Homeownership – 29 min read

Ultimate Guide for First-Time Home Buyers in Texas

Everything you need to know before you move from renter to homeowner in the Lone Star state.

Homeownership – 29 min read

Buying your first home in Texas is a huge deal. Not only is it something many dream about as they shift into adulthood, but it can define your entire financial future. 

Understanding how home buying works and what you need to consider to ensure you’re making the right decision is not always easy. Bookmark this guide, or email it to yourself because this is a resource you’ll want to keep handy.

In this guide, we’ll walk you through the entire process of becoming a proud homeowner in Texas. From deciding to buy a house in the first place to understanding down payments, closing costs, and how to apply for your mortgage. We’ve also included some practical house-hunting tips from our team of experts, so you’re as ready as can be!

Ready to throw your welcome mat on a Texas home? Let’s go! 

If you’re looking to make your home-buying process as efficient and stress-free as possible, we’re here for you. We created Dwelling to help aspiring homeowners match with the best down payment assistance programs, minus all the legwork. Find out how much you qualify for today

How can I prepare to buy my first home in Texas? 

So, you’re considering buying your first home in Texas. Congrats! But, hold your horses. Although we firmly believe that buying now is better than later, there are some things you need to consider to ensure your mind is set and your life and wallet are ready for the change. 

Decide if it’s the right time to buy

You need to answer two questions to figure out if now is the right time to buy your dream home in the Lone Star State. Let’s look at each of these factors more in-depth. 

Is purchasing a home aligned with your current personal situation?

The decision to buy a house hinges heavily on your personal circumstances, including your current lifestyle, financial situation, rental arrangements, family structure, and future goals. These factors shape the complex decision-making process involved in home purchase.

Answering questions about how much you have saved, your ability to set aside money for monthly mortgage payments, and whether homeownership aligns with your financial objectives is crucial. 

Assessing the impact on your lifestyle, the timing concerning your current rental lease, and weighing the pros and cons of renting versus buying are also essential factors. 

Here are some key questions to ask yourself:

  • What is your current lifestyle and financial situation like? 
  • How much do you have saved? 
  • How much could you realistically put aside for monthly mortgage payments? 
  • What are your financial goals? Is building real estate equity one of them?
  • Will buying a home now negatively impact your lifestyle and financial goals?
  • When will your current rental lease end? Are you waiting for it to end before buying, or would paying a mortgage and rent at the same time not be a big deal?
  • Have you explored the pros and cons of renting vs buying? 
  • What are the next major events in your life: marriage, family planning, getting a pet, career changes, potential relocation?

“I just think of all those years I was paying rent and how much equity I could have had by now! You know, that’s a lot of lost time. But I’m grateful that I am finally a homeowner.“  
—Meaghan, Dwelling’s customer, and proud new homeowner 

Buying a house is a huge step—in your present and financial future—so take your time at this stage. 

Is the real estate market in your favor?

The real estate market sounds like a big, complicated matter, but it doesn’t have to be. Let's break it down. 

The Texas real estate game right now is a bit of a mixed bag. Mortgage rates are through the roof, hitting 8% and above for a standard 30-year mortgage. That means your home-buying budget might not go as far as it did in years past. 

But there's a silver lining—Texas homes are still relatively budget-friendly, and diving into the market now means less competition as many folks are playing the waiting game.

“The Texas real estate market has been slowly returning to a more even and balanced market since the pandemic," says Dianne Moore, Dwelling's Head of Brokerage. "There’s reduced buyer competition and increased seller flexibility.”

Despite higher interest rates, she thinks now is a favorable time to buy, offering a more pleasant experience for buyers.

The bottom line? Don't get too caught up in trying to time the market perfectly and make the most out of what’s out there. Take your time to find a loan that works for you and a price tag you’re comfortable with. 

💡Top tip: You can also consider adjustable-rate mortgages. They're handy because they automatically adjust after a few years, saving you the hassle of constant refinancing. 

You may have a tougher time finding exactly what you want due to the current low inventory in real estate. On the other hand, sellers are pricing well for first-time buyers in this market. So, if you do find what you’re looking for, it should come at a reasonable price. Weigh your options up and make your move wisely!

