Homeownership – 14 min read

The Right Time to Buy Your First Home in Texas

Unsure when to buy in Texas? Make the best decision for you with this life self-analysis, market insights, and more.

Homeownership – 14 min read

With the current mortgage rate of 8%—the highest since 2000—increased inflation, rumors of an impending recession, and more uncertainties, you're not alone in wondering: when is the best time to buy my house in Texas? Should I buy a house now or wait it out?  

Buying your first home is a huge life step—not only because it’s a whole new chapter, but because of the financial impact it has. Naturally, you want to ensure you’re making the best decision. 

Figuring out the right mortgage, nabbing a prime location, and timing your buy with finances can make or break your peace of mind and long-term financial goals. 

Here, we're digging deep into the nitty-gritty you need to consider when you're diving into the world of first-time home buying. We’ll help you assess your personal finances and life circumstances, as well as take a look at worth-knowing real estate market trends in the Lone Star State. 

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 without all the work. Find out how much you qualify for today

4 Factors to consider when timing your first home purchase

Debating whether to buy your first home today, next year, or in a few years? The short answer will always be: now is the best time. Getting on the property ladder as soon as you can is one of the best things you can do for your financial future. However, doing it right and thinking a few things through will help you time this decision better in the short-term so it brings ample benefits and none of the headaches.

Let’s look at the factors you need to consider when timing your first home purchase in Texas. 

House price graph showing continued increases in home prices in Texas.

1) The timing of your personal life

The first thing you need to consider is, well, you. Your personal life will be one of the most important factors in whether buying a house now is the right step to take. 

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 mortgage monthly 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 you don’t mind paying mortgage and rent at the same time?

• 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?

• Are you tired of dealing with landlords and are you ready to own the place you live? 

Once you've got these answers down, you'll have a clearer picture of where you stand right now and whether diving into the whole house-buying process (with down payments, monthly mortgage payments, dipping into your savings, etc.) is the right thing to do or not. 

However, don't rush in without your financial game face on. To figure out how much house you can really afford, check out Dwelling’s handy calculator.

Be sure to get that mortgage pre-approval (Dwelling can help you too!) in your back pocket before you kick off your house-hunting. The pre-approval is crucial to know how much the bank's willing to lend you, making it easier to stick to a budget that's not just a pipe dream.

2) The timing of the real estate market

Now that you understand your personal circumstances, let’s look at the bigger picture: the local real estate market in Texas. 

Here's the scoop: sadly, thanks to today's sky-high mortgage rates in Texas and the rest of the country (8%+ for an average 30-year fixed mortgage), your house-buying budget might not stretch as far as it did a year back. 

But, there's a silver lining. Homes in Texas are still pretty wallet-friendly, and if you decide to take the plunge now, you'll likely face less competition since many buyers are playing the waiting game.

Here are a few questions you might have about the current state of the market:

Will home prices in Texas rise or fall?

Home prices are staying relatively low, down by about 2.5% in most areas. The Texas housing market and affordability are expected to remain steady, with around 4.78 million existing homes going for sale in 2023, as per the National Association of Realtors' top economist. 

“We’re seeing accepted offers come much more in line with listing prices rather than the bidding wars that had been common in many Texas markets.”—Marcus Phipps, chairman of Texas REALTORS

In a nutshell, while rates are climbing up, home sales are sluggish. Nonetheless, it's a good time for those looking for some affordable options in the Texas real estate market.

First-time buyers need to take into account that if/when mortgage rates go down, people will flood the market again and that can cause a steep increase in prices. There’s a good chance it’s better to buy now with a high mortgage rate but a low purchase price and refinance later. Instead, if you end up with a low mortgage rate but a high purchase price there’s nothing you can do to alleviate the hit on your wallet.  

Remember: time in the market > timing the market. For most buyers, getting into the market as soon as possible is better than waiting to “perfectly” time the market. Realistically, timing the market is much harder than you would think. Many people who held off from buying at the beginning of COVID due to uncertainty in the market might not be feeling the same way today with the increase in purchase cost and interest rates we’ve seen since.

How do I manage changing interest rates?

With the expected decrease in mortgage rates, now is a good time to shop around for loans and consider adjustable-rate mortgages. Their benefit: you won’t have to worry about refinancing since they’ll automatically re-adjust after a few years.

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Clarification box:

Adjustable-rate mortgages (ARM)—also known as variable rate or floating mortgages—are mortgages that after a certain period of time re-adjust their rate. There are two common types of adjustable rate mortgages: 5-1 or 5-5. 5-1: this means that for the first five years, your rate will stay fixed, and after that, it will readjust every year. 5-5: means that for the first five years, your rate will stay fixed, and it will then be readjusted every five years. 

What’s important to know is that ARMs usually come with caps that put the brakes on how much your interest rate and payments can creep up each year or over the life of the loan.

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How does the current market in Texas affect me?

To be brutally honest with you, it’s practically impossible to time the market perfectly. However, with this current market there are a few pros and cons:

✅ There are fewer buyers, which means less bidding competition

✅ Even if you choose to refinance later, initially, you’ll be paying a hefty monthly mortgage fee

✅ Home prices are currently somewhat affordable despite the increase in mortgage rate

✅ Due to the low inventory, it might be harder to find exactly what you’re looking for

✅ To sell something in the current market (low inventory, low buyers, high mortgage rate) sellers are really pricing well for a first-time buyers

What else should I consider with the current market?

• Re-evaluate your must-haves vs. nice-to-haves

• Don’t compromise on the location of your house 

• Don’t forget that if you have a good credit score you’ll be able to get more competitive mortgage rates

• Shop around for lenders and loans to find the best offer possible

• Consider adjustable rate mortgages if you haven’t already

• Reduce the impact of a down payment on your wallet by getting down payment assistance—psst. At Dwelling we can help you with this!   

