Buying a house in Texas? Texas is home to some of the hottest real estate markets in the country.
What makes Texas such a popular place to live? Many residents cite the fact that Texas is one of the few states in the country with no income tax. In fact, The Lone Star State disliked personal income taxes so much that it banned them in the state’s constitution.
That’s not the only reason to buy a house in Texas. Overall, Texas affords home buyers a lower cost of living, a warmer climate, and plenty of employment opportunities. Whether you are ready to buy a house now or in the early stages of consideration, here are some tips for buying a home in Texas.
To begin, you’ll want to do your assess your finances and check your credit score, especially if you’re a first-time home buyer. These are essential first steps that will help you form a baseline of what you can afford and what neighborhoods are right for you.
If you can, take a proactive approach and lower the monthlies on your credit cards or, better yet, pay them off. Doing so will boost your credit score and make your financial profile as a borrower that much more appealing when it is time to buy a house.
Your next step will be to get in touch with a mortgage company. A good mortgage broker will walk you through the ins and outs of the entire financing process from start to finish. They’ll also help you evaluate your debt-to-income ratio and provide you information on interest rates and home loan types, such as FHA loans and private subsidized loans.
Most importantly, the mortgage broker will help you get pre-approved for a mortgage loan. Doing so will set limits on your purchase price and steer you towards a home you can afford. The mortgage broker will also outline what you can expect as far as mortgage payments so you can budget accordingly.
Now that you have your pre-approval letter, it’s time to call a real estate agent to start looking at homes. You will want to meet and discuss your unique needs, budget, and lifestyle with your agent so they can guide the search. When choosing a real estate agent, make sure they’re knowledgeable about the current real estate trends in your local market and are familiar with neighborhoods that meet your criteria and budget.
Finding the right neighborhood is critical. You will want to take your family, lifestyle, and work commute into account. Ask your real estate agent about local schools, crime rates, and community amenities. These details will help you zero in on a neighborhood and a home that is right for you.
Once you have located a home that fits the bill, you’ll want to talk with your real estate agent about making an offer. But there are several things to consider before doing so. It’s a good idea to first ask about property taxes for that specific county and understand the closing costs associated with buying a house in Texas.
The property tax rate is essential to keep in mind, as it will factor into your overall budget. On average, Texas homeowners end up paying approximately $2,775 in property taxes annually. Recent reports by SmartAsset reveal that Texas property taxes rank sixth highest in America, with the average property tax rate clocking in at 1.83%. Compare that to the current national average, which sits at a much lower 1.08%.
Keep in mind that when it comes to state taxes, Texas may have some of the highest property taxes in the U.S., but residents also enjoy one of the lowest sales tax rates, as well as zero state income tax.
Closing costs are another crucial aspect of the home buying process. These costs include settlement fees, lender charges, title and escrow fees, etc. Closing costs typically range from 2% to 5% of the purchase price. The exact number can vary depending on the cost of the home and the specific fees and services associated with the home purchase. In a real estate transaction, certain closing costs usually fall on the buyer, so talk to your mortgage broker to know what to expect.
There are many ways you can prepare for this added home buying expense. Per NerdWallet, paying closing costs out-of-pocket as a one-time expense is the most cost-effective route. However, your lender may be able to fold them into your loan and include the cost in your monthly mortgage payments. However, keep in mind that you’ll end up paying more interest over the life of the loan for these costs.
Once you’ve made a winning offer on a house and you’ve signed the purchase contract, you’ll kick off the option period. During this period, the buyer can terminate the contract for any reason and still get their earnest money deposit refunded. (Remember, this is the “good faith deposit” paid by the buyer that is held in escrow and later applied to your closing costs.) Most buyers use this time (usually 7-10 days) to understand the condition of the property through a home inspection.
A home inspection ensures the buyer has all the details on the current condition of the property, including the home’s foundation, structure, electrical, plumbing, and more. Typically, your real estate agent can recommend a reliable home inspector.
The home inspector will check these areas of the house and present you and your agent with a detailed report. You can choose to accept the home as-is, request the seller update or fix the items, or negotiate on the price to offset the costs of the necessary repairs.
After all of the above has run its course, you will finally find yourself on the closing day, where you’ll sign your closing documents and get the keys to your new home.
With so many factors to consider when buying a home in Texas, it can be tough to keep track of everything. But what if there was a way to buy and sell without the stress and uncertainty? With Orchard, you can.
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