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The Step-by-Step Guide to Buying a Home in Houston

buying home in Houston checklist

Home purchasing is a major life event and investment, particularly in a fast-paced city like Houston. Due to the strong economy, various communities and available homes, Houston is popular among homebuyers. However, the process of home buying can be daunting, especially for first-time buyers. From understanding your preparedness to own a home to moving in, we will focus on the basics of buying a house in Houston. This guide will help you navigate the process of searching for and purchasing a home in Houston, whether you are a first-time home buyer or a seasoned investor.

Step 1: Assess Financial Health for Home Buying

You must evaluate your financial readiness before pursuing the process of buying a home. This includes:

Reviewing Your Credit Score: Your credit score is one of the factors that determine the interest rate on your mortgage. A higher score can mean better interest rates and repayment terms for the loan. Try to get a minimum score of 620, but the best score is 700 and above.

Evaluating Your Savings: Ensure you have enough savings for the down payment, closing costs, and an emergency fund. A down payment is usually between 3-20% of the home’s price.

Analyzing Your Debt: Determine your debt-to-income ratio (DTI). Most lenders advise a DTI of 36% or less. This ratio is the proportion of your gross monthly income that is used to pay for debts.

To determine your debt-to-income ratio (DTI), follow these steps:

Calculate Your Total Monthly Debt Payments - This Can Include:

  • Current mortgage or rent payments
  • Car loan payments
  • Student loan payments
  • Credit card payments (use the minimum payment amount)
  • Any other monthly debt payments

Calculate Your Gross Monthly Income - This Can Include:

  • Salary or wages (use your pre-tax income)
  • Bonuses and commissions
  • Rental income
  • Alimony or child support payments
  • Any other sources of income

Calculate Your DTI:


Example Calculation
Suppose you have the following financial details:

Rent payment: $1,200
Car loan payment: $300
Student loan payment: $200
Credit card minimum payment: $100
Total monthly debt payments = $1,200 + $300 + $200 + $100 = $1,800

Assume your gross monthly income is $5,000.
Use the following:

DTI=(1,800/5,000)*100= 36%

Remember, your monthly housing budget will also influence the kind of house you can get in Houston. Think about the size, location and features that are essential to you and rank them according to the amount of money you are willing to spend. It is wise to be realistic when buying a home and be prepared to make some sacrifices if need be. It is also a good idea to have some money saved for a rainy day or for any unplanned events. Ideally, you should save three to six months of living expenses in an emergency fund before buying a home.

Step 2: Budget for Upfront Costs 

Several upfront costs are associated with buying a home:

Down Payment: The down payment required will vary with the type of loan taken and can be as low as 3% of the purchase price of the home to as high as 20%. For instance, on a $300,000 house, a 20% down payment would be $60,000.

Closing Costs: These include origination fees, appraisal fees and title insurance, which can range from 2% to 5% of the loan amount. For a $300,000 home, closing costs may be between $6,000 and $15,000.

Home Inspection: It is recommended that the homeowner hires a professional inspector, which can range from $300 to $500.

Step 3: Understand Mortgage Options in Houston

Various mortgage options are available, each with its pros and cons:

Conventional Loans: These are not backed by the federal government and usually demand a higher credit score and a larger down payment.

FHA Loans: These loans are offered by the Federal Housing Administration and are especially suitable for first-time buyers as they demand small down payments and good credit scores.

VA Loans: These loans are offered to veterans and active-duty military personnel and come with reasonable interest rates and no need for a down payment.

Jumbo mortgage: These are home loans that exceed the Federal Housing Finance Agency's limits, typically $726,200 in most areas but higher in expensive markets. These loans are used for high-value properties and have stricter qualification requirements and larger down payments compared to standard loans.

Step 4: Apply for Mortgage Pre-Approval in Houston

Now that you know your monthly housing budget, the next step is to get pre-approved for a mortgage. A mortgage pre-approval is a preliminary decision by a lender to make a mortgage loan to a specific buyer up to a certain amount. Getting pre-approved is crucial because it lets you know your buying power, prove your ability to pay to the sellers and make stronger offers on properties. In order to be pre-approved, the lender will require you to submit proof of income, assets and debts.

buying home in Houston CostThis typically includes:

1. Last two years’ W-2 forms or 1099 forms in case of self-employed individuals.
2. The most recent two years of federal tax returns
3. The last 30 days pay stubs
4. The last 60 days bank statements
5. Investment account statements
6. Identification documents
7. Evidence of any other sources of income

Your lender will review your financial information and check your credit standing through your credit report. They will look at your credit score, debt-to-income ratio, employment history and other factors to determine your ability to repay the mortgage and the amount they are willing to advance to you. You should consider comparing the interest rates and terms offered by different lenders to get the best deal. 

