How to Buy a House in Texas

So you want to buy a house — awesome! You’re already on the right track. You know how I know? Because you’re here!

Acknowledging that buying a home takes research and preparation is the first step to buying your first property, and we are so excited to help you. Also, let’s face it, school didn’t prepare us for this journey so we need to take it upon ourselves to dig into the process so you buy an asset, not a liability!

And, at the end of it all, if you feel like there’s still so much more you’d like to learn, you can click here to access our book “How to Buy a House in Texas” for an even more in depth look at the process!

But for now, we’re going to briefly go over the 9 stages of buying a home in Texas, and how you can not only buy your first home, but buy it with as little stress as possible. We provide all the information that you need, and nothing that you don’t!

THE 9 STEPS TO BUYING A HOME

1. ASSEMBLE A KICK-ASS REAL ESTATE TEAM

I want to emphasize the importance of this step. If you do this correctly, buying a house will be so much easier. Your “Real Estate Team” is made up of your real estate agent, lender, and title company. All are essential.

You should ALWAYS have a real estate agent by your side, especially as a buyer. Why? To protect yourself! Find a real estate agent who will represent your best interests. You need someone that can speak eloquently on your behalf when you are not present and who will consistently look out for your best interests. This is the BIGGEST and MOST IMPORTANT reason everyone should get a real estate agent.

The reality is some buyers’ agents will do a lot, and some won’t do much at all. There are so many real estate agents in Texas, and not all are created equal. You need to make sure that you’re working with somebody you feel comfortable with. Another obvious reason to work with a real estate agent as a buyer? It is a free service to you! That’s right. As a buyer you do not pay your realtor, it is a seller expense. So might as well use that free resource! And that is exactly what your realtor will be, not only during the process but after as well.

A good realtor will save you lots of time and money because they will have a list of reputable contractors and resources that will help you well beyond the closing table. If you are interested in working with the best of the best in your city, we are happy to connect you with a realtor who will have your best interests in mind.

Next up on your team is your lender! You will be working with a lender, credit union or bank if you are financing your home and not paying for it all in cash. If you are financing your home, like the majority of us will be, you should definitely be in contact with a lender before starting your home search. This is because you’ll need to know what your budget is before making specific decisions such as where to buy, how many bedrooms, features, etc.

Let’s say you have your heart set on an area and the average list price is $600,000. After months of searching, you finally speak to a lender and realize that your actual budget is $400,000 max. At this point, you need to reevaluate your whole plan. So many first time buyers approach us not knowing where to start. They are not quite sure what their home criteria is or even if they want a home or a condo.

The first step to narrowing down some of your criteria is knowing how much you can spend on a home. Bottom line: know your budget before you go shopping. Trust me. Nothing hurts like finding a home you love and realizing it cannot be yours.

2. IDENTIFY AND FULFILL WANTS AND NEEDS

After you know what you can afford, you can begin to think about your deal breakers.

Typical “deal breakers” I commonly see with clients include:

• Location
• Backyard for dogs
• Move-in ready
• Natural light

We provide clients with more in-depth stats on homes and areas when we get to know them as individuals. As soon as we know their character, combined with their deal breakers, we can help them narrow down an area.

Then, you will need to consider your needs as well:

• Do you work from home and need an office?
• Do you want roommates to help cover your mortgage payment?
• Do you need to live close to work?

Physically writing out a list of your wants and needs will not only help you to better understand what you’re looking for but also help your real estate agent find the best matches for you, saving you both time and energy. This exercise will also help your agent explain what is reasonable on your list and what isn’t, compared to your budget.

3. BINGO: FOUND THE ONE!

About three to five months from when you need to move into your new home, start getting more serious in your search. Remember to keep in mind; you may need a longer or shorter search period, depending on your situation and the state of the market. You’ll now visit the homes you’re interested in with your agent. They can also send you information on homes that have recently sold in the neighborhood. This way, you’ll have a clear idea of how quickly homes are appreciating in that particular area, and see if the home for sale is overpriced by comparison.

Your agent should also contact the listing agent and get more information, possibly not shared online. Your agent will come in handy and provide inaccessible market information. They can even pull the history of the home, including the last time it was sold, and also explain questions you may have. For example, “Hmm, why was this property listed on the market last month, and then it went pending, and then it came back on the market multiple times. Is this a red flag?”

Looking at homes in person too early will be, quite frankly, pointless. I suggest looking online first to get a feel for what’s on the market and what’s selling quickly or sitting longer. You can have your realtor set you up with a home search to do this and you can monitor it daily or even weekly. Be careful which online service you use; Zillow and Trulia don’t always have updated information, and hundreds of real estate agents use it as a lead generation source. Meaning, if you inquire about a home, your phone may start buzzing for a few days.

Because of technology and being able to look online, you may find you only look at a few homes before deciding to make an offer. Or, you do the opposite and spend a couple months looking. Whatever your method, try not to let your emotions get in the way of seeing great potential in a home or get too attached when you put in an offer.

