5 Steps to Become a Texas First-Time Home Buyer

Are you wanting to own your own home in Texas? Being a first-time home buyer can feel confusing and overwhelming when trying to decide which program is right for you.

The truth is that which first time home buyer program you use in Texas is going to come down to your personal financial situation.  You’ll need to evaluate a few things before getting started.

The Steps for First-Time Home Buyers in Texas

1. Review Your Credit Report and Scores

Before you begin the home buying process you need to pull a copy of your credit report to get familiar with what shows up there. You can get a free copy of your credit at

You’ll want to make sure to grab a copy from all three credit bureaus:

• Experian

• Transunion

• Equifax

Once you get your reports in hand you want to review them to ensure all of the information is accurate and up-to-date.  If you find anything that’s not accurate you want to dispute the errors and work to get them removed.

Next, you want to get a copy of your credit scores. There are only two ways to get a copy of your actual mortgage credit scores. These are different than the scores you find on credit karma or through some other websites FYI.

• The first is to work with a mortgage loan officer who can pull your credit as part of your application.  This is the best option if you plan to purchase in the next 3 months or so.

• The second is to go to Myfico.com and sign up for their credit monitoring service.

Myfico’s credit monitoring service is a fantastic service that I definitely recommend, especially if you don’t want to buy a home for awhile. You will see all of your actual credit scores as well as get a copy of your credit reports. It also includes credit simulators to help you see how to improve your score. This will help you proactively improve your credit.

Once you have reviewed your credit report and know what’s going on with your credit history and score, check out What Credit Score Is Needed to Purchase a House. This will help you learn more about what First-Time Home Buyer Programs are available to you.

2. Set Your Home Buying Budget

The next thing Texas first-time home buyers should do is set a budget for their mortgage. This is a critical and often overlooked step because many people just rely on getting a mortgage for whatever the lender approves them for.

However, many times you may get approved for a lot more than you want to spend. It’s important to set your budget going into the process so you don’t put yourself in a bad position.

Understanding Your Mortgage Payment

Your mortgage payment is going to be made up of more than just your loan that you pay back to the back.  It also includes other annual expenses for your house.

Your payment will include:

• Principal and Interest ( What you pay the bank back)

• Taxes (Annual property taxes for your home)

• Insurance ( Annual insurance premiums for your home)

• Mortgage Insurance ( If you put less than 20% down you’ll also pay PMI- private mortgage insurance)

Keep these in mind when setting your budget.

When it comes to setting your budget for your mortgage, most lenders will allow you to get a mortgage payment that’s as much as 45% of your gross income. That is the amount of money you make prior to taxes coming out of your check.

We like to follow the 25% rule as it will put you in a much better position.

What is the 25% Rule?

The 25% rule is that you spend no more than 25% of your net household income on your mortgage or rent payment. By limiting your payment, you’ll ensure you keep enough space in your budget to cover all of your other expenses.

No one wants to be house-poor, where you have a nice home but you can’t afford to go to dinner, or enjoy life. So setting your budget upfront will help keep you on track.

3. Understand Your Down Payment Requirements

This is basically part two of setting your budget. You’ll have your initial monthly budget that shows you what you can afford to spend on a mortgage, then you’ll have the amount you can afford to put down on your new home.

Remember that when buying a house you may have to make a down payment and cover closing costs. While it’s possible to purchase a home with no down payment you’ll be in a better position if you can.

Typical Texas First-Time Home Buyer Down Payments:

First-Time home buyers in Texas will have access to many different loan programs that offer low and no down payments.

No Down Payment Options:

USDA Rural Development Loans

 This is an excellent loan program available in Texas.  If you can live outside of the city limits of the major cities, this loan could be an option for you.

USDA offers:

• No down payment

• Seller paid closing costs

• Competitive interest rates

• Low mortgage insurance

Down Payment Assistance or Home Buyer Grants

Texas also has access to many different down payment assistance and home buyer grants. These can be a great option for home buyers who can’t qualify for a USDA Rural Development Loan.

Some of the top Texas down payment assistance programs include:

• Texas Department of Housing and Community Affairs (TDHCA)

• Texas State Affordable Housing Corporation (TSAHC)

• Some Counties or Cities in Texas offer other specific programs

Down payment assistance programs can help home buyers who may not be able to come up with a down payment for a mortgage. They typically work by adding a second mortgage to your home that’s forgivable or unforgivable after a certain period of time. However, if they can help you get into a home sooner, they are great options.

VA Loans

This is the best mortgage program in America. If you are a veteran or active duty military member, you may be eligible for a VA Loan.

VA Loans offer:

• No down payment

• No mortgage insurance

• Flexible credit requirements

VA Loan Guide: What You Need to Know

If you’d  like to learn more about down payment requirements check out: What Down Payment Is Required to Purchase a House. Here you can learn about all of the no down payment as well as low down payment options available for first-time home buyers.

4. Get Pre-Approved

Now that you’ve got an idea of what your credit score and down payment requirements are, and you have a solid home buying budget, it’s time to get pre-approved.

What is a mortgage pre-approval?

A mortgage pre-approval is a process that home buyers go through to get mortgage ready. You’ll meet with a licensed loan officer who will guide you through the home buying process.

A mortgage pre-approval should be like a practice run for your loan application. When you make an official application and go under contract on a home, your application will be reviewed by an underwriter.

The Pre-approval process mimics this process and it’s why you should work with an experienced loan officer who knows what they are looking for. They will walk through your application just like an underwriter looking for potential issues.

Doing this work upfront ensures you will have a smooth home buying process and not get denied.

Beware of online pre-approvals where you don’t have to speak with a reputable loan officer. If they haven’t asked you for these documents before pre-approving you, get a second opinion.

The Mortgage Pre-Approval Process:

1. Talk with a Loan Officer

2. Complete an Online Application

3. Upload or Email Your Documents

4. Review Your Closing Costs and Fees

5. Start Shopping for Homes

Once you’ve gone through the pre-approval process, you’ll be able to match up your approval with your home buying budget. Make sure you make your loan officer aware of your budget so they can help you with the price range you’ll need to be in.

5. Find a Good Realtor

Once you have the confidence to know that you can purchase a house and what price range you are looking for, you’ll need to find a real estate agent.

If you follow our process, you’ll be able to confidently search to find the best real estate agent in your area. You’ll have all of your ducks in a row and be equipped with a pre-approval letter.

Find Your Own Agent

One of the most common mistakes I see with first-time home buyers is not picking their own agent. Most call the agent on the sign of the house they are interested in.  This is not a good strategy. While the agent has a duty to represent you and the seller fairly, when you work with the agent who represents both parties you lose negotiating power.

By finding your own Realtor, you can ensure you have someone who is only in your corner. They will seek out and do only what’s in your best interest.

Traits of a Good Realtor

• Be a solid negotiator – this is the most important thing you’ll need in a real estate agent. You want someone who can handle their own to help you get the best deal.

• Understand the Market – A good realtor should understand your current real estate market. Are prices dropping? Is demand increasing? These are all important questions to answer when making an offer.

• Honesty and Integrity– No one wants to work with someone who doesn’t do what they say they are going to do.  Make sure the agent you pick has good reviews and is known for keeping their word.

Become a First-Time Home Buyer in Texas?

Now that you know the steps you need to take to become a first time home buyer, what’s your next step?  If you’d like some expert help in putting your plan together, we’d love to help.  Book a call with one of our loan experts today!