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5 Things Texas First-Time Home Buyers Should Know

August 2, 2022 | By Reef Merhi
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If you're a Texas resident who is ready to become a homeowner for the first time, there are a few things you should know before you get started. Being prepared can make a big difference when you're making an investment as huge as purchasing your dream home!

With so much to cover, our experts have focused on 5 of the most important things that Texas first-time home buyers should be aware of. So, whether you're just starting to research your options or you're already in the process of buying a home, read on for helpful information!

Finding the right real estate agent and mortgage lender

When you're ready to start looking for a home in the lone-star state, it's important to find a real estate agent and mortgage lender that you can trust.

Real estate agent

A good agent will be knowledgeable about the Texas real estate market and will be able to help you find the right home for your needs. They should also be able to provide guidance on the home buying process, from negotiating contracts to applying for a mortgage.

Mortgage lender

It's vitally important to find a mortgage lender that offers competitive rates and terms. There are many different lenders out there, so take your time to shop around and compare offers before making a decision. You want a loan officer who is experienced, knowledgeable about the area, and easy to communicate with.

Additionally, first-time buyers have a variety of options and programs to help them. Make sure your lender is familiar and can get you the best deal.

Different Texas-specific home buyer programs

If you're a first-time home buyer in Texas, you may be eligible for certain state-sponsored down payment assistance programs. These programs can help you with the upfront costs of buying a home, including the down payment and closing costs. In some cases, you may even be able to get assistance with your mortgage payments. Be sure to research different programs and see if you qualify before applying for a loan.

My First Texas Home program

This program provides down payment and closing cost assistance up to 5% of the loan amount for 30-year fixed-rate mortgages (conventional loans). This no-interest deferred loan must be paid back in full when you refinance, sell, or pay off the mortgage loan.

My Choice Texas Home loan

This program also offers down payment and closing cost assistance up to 5% of the loan amount for either conventional or government-backed mortgages. If you're interested in this offer, check your credit report - a 620 minimum credit score is required.

Home Sweet Texas Home Loan Program

The Home Sweet Texas Home Loan Program is provided through the Texas State Affordable Housing Corporation (TSAHC). It offers a 30-year fixed-rate mortgage and up to 5% down payment assistance, either as a grant or second mortgage. The benefits include that there is no interest and no monthly payments on the second mortgage. But best yet, it will be forgiven after three years! However, if you sell or refinance your home before the three-year term ends, you’ll need to pay it back.

Homes for Texas Heroes Program

If you work in a public service profession or are an eligible veteran, you might qualify for the Homes for Texas Heroes Program, also through TSAHC. This program offers a 30-year mortgage along with down payment assistance of up to 5% for eligible employees such as teachers, police officers, and firefighters. Like the Home Sweet Texas Home Loan Program, the assistance can come as either a grant or a second mortgage. This program has income limits and purchase price limits.

Texas first-time home buyer grants

If you’ve been approved for a home loan through the Texas State Affordable Housing Corporation, you may be eligible to receive a mortgage credit certificate worth up to $2,000 a year on your taxes.

Additionally, you could receive down payment assistance of up to 5% of the loan amount as an outright grant or a forgivable second mortgage. Funds that would not need to be repaid!

There are also more than 40 programs that provide help for first-time home buyers in Texas. But these are specific to counties, cities, and towns. The TSAHC program is statewide.

City-specific programs

Houston, San Antonio, and Dallas each have programs that can help first-time homebuyers. If you're looking in one of these markets, ask your lender what options are available to you!

Types of home loans

There are many different types of home loans available, and it's important to choose the one that's right for you. The most common type of loan is a fixed-rate mortgage, which offers a fixed interest rate for the life of the loan. Adjustable-rate mortgages (ARMs) have an interest rate that can change over time, so they may start off with a lower rate but could increase in the future.

There are also government-backed loans, such as FHA and VA loans, which may have different eligibility requirements.

FHA loans

FHA loans are available to first-time home buyers with low credit scores and offer low down payment options. They also offer more flexibility for buyers with higher debt-to-income ratios.

VA loans

VA loans are available to eligible active duty military personnel and veterans. These loans often come with no down payment or private mortgage insurance requirements.

USDA loans

USDA loans are available to eligible buyers in rural areas. These loans offer low down payment options and competitive interest rates.

What to expect: down payment, closing costs, and mortgage insurance

While you may only be thinking about the purchase price of the home, there are other costs and fees you should be aware of.

Down payment

One of the biggest expenses of buying a home is the down payment. The down payment is the upfront cost that you'll need to pay when you get a mortgage. The amount you are required to put down is dependent upon the type of loan you use. For example, a conventional loan typically requires you to put down 20% of the purchase price. However, FHA loan down payments can be as low as 3.5%!

Closing costs

Closing costs are also typically due at closing, and these are fees associated with getting a loan and closing on a home. These can include things like an appraisal, loan origination fees, and title insurance.

Mortgage Insurance

Mortgage insurance is another cost to consider, as it's typically required if you're putting less than 20% down on a home.

If you're using a government-backed loan, like an FHA loan, mortgage insurance is required for the life of the loan. However, if you're using a conventional loan with private mortgage insurance (PMI), you may be able to cancel it once you've reached 20% equity in your home.

Mortgage insurance is typically rolled into your monthly mortgage payments.

Other costs and fees

Other costs and fees you may encounter include property taxes, homeowners insurance, and HOA dues (if applicable). These are typically paid on a monthly basis, along with your mortgage payment.

Be sure to ask your lender about all of the potential costs (and their lender fees) so that you can budget accordingly.

How to get pre-approved for a home loan

If you're ready to start the process of buying a home, the first step is to get pre-approved for a loan. This will give you an idea of your home buying budget, how much you can borrow, and what your monthly payments will be.

To get pre-approved, you'll need to provide some financial information to your lender, such as your income, assets, and debts. Once you're pre-approved, you can start shopping for homes in your price range!

Get started today

Texas first-time home buyers should know that there's a lot to consider before beginning the home buying process in this competitive market. But with the right preparation and guidance, it can be a smooth and rewarding experience. So if you're ready to take the plunge into homeownership, don't wait any longer - get started today!

The team at Texas United Mortgage loves helping Texas residents on their home-buying journey. We want to help YOU find your dream home.

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