Helpful tips for buying a home in central Texas

Known as the “Lone Star” state, Texas is the second most populous state in the nation and the second largest state by land mass which means there is plenty of room for prospective residents. If you have heard the saying, “Everything is bigger in Texas” allow this to serve as confirmation that this slogan does in fact ring true for houses in the state too. If you are interested in purchasing a home in central Texas, here are a few things to take into account. Moving from New York City, Los Angeles, or Miami? Your dollars may stretch further in Texas. Oftentimes, buyers from other areas with higher costs of living such as New York City or Los Angeles, are pleasantly surprised by how much bang they get for their buck, or, in other words, how much square footage and outdoor space you get when buying a house in Texas. No state income tax. Texans reap the benefit of not having to pay state income tax putting that much more money in their pockets. If you have decided that a move to central Texas is right for you, here are a few helpful tips and tricks you can use when you are ready to buy your home.
    1. Assess your financial standing.
    2. Down payment, down payment, down payment. The median home price in central Texas is roughly $350,000. So it is important to anticipate spending somewhere around that number depending on what part of Texas you’re purchasing in, the amenities you want, and the size of the property, among other factors. Different loan programs will require different down payment amounts, but you do not always need to put 20% down when buying a home. There are loan programs out there that allow buyers to make low down payments on their dream homes. FHA Loans usually require a minimum down payment of 3.5%, so if you purchase a house for $325,000, expect to put down at least $11,375 with this type of loan. Keep in mind that this doesn’t include the funds you will need for closing costs Take advantage of down payment assistance. Before stressing about not having enough money for a down payment, research down payment assistance and first-time homebuyer programs available in Texas to see if you might qualify. It’s best to contact the down payment assistance programs directly for a list of qualified lenders and specific details, as program funding changes frequently.
    3. Do market research and determine where in central Texas may be the best fit for you and your financial status.
    4. Mortgage pre-approval. Once you have nailed down your dream neighborhood, get pre-approved for your mortgage. It is always smart to shop around for the best rates and terms, but it could be helpful to start with the bank or credit union you already have a banking relationship with. Find out what mortgage products they offer and then compare them to a few other lenders. All lenders have different loan qualifications but most of them will consider the following in making their decision:
    5. Credit score: This is a number between 300 and 850 that depicts your creditworthiness. Lenders will look at all three credit bureau scores and the higher your scores, the better. A good credit score typically falls between 670 and 739.

      Debt-to-Income Ratio (“DTI”): Your debt-to-income ratio helps the lender assess if you as a borrower would be able to afford your monthly payment. It shows the amount of debt you have in comparison to your income. DTI requirements vary from lender to lender, but conventional loans typically require a DTI of less than 45% — some exceptions can be made for certain qualified borrowers with DTIs of up to 50%. To calculate your DTI, divide your monthly debt payments by your gross monthly income and multiply by 100 to get a percentage.

      Income: Your lender will ask for proof of income and may request tax returns, profit and loss statements, and/or bank statements depending on the source of income. Your lender will typically require a two-year history of employment and will require your employer to provide verification of this.

      Down payment amount: Your down payment amount determines your LTV, or loan-to-value ratio, which is the amount you owe on your mortgage divided by your home’s value. Your required down payment will vary depending on the type of loan you get. A higher down payment typically means less risk for the lender, which could translate to a lower interest rate.

    6. Find a local real estate agent in central Texas.
      My team and I want to help you find your dream home. Contact us here today.