"It wasn't the best moment to buy, but I drew a line because I faced a choice: either continue paying the equivalent of a home's worth in rent for something that’s not mine or take a stand and become a homeowner.”
— Ron, Dwelling Customer

🤓 Learn more about the four key factors to consider when timing your first home purchase to decide when is the right time to buy your first home here. 🤓

Calculate your upfront costs and start saving early

Your path to buying your dream home in Texas begins with building up your savings. Beyond just the mortgage, you've got to stash cash for the down payment, closing costs, and unexpected moving expenses (ever had a moving crew accidentally wreck your TV or favorite couch?). 

Start by determining your down payment goal by exploring mortgage options and estimating what you can afford. Below is a handy table featuring the down payment required depending on the type of loan you get. 

If the down payment is your biggest hurdle, don't forget to check out down payment assistance programs—with Dwelling, you can get matched up with up to $30,000 in no-strings-attached down payment help from federal, state, and non-profit programs.

Down payment requirements based on mortgage type

Next on your savings checklist are closing costs, those extra bills sneaking in when you're buying. Your real estate agent will break down these fees, typically running 2% - 6% of the loan price or 1% to 2% based on the purchase price. Yeah, they add up, but they're part of the deal, so get to budgeting! 

Lastly, prep for moving and other incidentals by researching costs for trucks, personnel, and whatnot. 

💡Top tip: The golden rule for saving is to set clear goals and a monthly budget that includes both savings and expenses. Start saving from the get-go; don't wait until the month's end. 

“Based on my savings and credit score, what actually allowed me to buy my home was getting that down payment assistance. It meant everything to me.“ 
— Meaghan, Dwelling customer and proud new homeowner

Figure out what you can afford

You might think you have a pretty good idea of how much house you can afford. However, more often than not, people miscalculate and end up stressing a few months down the line because they bought more house than they should have. 

To avoid this massive headache, it’s crucial that you truly understand what your monthly payments will be and for how long you’ll be paying them. 

🔎 Clarification Box: One thing you need to keep in mind when budgeting for your first home is that there are two types of costs: upfront and ongoing. Your upfront costs include your closing costs and down payment, and your ongoing payments include your mortgage, taxes, insurance, and other monthly payments. Budgeting for these two types of costs is mandatory to really gauge how much house you can afford.

Your monthly ongoing payments will include:

  • Principal: the actual amount you borrowed from the bank. For example, a $350,000 house with a 3.5% down payment ($12,250) would require you to borrow $337,750—this is your principal. This is the amount that will be used to calculate the interest rate. 
  • Interest: what your bank charges for lending you the money. If you’re a high risk for the bank (like if you have a low credit score), you’ll get a higher interest rate to compensate for the risk they take on lending you the money. 
  • Taxes: property taxes are used by the government to maintain the infrastructure and community you’ll be moving into. These taxes are typically calculated on the assessed value of the home. If you pay less than 20% down payment, lenders are required to roll them (and your insurance) into your mortgage payments by adding them into an escrow account so that when the payment is due, the lender pays the municipality directly.  
  • Insurance: property insurance is money you pay so that if something happens to your home (a tree falls on your house, for example), you can get compensation based on a covered claim. 
  • Miscellaneous and others: moving to your own house can also include maintenance of a garden, or some unexpected fixes (when the toilet isn’t working, there’s no calling your landlord anymore), and other expenses you’ll need to budget for. 

Ensure your income and savings allow you to handle those payments without breakin' a sweat.

Check, maintain, and improve your credit

Your credit score is one of the most important elements lenders will look at when deciding whether or not you’ll get approved for a mortgage. After all, it shows how good you've been at paying back loans in the past and gives them an idea of how likely you are to handle future loans. 

The higher your score, the more likely you are to pay bills on time and the better chances you have to negotiate favorable terms on your loan. 

