMI) until your loan balance reaches 80% of the purchase price. FHA loans, on the other hand, require a mortgage insurance premium (MIP) for the life of your loans.

Mortgage insurance costs around 1% of your mortgage balance annually. However, rates vary based on your down payment and credit score. Typically, your mortgage insurance payment is added to your mortgage payment each month.

VA loans don't charge mortgage insurance. Instead, you'll pay a VA loan funding fee at closing, which can range from 1.4% to 3.6% of the purchase price.

» READ MORE: Everything you need to know about low-income home loans

Texas down payment assistance programs

There are several down payment assistance (DPA) programs that are designed with Texas residents in mind. If you qualify for one of these programs, you could receive a grant or a second mortgage to cover your closing costs or down payment.

Here are just a few DPA programs in Texas that you might be eligible for:

My First Texas Home

The My First Texas Home program offers first-time buyers and veterans a 30-year, low-interest mortgage of up to 5% of the loan amount.

The first mortgage must be from a lender approved by the Texas Homebuyer Program, and eligible borrowers must have a credit score of at least 620. Home purchase price and income limits apply and vary by county.

My Choice Texas Home

The My Choice Texas Home program offers a first mortgage with an option to add down payment assistance of up to 5%. Down payment assistance comes as a 30-year, 0% interest second mortgage.

This program is available to first-time and repeat homebuyers with credit scores of 620 or better. Home purchase price and household income limits apply and vary by county.

TSAHC Home Sweet Texas Home

The Texas State Affordable Housing Corporation (TSAHC) gives eligible homebuyers a grant or a deferred forgivable second loan through its Home Sweet Texas Home Loan Program.

To qualify, the borrower must have a credit score of at least 620. Home purchase price and household income limits apply and vary by county.

U.S. Department of Housing and Urban Development

Additional DPA resources in Texas can be found on the state's HUD page.

Step 2: Find a great real estate agent in Texas

🔑 Key takeaway:

Interview multiple agents to find one who knows your target neighborhoods, has experience in your price range, and communicates well.

Your real estate agent will be your main ally during the home buying process. Besides finding and showing you properties, your agent will help you make offers, negotiate contracts, and navigate the closing process. Plus, they can recommend other service providers like title companies and inspectors to help you buy your home in Texas.

Don't rush into choosing an agent. Instead, take the time to research and interview multiple real estate agents who have experience in the neighborhoods you're interested in. You should pay attention to a realtor's:

  • Years of experience
  • Number of transactions in the last year (the more the better!)
  • Experience in your price range
  • Overall review score
  • Individual reviews and complaints

Top Local Agents Hand-Picked for You!

Clever matches you with multiple agents in your area so you can interview, compare, and choose the best one to help you buy your next home.

Step 3: Get preapproved for a mortgage

🔑 Key takeaway:

Once you're preapproved for a mortgage, it's imperative that your financial situation doesn't change. If your credit drops, it can derail the process and keep you from closing on your house.

Here are some easy ways to ensure your credit doesn't change after you receive your preapproval letter:

  • Avoid opening new credit accounts
  • Don't close any accounts that have been open for a long time
  • Make all of your credit card payments on time

» LEARN MORE: What factors do mortgage lenders consider?

A mortgage preapproval letter is an offer to lend you up to a certain amount of money to purchase a home. It shows sellers that you are a serious buyer who is financially qualified to make an offer on a home.

Most sellers in Texas will require preapproval before showing you their home.

You don't have to decide on one lender right now. In fact, you should compare interest rates and preapproval amounts from several lenders to make sure you're getting the absolute best terms when you buy your Texas home.

Get Pre-approved Today!

Get matched with a lender who can tell you how much house you can afford. To get started, where do you plan on buying?

Step 4: Choose the right location

🔑 Key takeaway:

Search for neighborhoods where:

  • Home prices are within your price range
  • Home values are on the rise
  • The local amenities support your lifestyle

Currently, the typical home value in Texas is $314,837, but don't worry if that doesn't perfectly match your budget. Home prices vary dramatically from city to city and even from neighborhood to neighborhood!