Buying a house is a long-term investment with short- and long-term impact, so ensure you’re planning with all of the above in consideration. Remember, you “date the rate, but marry the house,” as NBC’s Vicky Nguyen says, so put the rate to the side and find the best home for you.

Whether you decide that now’s the perfect time to buy or want to revisit the option in the future, Dwelling can help with your mortgage, pre-approval, FICO credit score calculator, and more—our door is always open. 

3) Managing your mortgage

You’ll need to consider how mortgage-ready you are. It might be that you’re at the right time in your life and the market is right, but if you have a bad credit score, a poor debt-to-income ratio, or lack enough proof of employment you won’t be able to apply for a loan just yet. 

Want to learn more about getting a mortgage in Texas? We got you covered. 

Besides proof of employment history, a sufficient income for the loan you want, and proof of other financial assets, there are two key things you need to pay attention to before starting your home-buying process in Texas.

1. Your credit score

Your credit score is a number that goes from 300 to 850 (as measured by your  FICO score—the one used by most lenders) that indicates to lenders on your level of creditworthiness.

The FICO credit score is calculated based on five factors: 

• Your payment history

• Current debt

• New credit requests

• Length of credit history

• Types of credit you have

However, the three main U.S. credit bureaus (Equifax, Experian, and TransUnion) calculate it slightly differently. 

What should I do if I have bad credit? 

Don’t panic if you have a bad credit score. You can always improve your credit by:

• Paying your bills on time: It takes about six months of on-time payments to make a noticeable score improvement

• Getting a credit limit increase: If you've got credit cards, ask for a credit bump. Just make sure not to max it out to keep your credit utilization low.

• Keeping old credit cards open: Even if you're not using a card, don't close it. Closing can hurt your score, especially if it's old or has a high limit.

• Considering credit repair services: If you're short on time, credit repair companies can negotiate with your creditors for a monthly fee

• Reviewing your credit report: Grab your free annual credit reports from the main bureaus or use a monitoring service to keep tabs on your info and identify areas to work on

To get instant access to the same FICO score that most lenders use, your full credit report, and credit-building tools, try Dwelling Credit for free. 

Your debt-to-income (DTI) ratio

Your debt-to-income (DTI) ratio is a way to see if you can handle your monthly bills. It indicates the proportion of your debt in comparison to the amount of income you're earning. In other words, it's a measure of how much you owe relative to how much money you're making. Mortgage lenders use it to make sure they don't give you credit for additional debt you can't afford to pay.

As a general guideline, lenders like to see a DTI ratio under 36%, with no more than 28% of that going to your mortgage or rent. The highest you can go and still snag a mortgage is around 43%.

Top tip: If your DTI ratio is too high you can always lower it by reducing your monthly recurring debt or by increasing your gross monthly income. 

4) Building your savings

The last thing you’ll need to consider before deciding whether now or later is the best time to buy your first home in Texas is checking your savings. 

Buying a house means more than just the price of the mortgage. You’ll need to have money for the down payment, closing costs, and for actual moving into your new home, with contingency funds for any unexpected costs (the moving crew accidentally broke your TV and favorite couch?). 

Let’s look at the savings you’ll have to take into account: 

Saving for a down payment

Set your down payment goal: shop around and find the mortgages you’d qualify for. By knowing how much house you can afford, you’ll have an estimate of what your down payment goal should be.

Consider down payment assistance: if the down payment is the only thing getting in the way of you getting on the property ladder don’t hesitate to apply to some down payment assistance programs. 

Down payment requirements based on mortgage type:

*You’ll need to pay private mortgage insurance (PMI) if you put less than 20% down payment

**They have additional costs like FHA mortgage insurance, VA funding fees, and USDA guarantee fees, respectively

Psst. With Dwelling, you’ll get matched with up to $30,000 in down payment assistance from federal, state, and non-profit programs—no strings attached.

Saving for closing costs

Closing costs are any extra bills you have to pay when you're buying or selling a house. These can include things like fees for getting a loan, paying the real estate agent, taxes, insurance, and other paperwork fees. 

By law you have to know about these costs and agree on them before you can finish the deal—your real estate agent will give you the exact amount during the home-buying process. 

Closing costs typically end up being 2% - 6% of the loan price or 1% to 2% if they’re calculated on the purchase price. Be warned, they can add up, but it's part of the whole buying and selling process so ensure you’re budgeting—and saving—for them as they can’t be avoided.

Saving for moving & incidental expenses

Before you start the house hunting process, ensure you have an idea of what moving out of your current place and into your amazing new home in Texas will cost you. Ask around, check with friends and family, and Google to know the prices of moving trucks, moving personnel, and more. 

Lastly, remember that the best way to save money is to have a clear goal and set a clear budget for the month that includes your savings and your expenses. Put money into your savings at the start of the month, not at the end. Plan to save, don’t wait to see how much you didn’t spend to put it in the piggy bank. 

By now you should know whether or not it’s the right time for you to buy your dream home in Texas. Your personal life, goals, finances, and the current market situation are all on the table. If you want to seize the market as it is today and make the most out of your finances by getting the right mortgage and down payment assistance you can then Dwelling is here to help. 

Ready to buy your first home in Texas?

Getting on the property ladder will always be one of the best things you can do for your financial future. However, if you’ve decided to wait for a while, worry not. You can continue to check Dwelling 

If you’ve decided everything is right and the time is now, enter your income to find out how much down payment assistance Dwelling can get for you. Forget about the paperwork we’ll handle all of that for you.

Whenever you think is best to buy your first Texas home, Dwelling helps you on each step of the way.

Buying a
home is closer than you think.