Here are the most common credit score requirements needed for the most common home loan types:

  • Conventional home loan: Minimum credit score of 620
  • FHA home loan: Minimum credit score of 580. However, some lenders might allow a score as low as 500 with a 10% down.
  • USDA home loan: Minimum credit score of 640

Wondering what credit score you have? At Dwelling, we have a FICO score calculator—the score used by 90% of lenders—for you to see the credit score that your lenders will look at—for free (and it won’t impact your credit score). Is your credit score lower than you’d like? Don’t worry. There are things you can do to improve it quickly. Here are a few suggestions:

  • Pay bills on time: Your payment history is a significant factor in your credit score. Paying bills on time, including credit cards, loans, and utility bills, can positively impact your score over time.
  • Reduce credit card balances: Aim to lower your credit card balances, especially if you're using a high percentage of your available credit. A lower credit utilization ratio can improve your credit score.
  • Settle outstanding debts: Work on settling any outstanding debts, particularly those in collections. Negotiate with creditors to arrange payment plans or settlements.
  • Avoid opening new credit accounts: Opening multiple new credit accounts in a short period can be seen as risky behavior. Focus on managing your existing accounts responsibly.
  • Become an authorized user: If possible, become an authorized user on someone else's credit card with a positive payment history. This could benefit your credit score.

Most importantly, be patient. Fixing a really low credit score can take some time, but it’s totally possible. Check out Dwelling Credit for more information about your credit score, debt analysis, and credit-building tools. It’s free. 

“I was working on fixing my credit for probably about five years and just getting to that point where I could apply for a mortgage,” says Meaghan, a Dwelling customer.

She tells those aspiring to be homeowners to “ensure you live within your means and carefully consider your finances. Once you do that, you’ll see that owning a home can set you up for success."

Understanding down payment assistance

Are you ready to buy your home, but the down payment is proving to be a Texas-sized tumbleweed in your way? Down payment assistance might be exactly what you need to kiss that tumbleweed goodbye and find yourself jiggling the keys to your new home in Texas. 

1. What is down payment assistance and what's it for?

A down payment assistance (DPA) program is a helpful financial initiative that offers financial support to cover all or part of the down payment required for your dream home. 

DPA programs are often provided by government agencies, nonprofit organizations, or private lenders, and are designed to help make homeownership more accessible to more people.

🔎 Clarification Box: Need a quick reminder of what a down payment is? No problem. A down payment is the initial payment you make when buying a house, typically ranging from 3.5% to 20% of the home's price, depending on your mortgage. Securing a down payment can be challenging, especially in dynamic economies.

2. Who is eligible for down payment assistance?

The criteria for qualifying for down payment assistance programs in Texas differ based on each program. However, common factors include:

  • Income limits relative to the area's median income
  • First-time homebuyer status—some programs exclusively target first-timers
  • Credit score requirements
  • Residency in Texas may be necessary for state-specific programs
  • Some programs might place limits on the maximum home purchase price
  • Completing homebuyer education courses is a prerequisite for some programs
  • Legal U.S. citizenship or residency status may be required for some programs
  • The property type of the house you’ll purchase may also be a factor

🤓 Detailed eligibility criteria for each program can be found on each program’s website. However, because we’re here to help, we’ve done our research and found the top eight down payment assistance programs in Texas for first-time home buyers. We’ve also included a table breaking down each program more visually—you’re welcome! 🤓

3. How do I apply for down payment assistance?

Applying for down payment assistance entails a few steps and some paperwork. Here's the process in a nutshell:

  1. Nail down the right program: Figure out which program suits your needs best
  2. Check those eligibility boxes: Visit the program's official site to make sure you meet all the criteria
  3. Hit the books: If there's a required homebuyer education course, go ahead and attend
  4. Talk mortgage details: Reach out to your mortgage lender for the lowdown on the application process, program requirements, and deadlines
  5. Paperwork hustle: Gather all your documents meticulously. Missing deadlines or stumbling on incorrect paperwork is a no-go.
  6. Double-check, then submit: Before hitting send, make sure all the info is accurate and up-to-date
  7. Be patient: Some programs have a review period (typically one to two months in Texas), so chill out and let patience be your BFF
  8. Follow the rules: Once you're approved, stick to the program guidelines, especially when it comes to choosing an eligible property within the specified timeframe

That’s it, get your keys, and go pick your favorite cowboy boots because you’re now a first-time homeowner in Texas!