Also, look at past home value trends. This will give you an idea of how much your home's value could go up over the next few years.

To give you an idea of how appreciation could impact what your house is worth in the future, consider these examples from three neighborhoods in Dallas:

Home value appreciation in Dallas

Neighborhood
2015
Current
Appreciation
Northeast Dallas
$222,110
$473,614
53.1%
Far North
$291,635
$557,054
47.6%
Southeast Dallas
$76,996
$233,853
67.1%

Step 5: Start house hunting in Texas

🔑 Key takeaway:

There is a fair amount of inventory in Texas’ market, but with listing prices shooting up, it may be challenging to find a house on a budget. If you’re set on buying in the state, review your priorities and temper your expectations. An experienced agent will be a big help to filter out listings — and while a lot of the homes they show may not check all your boxes, there might just be a deal that’ll be worth taking.

Searching for homes in Texas is the fun part of the home buying process! You'll get to look at a variety of homes and discover what you really want in a home.

Make a list of everything you want in a home and prioritize them. At the top of the list should be the items that are most important to you. This will help you separate your "must-haves" from your "nice-to-haves."

Your agent can help you understand if your wants are realistic for your budget and favorite neighborhoods or if you need to rethink what you're looking for.

Look at current housing inventory

The timing of your house hunt in Texas can have a big impact on your number of options. For example, in Texas, June has historically seen the most homes for sale. Searching in this season could give you more options and a greater likelihood of finding your dream home.

On the other hand, December gives you the fewest choices in Texas. Historically, there are 42.6% fewer homes for sale than during Texas's peak season.

Housing inventory in Texas by season

Season
New listings per month
Spring
44,144
Summer
46,042
Fall
36,471
Winter
33,565
Based on data from Realtor.com (September 2022)

Step 6: Make an offer

🔑 Key takeaway:

Local real estate markets vary in Texas — houses in the metro sell faster than those in far-flung towns. Heed your realtor’s advice when writing your offer, as they know your local area intimately and know how aggressive or competitive you need to be. They can also help negotiate a decent price for you to make sure that you still come out of the transaction with a great deal.

Once you find a Texas house you love, it's time to make an offer. Your real estate agent will help you write a compelling offer that gives you the best shot of convincing the homeowner to sell to you.

Currently, in Texas, homes stay on the market for 60 days before going under contract. However, every market goes through seasonal changes. During busier months, homes get snatched up more quickly than others.

Historically, Texas homes sell fastest in June, where the average property is only on the market for 52 days. If your home search falls around this time, you should be prepared to move quickly and potentially make offers on several homes before yours is accepted.

On the other hand, if you buy in January, you have a bit more time to search. Homes typically stay on the market 16 days longer than Texas's annual average.

Average time homes spend on market in Texas

Annual average
60 days
January
74 days
February
64 days
March
54 days
April
50 days
May
49 days
June
49 days
July
50 days
August
52 days
September
58 days
October
63 days
November
65 days
December
70 days
Based on data from Realtor.com (September 2022)

» LEARN MORE: What should an offer include?

👋 Next Steps: Talk to an expert!

If you're weighing your options for buying or selling a house, Clever can help!

Our fully-licensed concierge team is standing by to answer questions and provide free, objective advice on getting the best outcome with your sale or purchase.

Ready to get started?

Give us a call at 1-833-2-CLEVER or enter your info below. Our concierge team will be in touch shortly to help.

Remember, this service is 100% free and there’s never any obligation.

Step 7: Inspections and appraisals

Inspections and appraisals are an opportunity for you to better evaluate the home's condition and value before officially purchasing it. You may have an opportunity after this step to renegotiate the terms of your contract with the seller if something unexpected pops up.

🔑 Key takeaway:

  • Inspections: A licensed professional checks the house for any unseen, unexpected, or potential issues.
  • Appraisals: An appraiser hired by your lender examines the house to determine how much it's worth.