Looking at houses can be fun, but this isn’t HGTV. Reality will hit hard if you over-complicate your search, let your emotions take control, or shop before knowing what you can afford. A little education goes a long way! If you are interested in getting more coaching on what path to take with your first purchase, you may want to look into our Homeschool Course, especially if you’re wanting to make your first home an investment.

4. SUBMIT AN OFFER

Once you find a home you want to buy, next up with submitting an offer to the seller. Filling out the necessary paperwork and waiting for it to be reviewed can cause a little anxiety. Yet, when you’re going through the motions with a real estate agent by your side, the task will not seem so daunting. Your agent will prep you as best as they can. Don’t fret! An excellent agent walks clients step by step through this process and makes sure everything is done correctly.

When you submit an offer there are a few documents that you will need besides the sales contract:

• Contract. This is a long document created by Texas State attorneys that basically goes over the details of the deal. For example how much you will be offering, how much your down payment will be and when the closing date will be. Your agent has seen so many contracts and will fill it out for you to sign. They will walk you through the details prior!
• Third party financing addendum. If you use a lender/bank, this document is required and will be attached to the sales contract. This document states what type of financing you have (Conventional, FHA, or VA loan). It also says how many days you, as a buyer, have to get official approval on your financing. If you don’t get financing within those days, you can back out of the contract and get your earnest money back. We go over earnest money in the next section.
• Pre-approval letter. This is a letter that you get from your lender or bank. You may be thinking, “Doesn’t that mean I already have financing? Why do I need a third party financing addendum?” A pre-approval is NOT final approval. It just means your lender has enough information and you should qualify for a particular loan amount based upon what you have provided. The determination and loan amount is based on income and credit information that you have given them. So, if you are leaving out information or if you buy a car when you go under contract or lose your job, you may be denied financing.
• Sellers Disclosure. This is a document completed by the seller of a home. It lists any known issues with the property, as well as any remodeling projects done during the time they owned the home. The seller doesn’t have to report any problem that they are unaware of. If you buy the house and discover a problem, how can you tell whether the owner knew about it? That’s why you hire a home inspector.

If you’d like the full breakdown of a standard Texas real estate contract, make sure to download the “How to Buy a Texas Book”!

5. YAY! OFFER ACCEPTED

Yay, you made it through! Now onto the true due diligence phase of buying a house. Below is a list of immediate steps that a buyer usually goes through once their offer is accepted.

Offer accepted:

Turn in your Option and Earnest money checks within seventy two hours after the effective contract date. Option money goes to the seller, and earnest money goes to the title company and will sit in an escrow account until closing day. As a buyer, you get to decide how much to offer for each and your realtor will help you navigate how much these amounts should be. For example, on a house with multiple offers, your realtor may tell you to increase these amounts in order to make your offer more appealing.

The option period (aka inspection period), along with the option money, buys you time to have home inspections done and negotiate any final terms or repairs with the seller, if possible. For example, if you have a seven-day option period written into the contract, you’ll have seven days to have your inspection completed, try to further negotiate with the seller, or back out if you decide it’s not the house for you. If you back out of the contract within those seven days, you will not get your option money back.

Earnest money is provided by the buyer so that the seller takes the offer seriously. You’re using these funds to show the seller you’re earnest about buying their house. Don’t confuse this with the down payment on the house. They are two separate things. The earnest money is turned into the title company, who will hold it in an escrow account. You will lose the earnest money if you breach the contract after your option period. Otherwise, this is a deposit, and you will get it back, or it can be applied to your down payment amount at closing. Remember, you do not turn this money in until your offer is officially accepted! Make sure to have these funds available in a bank account.

1. Schedule the inspection within your option period, so that you have time to get to know your house a bit before moving forward. This also gives you time to terminate the contract if you don’t like what the inspector finds. Inspections can last a few hours, but we always encourage our buyers to come at the end so the inspector can go over the report with them. It’s a great way to start getting to know your home. The inspector is looking for things you may not have noticed before.
2. Review inspection report and start negotiations with the seller if needed. The repairs don’t need to be completed within the option period. But there needs to be a final agreement made before the option period is up. The report can be twenty to forty pages, but don’t be alarmed; this is typical. Your realtor will also be there and has seen many inspection reports. We will help you navigate what a serious problem is and what is pretty standard to see during an inspection. The cost of a basic inspection usually starts at around $300.
3. Settle negotiations with an amendment. An amendment is a document that makes a change to the contract. For example, the inspector sends his final report, and you pick three items you want to be repaired by the seller: 1.) The water heater, 2.) A few rotting shingles on the roof, and 3.) To have the insulate attic insulated. You present your list to the seller, and they agree to fix only two repairs: shingles, and the water heater. After considering your options, you decide you’re happy with this compromise. Your agent would write this in an amendment, and both the seller and buyer would sign. These repairs must be agreed upon within the option period. Remember, the repairs will need to be done before closing, not before your option period is up. This should give the seller plenty of time to make arrangements. Buyers can also ask for money in lieu of repairs; many sellers prefer this route.