💡Top tip: If you want to avoid the lengthy process, you can check Dwelling. We’ll match you with up to $30,000 in down payment assistance without any hassle. 

How to get a mortgage in Texas

Once you’ve decided to buy a home in Texas, your next step is getting a mortgage. A mortgage is a loan that you get from a bank or financial institution to be able to pay for a home (primary residence). The usual payback time is between 10 to 30 years—so it’s a decision that will massively impact your financial future. 

Thankfully, there are many options when it comes to mortgages in Texas, so you can always find the one that best suits your needs and financial goals. 

Explore your mortgage options and terms

There are four key factors that contribute to budgeting monthly mortgage payments and the ones that will help you better understand the terms and conditions of mortgages: P.I.T.I.:

  • Principal
  • Interest
  • Taxes
  • Insurance

Depending on your chosen mortgage, you’ll be paying a fixed interest mortgage rate or an adjustable interest rate. 

A fixed-rate mortgage ensures a consistent interest rate throughout the loan, providing stability and predictable monthly payments until its completion. However, it's important to note that taxes and insurance may be subject to annual adjustments.

On the other hand, an adjustable-rate mortgage offers an initial fixed rate for a specified period, often the first few years, after which it’s periodically readjusted. This option is better for those seeking lower short-term payments but involves the risk of potential increases in the future.

Here’s an overview of some of the different mortgage options you have available in Texas:

Various financial institutions (private and from the government) will offer these types of loans to first-time homebuyers in Texas. Since getting a loan is like any other product, you should shop around and negotiate the terms with the lender. As Dianne explains: 

“The higher your credit score and the greater your savings, the better your ability to shop around and compare different loan products, interest rates, and fees.

This allows you to make the best choice for yourself instead of thinking that you only have one loan option available to you (which will typically include higher rates and fees).”

🤓 Ready to apply for a loan? Our How to get a mortgage in Texas resource will give you the step-by-step of the process. 🤓 

Gather all your necessary documents

Once you know which mortgage you want to go for, you’ll need to gather all the necessary documents to apply for it. Most mortgages will ask you for:

Financial documents

Income and financial history verification: This includes tax returns, pay stubs, W-2s of the previous two years if you’re employed, or year-to-date profit and loss statement if you're self-employed

Asset verification: This includes bank statements, information about other assets, and available money—or assistance—for a down payment

Other financial documents: Recurring debts and rental history

Credit score

Most loans have a minimum credit score requirement. However, they can vary. 

Find out your FICO score and access credit improvement tools for free

During the loan process, you’ll need to authorize the lender to check your credit report.

Other documentation

Social security number, driver’s license, and some loans might ask that you provide a residence card or proof of nationality. 

For the mortgage to be finalized you’ll need to provide your pre-approval letter and property information to ensure it fits with the loan’s requirements. 

Get pre-approved

Getting pre-approved is a game-changer. It helps you hone in on homes within your budget and shows sellers you're serious. However, it's not a guaranteed mortgage ticket—things might change, and you need to keep an eye on your financial situation, property choices, and the market.

Getting pre-approved may sound simple, but it's a bit of a dance. Here's a quick breakdown:

Gather financial documents:

  • Recent pay stubs
  • W-2 forms (or 1099 for the self-employed)
  • Last two years' tax returns
  • Proof of extra income (like alimony or bonuses)

Assets check:

Lenders peek into your bank and investment accounts to ensure you have enough for a down payment, closing costs, and a safety net. If your down payment is less than 20%, there might be talk of private mortgage insurance (PMI).

Credit check:

A good credit score is your golden ticket. Most lenders look for a minimum FICO score of 620 (conventional) or 580 (FHA) but always double-check for your specific mortgage.

Other essential documents:

  • Your driver’s license
  • Social Security number
  • Permission for the lender to look at your credit report

Once you've got all your paperwork in a neat pile and selected your chosen lender, you can let the mortgage adventure begin. Expect your pre-approval in the next two weeks to two months. Keep in mind that your pre-approval letter is only valid for 60 to 90 days, so time it right and kickstart your house hunt pronto! 

