What Are the Steps to Buying Property in Texas?

Acquiring property in Texas involves structured financial and legal steps. This process demands careful attention and a clear understanding of each stage. Navigating the real estate landscape requires preparation, from securing financial readiness to understanding contractual obligations and the final transfer of ownership. This article guides prospective buyers through the phases of property acquisition.

Financial and Agent Preparation

Before an active property search, prospective buyers should establish a clear financial position. This involves assessing personal financial health, including reviewing credit scores and understanding debt-to-income ratios. Lenders look for a credit score of at least 620 for mortgage eligibility, with higher scores leading to better interest rates. Financial readiness also encompasses saving for a down payment and anticipating closing costs, which range from 2% to 5% of the purchase price.

Obtaining loan pre-approval is a key financial preparation. Pre-approval involves a thorough lender assessment, providing a stronger indication of borrowing capacity than pre-qualification. Lenders require documentation like recent pay stubs, bank statements, and two years of tax returns to verify income and assets. This helps buyers understand their maximum loan amount, allowing them to focus their property search within a realistic budget.

Selecting a knowledgeable real estate agent is also part of the preparatory phase. An agent provides market insights, assists in identifying suitable listings, and offers expertise during negotiations. They guide buyers through the Texas real estate market, leveraging access to listing databases and understanding local conditions. Establishing this professional relationship early helps streamline the buying process.

Property Search and Offer Submission

With financial preparations complete and an agent secured, the active search for properties begins. Buyers can explore online resources and attend open houses, but collaborating with a real estate agent helps identify listings that meet specific criteria. An agent can narrow options and arrange private showings, ensuring the search remains focused and productive. This phase is about discovering a property that aligns with the buyer’s needs and financial capabilities.

Once a suitable property is identified, craft a formal offer using standard contract forms. These forms outline the terms of the proposed purchase. Key components of an offer include the proposed purchase price, the amount of earnest money, and the duration of the option period. Earnest money, 1% to 3% of the purchase price, is a deposit held by a title company to demonstrate the buyer’s serious intent.

The option period allows the buyer to terminate the contract for any reason within a negotiated timeframe, usually 7 to 10 days, in exchange for a non-refundable option fee, ranging from $100 to $500. The offer also includes contingencies related to financing, appraisal, and property inspection. If the seller accepts the offer, negotiations may ensue, involving counteroffers until both parties reach a mutually agreeable contract.

Inspections, Appraisal, and Loan Finalization

After an offer is accepted, due diligence begins with property inspections. A home inspection identifies material defects within the property’s structure, systems, and components. Buyers arrange for a licensed inspector during the option period, which allows time to assess findings and negotiate repairs or credits with the seller. A general home inspection covers:
The foundation
The roof
Electrical systems
Plumbing systems
HVAC systems

Costs range from $300 to $600, depending on property size and age. Additional specialized inspections, such as for wood-destroying insects, may also be conducted.

If the purchase involves financing, the lender orders a property appraisal. The appraisal determines the property’s market value, ensuring the loan amount does not exceed the asset’s worth. This protects the lender by confirming the property provides sufficient collateral. If the appraisal value is lower than the agreed-upon purchase price, the buyer, seller, and lender may renegotiate the terms, or the buyer may cover the difference.

Following successful inspections and appraisal, the loan moves into the finalization phase, known as underwriting. During underwriting, the lender conducts a detailed review of the buyer’s financial information and the property’s value to grant final loan approval. This process involves verifying employment, income, assets, and credit history, often requiring updated documents. The underwriting process can take several days, with initial approval within 48 to 72 hours, and the overall loan process can extend for over 50 days.

A title company performs a title search, reviewing public records to ensure clear ownership and identify any liens, unpaid taxes, or encumbrances against the property. A clean title confirms the seller’s legal right to transfer ownership. The title company then prepares a title commitment, which outlines the terms and conditions under which title insurance will be issued. Buyers review this commitment to understand potential issues that need resolution before closing, protecting against future claims.

Understanding the Closing Process

The closing process is where ownership is legally transferred from the seller to the buyer. Several days before closing, at least three business days, the buyer receives a Closing Disclosure (CD) from the lender. This document provides a final statement of all loan terms, including interest rates, monthly payments, and a detailed breakdown of all closing costs and fees. Reviewing the CD ensures accuracy and transparency regarding financial obligations.

On the scheduled closing day, all parties involved, including the buyer, seller, their real estate agents, and a title company representative, meet. During this meeting, the buyer signs numerous legal documents, such as the promissory note (promise to repay the loan) and the deed of trust (secures the loan against the property). The deed, which legally transfers ownership, is also signed. Buyers must bring valid government-issued identification and certified funds, such as a cashier’s check or wired funds, to cover the down payment and remaining closing costs.

Upon completion of all signings and fund transfer, the deed is recorded with the county clerk’s office, establishing the buyer as the new property owner. Following closing, new homeowners in Texas can apply for a homestead exemption. This exemption reduces the taxable value of their primary residence, lowering property taxes. To qualify, the property must be owned and occupied as the primary residence as of January 1 of the tax year. Homeowners can apply for this exemption immediately after closing, which can provide a reduction, such as a $100,000 reduction in appraised value for school district taxes.