Appraisal: After negotiations have concluded, the next major hurdle is the appraisal. Your lender will hire an appraiser to ensure the property is enough to cover a loan in case you stop making payments. The appraiser researches similar homes in your area and compares recent sales to determine the market value of the house. Let’s say you put an offer on a home in a neighborhood that has recently gone up in value. You love the home and submit a full price offer of $380,000. You go through the inspection, and your option period ends. Everything is going well, but then the appraiser comes out and does not value the home at $380,000. The appraiser has looked at other homes in the neighborhood and can’t find comparables that justify the price you offered. The appraiser thinks it’s worth $370,000. Their conclusion will lead to more negotiations between you and the seller. There’s a $10,000 difference between the initial $380K and valued $370K. There are a few options.

1. The seller will agree to lower the selling price to $370K
2. The buyer will come up with the $10,000 in cash
3. The seller will lower the cost slightly, and the buyer will come up with the rest in cash.

Sometimes, this can be a deal-breaker, especially if the seller has no intention of lowering the initial price, and the buyer doesn’t have enough to make up the difference. The seller may then go with a backup offer or put the home back on the market. In a hot market, the seller may require that the buyer lets them know in the offer they submit, what they would do if the home doesn’t appraise. You realtor will walk you through this process!

6. PRE-CLOSURE: I SEE THE LIGHT

Phew, that was a lot! But you got through and you are almost at the home stretch. After you get through these steps, the rest of the transaction should go relatively smooth. The title company will run a full title search of the property, and your lender will be working towards final loan approval. Since you’ll be preparing for closing, you still may have some more paperwork to review or fill out:

Title Commitment:

You will get the title commitment from the title company. This discloses any liens or defects that affect your future home. Make sure to look through the document completely, paying particular attention to the following. But just know that if there are liens on the home that the title company catches, they will need to be paid by the seller prior to closing.

• Schedule A of the title commitment. This identifies the current owner and the legal description.
• Schedule B of the commitment. This identifies if there are any easements, mineral reservations, and restrictions that won’t be covered by your policy.
• Schedule C of the commitment. This lets you know if there are any requirements that you must meet before closing. Typical examples include paying off liens or resolving ownership problems.

Homeowners Insurance:
If your personal property is damaged or destroyed by an event covered by your policy, homeowners insurance will pay for your losses. If you’re like most Americans and need to finance your home (if you’re not paying cash), your lender will more than likely require that you purchase at least some homeowners insurance before you can close on your home. Again, your realtor will have a few great companies you can reach out to for quotes.

7. FINAL WALK THROUGH: THE HOME STRETCH

Before closing, your agent will schedule a final walk-through of the home. During the walk-through, you and your agent will check to make sure everything is repaired and in its proper place.

At least three days before close, you will receive your closing disclosure from your lender. This document will go over your loan details: loan terms, monthly payments, and a breakdown of your closing costs. Your closing disclosure shows the final amount of money you will need to bring to the title company on the day you close. Buyers may wire transfer funds or bring a cashiers check to the title company. You’ll have to check with the title company to see what they prefer. If you wire money, be wary of wire fraud! You’d be surprised how well hackers can imitate title companies or even your realtor. Also, double-check with your realtor or the title company before sending any funds!

8. CLOSING TIME (CUE SEMISONIC SONG)

Closing is typically held at the title company. As soon as the title company has the loan documents from the lender, they’ll let you know the final amount needed for closing, through the closing disclosure. Then you can initiate the wire transfer either the day before closing or the morning of or bring in a cashiers check. Don’t forget to start switching over utilities and changing your address wherever needed.

On closing day, you will need to sign many documents, and it usually takes about an hour. The title company will have one of their escrow agents go over each document as you sign. Your agent will often come for moral support. I bring clients gifts on this day and tell them about the support we offer after they become a homeowner. The seller typically closes on the same day, but at a different time, you won’t come into contact with them.

Your title company, lender, and the seller and buyer agents work hard to close on time, but sometimes, your lender may need an extension. This can be anywhere from a few days to a week and is simply done through an amendment document.

9. CELEBRATE!

Congratulations, you’re a homeowner! Now it’s time to start bragging to all of your friends and family, and teach them the perks of homeownership!

DID YOU READ THIS, BUT AREN’T FEELING 100% READY TO BUY? DO YOU WANT TO LEARN MORE ABOUT BUYING YOUR FIRST HOME AND MAKING IT AN INVESTMENT?

JOIN OUR HOMESCHOOL COURSE WAITLIST!

Don’t have the time to do all the extensive research it takes to get this done within the next year? We get it! That’s why we created Homeschool: the only online homebuyer course that will teach you how to buy a house and make it an investment. Join us for our next cohort by signing up for our waitlist to be the first to know when you can officially enroll.