 If you want to breeze through this process, Dwelling's got your back. Check out our resources, from FICO calculators to down payment assistance matching. Dive into Dwelling today and kickstart your journey to homeownership!

House hunting tips for first-time home buyers in Texas 

Once you’ve been pre-approved, you can start your house hunting. However, because we understand you’re just starting your home-buying journey, here we have a few tips to keep in mind:

Choose your real estate agent carefully

Your real estate agent is the person who’ll guide you through the whole process. You want to ensure you’re picking a good one. 

Here’s a handy checklist to consider:

✅ Ask for recommendations from friends, family, and colleagues

✅ Check online reviews and testimonials for potential agents

✅ Look for an agent with experience in your property type

✅ Consider their track record in your target neighborhood or market

✅ Clearly understand the agent's fees and commission structure

✅ Verify the agent's license and standing with the real estate authority

✅ Ask how often they'll communicate with you to provide updates

✅ Ask about recent sales, local amenities, and future developments

✅ Inquire about their negotiation approach and past experiences

✅ Discuss strategies for both buying negotiations

✅ Ask for examples of past marketing efforts and success stories

✅ Confirm the agent's availability and commitment to your timeline

✅ Understand the terms of the buyer-broker agreement before signing

Additionally, ask yourself if you feel comfortable with the agent and if you feel like they listen to you and care about the questions you have. At the end of the day, the estate agent will be the intermediary of buying your first home, so you want to ensure you’re as comfortable as possible! 

Decide on your deal-breakers

We all have that dream checklist in our minds, right? Walk-in closet, a kitchen straight out of a cooking show, a private gym and pool – you name it. But here's the scoop: it's time to play a little game of "Needs vs. Wants."

Sure, having a wood-burning fireplace may seem like a Pinterest dream, but is it a must for your day-to-day living? Deciding what features are non-negotiable (the needs) and what would be nice but not a deal-breaker (the wants) is crucial to ensure you’re buying the house that will work for you, your budget, and your future. 

What are the essentials that would make your home life comfortable and functional? Maybe it's that extra bedroom for a home office or a backyard for your furry friend to have the zoomies in. Think about what you need to have, not just for today, but for the years that you see yourself living in your first home. 

Here are a few questions to consider when deciding the needs vs the wants:

  1. What is the minimum number of bedrooms and bathrooms you need?
  2. Do you need a dedicated home office?
  3. Are single-story homes a necessity due to mobility concerns?
  4. How important is proximity to work, schools, or public transportation?
  5. Are you looking for a specific neighborhood or community vibe?
  6. What amenities (parks, shopping, restaurants) must be nearby?
  7. How much square footage do you need for your lifestyle?
  8. Is an open floor plan essential for your living preferences?
  9. Do you anticipate your family size changing soon?
  10. What maximum are you willing to spend, and what are you comfortable with for monthly mortgage payments?
  11. Are you open to renovations, or do you need a turnkey home?
  12. Is a yard or outdoor space important to you?
  13. Are you looking for specific community features like a pool, gym, or security?
  14. Are specific design elements (like a modern kitchen or hardwood floors) non-negotiable?
  15. How important is the potential resale value of the home?
  16. Are you willing to compromise on certain features for better investment potential?
  17. Is a home with energy-efficient features, like solar panels or upgraded insulation, a priority for you?
  18. How much time are you willing to spend commuting, and what transportation options are essential?
  19. How important are the safety and crime rates of the neighborhood?

By sorting out your priorities, you'll make the house-hunting process smoother and increase your chances of finding a home that truly suits your lifestyle. It's like creating a roadmap to your perfect pad!

Go look at lots of houses and make the most of walk-throughs and open-house events

Now that you have your list of Needs vs. Wants, you’re ready to look at some houses! Our advice: quantity will show quality. 

Visit as many houses as possible. Sometimes, a property that may not have looked appealing online could turn out to be precisely what you've been searching for, and vice versa. Go ahead, be curious, thoroughly inspect every house, ask any questions that come to mind, open cupboards, and tap on floors—make the most out of each house visit and practice running through your deal breaker checklist. 