Home inspections in Texas

Having your Texas home inspected by a licensed inspector gives you peace of mind about the condition of the property before you commit thousands of dollars to purchase it.

Your inspector should check out the following parts of the property:

  • Roof
  • Foundation
  • Electrical system
  • HVAC system
  • Plumbing

If the home has a septic system, you should also pay for a septic inspection to make sure it doesn't have any problems that wouldn't be covered in a typical home inspection.

Texas-specific inspections

Texas law requires sellers to disclose all known problems with a property to interested buyers. However, some issues can go unnoticed until serious damage has occurred. Although it isn't required, homebuyers are strongly recommended to have specialized tests conducted before closing on a home.

In addition to a general home inspection, consider having the following tests done as well:

  • Radon testing: If the seller hasn't conducted a radon test within the past year, it's a good idea to do a test yourself. Elevated levels of radon can cause long-lasting health issues if the issue isn't mitigated quickly.

    You can request a free radon test kit from the Texas Radon Group here.

    • Termite and pest inspection: Termites and other pests can cause property damage and pose health risks to residents long before they're noticed by inhabitants. Even if a seller is confident their property is pest-free, it's a good idea to have a professional inspection done to give yourself peace of mind.

    Appraisals

    Appraisals determine the value of the property. If you're using a mortgage to buy your new home, your lender will order an appraisal to make sure the home is worth the money that it's loaning you.

    » LEARN: 3 options for buyers after a low appraisal

    Step 8: Close on your new home!

    🔑 Key takeaway:

    Before you close on your new home, you and your agent will do a final walkthrough of the property to ensure that it's still in the expected condition.

    To close on a home in Texas, you'll need to meet at the title company to complete some paperwork and settle your closing costs.

    On the closing date, prepare to spend about an hour reviewing and signing several legal documents. This paperwork is essential for finalizing your loan and the title transfer, so take your time to make sure all of the information is correct.

    A few important forms you'll need to complete will include:

    • Your final loan application
    • The deed
    • The mortgage promissory note
    • The disclosure statements

    Once you finish the paperwork, you'll pay your closing costs to the title company. The company will take care of distributing the correct funds to each recipient you owe.

    As a homebuyer, your closing costs can be broken down into four main categories:

    • Lender fees: Fees your mortgage lender charges for preparing your loan. Appraisal fees, survey fees, and other expenses related to your loan may also apply.
    • Title and escrow charges: Fees that the title company charges for conducting the closing and performing the title search. Buyers and sellers frequently split this cost.
    • Prepaid costs: Ongoing costs of homeownership, such as property taxes and homeowners insurance. Some lenders require borrowers to pay for these expenses in advance.
    • Other closing costs: Miscellaneous expenses that differ for each buyer. Fees for natural disaster certifications, real estate attorneys, or pest inspections are a few common examples.

    Buyers in Texas typically pay 3–5% of the purchase price in closing costs. For a $314,800 home — the typical home value in Texas — that's between $9,444 and $15,740!

    » LEARN MORE: Closing costs for buyers in Texas

    Should you hire a real estate attorney?

    Texas does not require you to hire a real estate attorney to buy a home. However, depending on your circumstances, you might consider hiring one anyways. If you do, treat the process similarly to hiring an agent. Interview multiple attorneys and proceed with the one that best meets your needs.

    Frequently asked questions

    1. Save for down payment
    2. Get pre-approved for a mortgage
    3. Choose your preferred Texas neighborhoods
    4. Partner with the right real estate agent in Texas
    5. Go house hunting
    6. Make a strong offer
    7. Inspections and appraisals
    8. Do a final walkthrough and close

    Yes! The Texas Department of Housing and Community Affairs offers the My First Texas Home program to first-time homebuyers and veterans. The program provides eligible participants with a 30-year, low-interest mortgage and flexible down payment assistance options.

    To qualify, buyers must have a minimum credit score of 620. Household income and home purchase price limits also apply and vary by county.

    » READ: What are the top first-time homebuyer programs?

    Related links

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