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Purchasing a home is a major decision. Unlike tenants who make monthly rent payments, homeowners are responsible for any repairs, upgrades, and renovations they wish to make on a property, and additional costs like insurance and local property taxes can take first-time buyers by surprise.
In 2020, more than 393,100 homes were sold in Texas, an increase of nearly 10 percent from 2019. Despite 2020’s economic shutdown due to COVID-19, nearly $38 billion was spent on constructing new homes for the single-family market. Single-family private construction value also increased nearly 14 percent.
Before purchasing a home, buyers should assess their budget and how long they’re planning to stay in the area. The average price of a home in Texas ranges from $224,500 to $339,900. In 2019, the state’s median home price increased by nearly 8 percent, with a significant percent of growth taking place in central Texas near Austin and San Antonio.
Along with a down payment, closing costs, broker fees, appraisal fees, and mortgage origination fees can add 2-5 percent of the loan’s total to the overall cost.
Federal Housing Administration (FHA) loans are often popular among first-time homebuyers with credit scores around 580. Ideally, adults should have credit scores of at least 620 and debt-to-income ratios that fall between 28 percent and 31 percent. Putting down at least 20 percent of the overall property value can also lead to a lower interest rate. However, there are options available for buyers who are unable to make down payments of at least 20 percent, have low credit scores, or high debt-to-income ratios.
During the mortgage pre-approval process, you’ll be asked to submit an application with your personal information. Lenders may verify this data by calling your current employer to check your work history, authenticating your current assets, and contacting any of the three credit reporting agencies (TransUnion, Equifax, and Experian) to assess your credit score.
There are many ways to search for your dream home. Many people begin their searches online to familiarize themselves with the current market and explore different neighborhoods. The next step is to hire a real estate agent to help them narrow down their choices.
Anyone searching for a home should identify the ideal features they’re looking for by making a list of important qualities and showing it to their real estate agent or keeping it nearby while browsing online.
They should consider the overall cost, size (square footage, number of bedrooms and bathrooms), overall condition, any possible repairs or renovations, location, neighborhood, school district, property taxes, size of the front yard and backyard, and more. It’s important to remain patient during this process. You may need to look at several homes before deciding to purchase one.
When you’ve chosen your ideal home, submit an offer in writing with your desired price, an earnest money deposit (1-2 percent of its total cost), and a deadline for the seller to respond. If you’ve hired a real estate agent, they will typically do this for you.
Don’t be afraid to walk away if the seller is unwilling to negotiate to the price you want. There are many available homes to choose from, and sticking to a price you can afford will save you from financial headaches in the future.
A certified inspector will look for any electrical, roofing, appliance, or structural issues that a home may have. You will receive a list of these problems, and any major drawbacks should be addressed with the seller before closing. Buyers can ask for a price discount if multiple repairs are needed, or the seller can fix the issues or cover some closing costs.
A home appraisal is just as important as an inspection and is required before receiving a mortgage loan. This will assess the current value of the property. Buyers should always conduct a final walkthrough to make sure any agreed-upon issues have been resolved by the seller and that nothing was overlooked.
During a closing meeting, a buyer should bring a valid form of ID, proof of funds, and any other necessary documentation. Before signing, they will be asked to carefully read over the closing disclosure, verifying the loan estimate and settlement statement before signing the mortgage note and deed.
The home-buying process can seem lengthy and complicated, but education and preparation can help Texas residents find the best homes for their needs. Visit texastechfcu.org/home-loans to speak with one of our mortgage experts today.
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