You’ll be surprised what you thought may be an absolute necessity perhaps isn’t when faced with winning something else.

Have a critical eye, but keep in mind that minor cosmetic issues are often fixable, whereas compromising on safety, neighborhood rating, or nearby schools is not as easily fixed.

Location is key, as Ron learned when buying his first home."I often see my neighbors relaxing on their lawns, some with their grandchildren. Considering my age, I'm not far from that stage. Seeing this makes me more comfortable with my decision to move to this area. I love it,” he shares. 

Don’t be daunted by your many options; your real estate agent will help you with the whole process. 

Home purchasing tips for first-time home buyers in Texas

We’ve collected our team’s advice to leave you with some last tips and considerations to make your home-buying journey as smooth as a bowl of Texas chili.

  • Understand your local market: Before diving in, take the time to understand the local market. Different areas in Texas have distinct characteristics, so research the neighborhood vibes, trends, and price brackets.
  • Stick to your budget: Set a budget and stick to it. It's tempting to go big, but staying within your financial limits ensures a more stable homebuying experience and mortgage payment.
  • Get informed before making an offer: Take a level-headed approach before making an offer. Conduct a thorough inspection to uncover any potential issues and avoid surprises down the road. Don’t be rushed into buying by a pushy agent!
  • Prioritize home inspections: Home inspections are crucial. Don't skip them. They provide a comprehensive view of the property and help you make informed decisions.
  • Negotiate wisely: Negotiation is part of the process. Approach it with a practical mindset to find mutually beneficial terms for both parties.
  • Keep paper copies: In our digital age, maintaining physical copies of important documents is wise. Always keep a paper trail of contracts and receipts for your records.

That’s it! Now, all you have to do is start your own home-buying journey (with this handy guide by your side), and soon you’ll be saying “Howdy” to your new Texas home. 

Make buying your first home in Texas a breeze with Dwelling

Achieving the milestone of buying your first home in Texas is totally possible. Yes, even in this economy. Save money and overcome the down payment hurdle by entering your income to find out how Dwelling can help secure down payment assistance for you. Best of all, we'll take care of all the paperwork for you. So you can just hang your boots and enjoy the journey. 

Ready to make your homeownership dreams a reality? Texas is waiting for you!

First-time home buyers in Texas FAQs

How much do first-time home buyers have to put down in Texas?

Aiming for at least 3-10% of the home's purchase price is often recommended. However, the down payment amount for first-time home buyers can vary depending on county and mortgage type. Some loan programs may allow for lower down payments, and some may even offer down payment assistance.

How can I buy a house in Texas if I don’t have much in savings?

If you have limited savings, consider exploring down payment assistance programs, low down payment loan options, or government-backed loans like FHA loans. These programs are designed to assist buyers with lower upfront savings, making homeownership more accessible.

How can I qualify for a mortgage as a first-time buyer in Texas?

Qualifying for a mortgage in Texas typically involves factors like a stable income, a good credit score, and a manageable debt-to-income ratio. Lenders may also consider your employment history and the amount of down payment you can provide. Exploring different loan programs and working with a mortgage professional can help you understand your specific eligibility.

What are the requirements needed to buy a house for the first time in Texas?

Requirements for buying a house in Texas include factors like a steady income, a favorable credit score, and the ability to cover closing costs and a down payment. Lenders may also assess your debt-to-income ratio. It's essential to clearly understand your financial situation to determine if you’re ready for homeownership.

How can I buy a house in Texas with no money for a down payment?

While a down payment is typically required, some programs in Texas offer assistance for first-time home buyers, allowing them to secure a home with minimal or no down payment. Exploring government-backed loan programs and down payment assistance initiatives can provide options for those with limited upfront funds.

Is there down payment assistance for first-time home buyers in Texas?

Yes, Texas offers various down payment assistance programs for first-time home buyers. These programs may provide grants, low-interest loans, or other financial assistance to help with the upfront costs of purchasing a home. Visit Dwelling to find out more about down payment assistance programs in Texas.

Buying a
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