What Is Needed to Buy a House in Texas?

Buying a home in Texas involves multiple stages, each with specific requirements. Navigating the Texas housing market requires preparation, from assessing financial readiness to understanding contractual obligations and ownership transfer.

Financial Readiness

Securing a home in Texas begins with assessing one’s financial standing, as lenders evaluate factors to determine eligibility and loan terms. A strong credit history is foundational, with conventional loans typically requiring a minimum credit score of 620. A higher score, such as 740 or above, often leads to more favorable interest rates and loan terms, reducing the overall cost of homeownership. Checking one’s credit report for accuracy and addressing discrepancies can help improve a score.

Saving for a down payment represents the initial equity in the home. While a traditional 20% down payment avoids private mortgage insurance (PMI) on conventional loans, many options exist with lower requirements. FHA loans can require as little as a 3.5% down payment for those with a credit score of 580 or higher, and some conventional loans may allow 3% down. The average down payment in Texas is around 19%, though this varies by location and loan type.

Obtaining a mortgage pre-approval provides a clear understanding of the maximum loan amount a lender will provide. This process involves submitting financial documents for review, including recent pay stubs, W-2 forms from the past two years, and tax returns. Lenders also request bank statements for the past 60 days to assess assets and verify funds for the down payment and closing costs. Identification, such as a driver’s license or passport, and a Social Security number are required to verify identity and enable a credit check.

Beyond the down payment, homeowners must budget for additional expenses. Closing costs, which cover fees related to the loan and transfer of ownership, typically range from 2% to 6% of the home’s purchase price for buyers in Texas. This can include loan origination fees, appraisal fees, and title insurance. Property taxes in Texas are comparatively high, averaging around 1.63% to 1.74% of the home’s value, as the state relies heavily on these taxes due to the absence of a state income tax. Homeowner’s insurance premiums are also an ongoing cost and a requirement for mortgage lenders.

Finding Your Home and Making an Offer

With financial preparations, the next stage involves searching for a home and initiating the purchase. Engaging a buyer’s real estate agent is beneficial, as these professionals offer expertise in local market conditions, property searches, and negotiation strategies. An agent can assist in identifying properties that align with specific needs and budgetary constraints, streamlining the search.

Defining clear home criteria before starting the search helps focus efforts. This includes considering factors such as desired location, property size, number of bedrooms and bathrooms, and specific features. Establishing a realistic budget, including the potential monthly mortgage payment and associated homeownership costs, guides property selection.

Property searches typically involve reviewing online listings, attending open houses, and relying on the agent’s network. Once a desirable property is identified, making a competitive offer is the next step. A typical offer in Texas includes the proposed purchase price, along with earnest money, a deposit demonstrating serious intent. Earnest money usually ranges from 1% to 3% of the contract price, though it can be higher in competitive markets. This deposit is held by an escrow agent, often the title company, and is typically delivered within three days of the contract’s effective date.

The Texas real estate contract also includes an option period, a negotiated timeframe during which the buyer can terminate the contract for any reason. For this right, the buyer pays an option fee, often around $100-$200, directly to the seller, and this period typically lasts 7 to 10 days. Common contingencies protect the buyer, such as financing contingencies, which make the purchase dependent on loan approval, and inspection contingencies, allowing for property evaluation. Negotiation may involve counteroffers and adjustments until both parties reach an agreement.

Loan Processing and Property Due Diligence

After an offer is accepted, the process transitions to securing the mortgage and evaluating the property. The full loan application process begins, moving from pre-approval to underwriting. During underwriting, lenders verify all information and may request updated financial documents, such as recent bank statements or pay stubs, to confirm continued employment and financial stability. This ensures the buyer’s financial situation has not significantly changed since pre-approval.

An appraisal of the property is mandatory, ordered by the lender to assess the home’s market value. This ensures the loan amount is commensurate with the property’s worth. If the appraisal comes in lower than the agreed-upon purchase price, it can necessitate renegotiation or require the buyer to cover the difference.

A professional home inspection is a due diligence measure for the buyer, typically conducted during the option period. This comprehensive inspection covers various components of the home, including structural elements, electrical systems, plumbing, heating, ventilation, and air conditioning (HVAC), and the roof. The inspection report details defects or concerns, which can then be used to negotiate repairs with the seller or, in some cases, terminate the contract.

A title search is conducted to ensure the seller has clear ownership and to identify any existing liens, easements, or other encumbrances that could affect ownership. Title insurance is then purchased, protecting both the buyer and the lender against future claims to the property’s title. In Texas, the seller typically pays for the owner’s title insurance policy.

Homeowner’s insurance is a prerequisite for obtaining a mortgage, providing financial protection against damages to the property from events like fire, theft, or natural disasters. Buyers must secure an insurance policy before closing. Texas law also mandates specific disclosures from sellers, providing information about the property’s condition and other relevant details. The Seller’s Disclosure Notice (Texas Property Code Section 5.008) details known defects, past repairs, and other material facts.

Additional Texas-specific disclosures may include information about Municipal Utility Districts (MUDs), which provide water, sewer, and drainage services and levy taxes. If the property is part of a Homeowners Association (HOA), buyers will receive HOA documents, including bylaws, rules, and financial statements, outlining community regulations and financial health. Other disclosures might cover potential annexation by a municipality or water level fluctuations for properties adjoining certain bodies of water.

Finalizing the Purchase

The culmination of the home-buying process involves final steps leading to ownership transfer. A final walkthrough of the property is typically conducted within a few days or hours before closing. This walkthrough ensures the home is in the agreed-upon condition, that all negotiated repairs have been completed, and that no new damage has occurred. It also confirms that all items included in the sale, such as appliances, are present and functioning.

At the closing appointment, buyers will review and sign numerous legal documents. The Closing Disclosure (CD) details all financial aspects of the transaction, including loan terms, estimated monthly payments, and all closing costs. Buyers also sign the promissory note, the promise to repay the mortgage loan, and the deed of trust, which secures the loan with the property as collateral. The deed itself, transferring legal ownership from seller to buyer, is also signed.

During closing, the buyer’s funds for the down payment and remaining closing costs are transferred. Once all documents are signed and funds disbursed, keys to the new home are typically provided, marking the official transfer of possession. As a final administrative step, the deed is then filed and recorded with the county clerk where the property is located. This public recording establishes the buyer’s legal ownership and provides notice to all other parties.