It is important to note that a pre-approval is not a guarantee of a loan. The final approval of your loan will, however, depend on the property you select and your continued financial and employment status. However, a pre-approval letter is a very strong document that can impress sellers and real estate agents that you are a credible and capable buyer.

When you receive your pre-approval letter, make sure to check the date of expiry. Pre-approvals usually have a validity of 60-90 days. If your home search extends beyond the expected time, you may need to update your pre-approval.

It is also important to understand that getting pre-approved for a certain amount does not mean that one should use the entire amount for the purchase of a home. Ensure that you stay within your monthly housing budget and only take a loan that you can repay without straining. This way, you will know how much you are likely to be approved for and, therefore, be in a better position to bid for houses in Houston. This step is very important in the home-buying process, and it shows that you are a serious buyer.

Step 5: Choose a Real Estate Agent in Houston

It is crucial to work with a competent real estate agent who knows the area and the market in Houston. A good agent will be able to assist you in the entire process, from searching for the right home to negotiating for the best price and dealing with the numerous documents and legal procedures involved in purchasing a home. To find a good agent, select someone who has experience working with the Houston market and has achieved positive results. They should be familiar with the communities you want to live in, the market conditions, the prices of properties and the rules and regulations that govern the real estate market. A good agent will also have a list of preferred service providers, including mortgage brokers, home inspectors and real estate attorneys, to ensure that the transaction goes through smoothly.

When talking to the agents, make sure to ask them about their experience, marketing strategies, negotiation skills and knowledge of the Houston area. You should be at ease with their manner of communication and have faith in their ability to negotiate on your behalf when purchasing a home.

Some key questions to ask a potential agent include:

1. How long have you been practicing in the Houston real estate market?
2. In the past year, how many houses have you assisted buyers in purchasing?
3. Which areas of the city do you cover?
4. What are you going to do to assist me in identifying the homes that I need?
5. What steps do you take in order to ensure that your clients get the best price?
6. May I have references from some of your previous clients?

As you will be working closely with your agent during the home-buying process, it is crucial to find someone you can trust and confide in. Having an experienced agent who is well-versed in the Houston market will be of great assistance in achieving your homeownership goals.

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Step 6: Consider Location, Size, Condition and Amenities in Houston

One of the most critical factors to consider when purchasing a home is its location. Location is a key factor in determining your daily traffic, facilities, schools and even the future selling price of your home. Research the neighborhoods that interest you and consider factors such as:

1. Safety and crime rates
2. Accessibility to workplaces, education institutions, supermarkets and other recreational centers
3. Future developments of the area and possible alterations to the space
4. Property values and appreciation rates

Another important factor that should be taken into consideration is size. Consider your present and future requirements for space, such as the number of bedrooms and bathrooms, storage and outdoor living areas. Think about how your family can expand or evolve in the future and whether the house can be adapted to meet those needs.

The state of the house also plays a role. Cosmetic problems can be fixed without a lot of effort, but structural damage or significant system failures can be expensive to fix. It is important to consider the age and condition of the roof, foundation, electrical, plumbing and HVAC systems. It is also important to consider the costs of repairing or upgrading any part of the property if the need arises.

Features and benefits are the comfort and convenience that can be added to a home to enhance your living experience. These may include:

1. Updated kitchens and bathrooms
2. Energy-efficient appliances and systems
3. Smart home technology
4. Examples include decks, patios or pools that are located outside the house.
5. Facilities such as parks, trails or fitness centers in the community

Of course, some features may be more critical to you than others; however, think about how they can influence your daily routine and the future resale of the house.

As you consider these factors, develop a ranked list of your requirements and wishes. This will assist you in keeping your attention on the aspects that are most important to you and compensate for the others. It is also important to understand that no home is likely to be perfect in every aspect, but you can always choose a house that suits you in terms of location, size, condition and amenities. With the help of your agent and considering these tips, you will increase your chances of finding the home of your dreams in Houston.

Step 7: Share Needs with Your Agent

After identifying a professional real estate agent, it is time for a more detailed conversation about your preferences, budget and the location you are interested in. This conversation will enable your agent to understand your wants and needs and look for homes that suit your description.

First, it is crucial to address the financial aspects of the transaction with your agent. Bring your pre-approval letter and state the amount of money you wish to spend monthly on a house. This will help your agent concentrate on properties within your financial reach and not present you with houses that are out of your budget.

Then, describe your desired neighborhoods and location preferences. Houston is a huge city with many areas that have their own features, services, and types of real estate. When discussing your location preferences, think about the distance to your workplace, schools, shops, restaurants and leisure facilities. If there are certain neighborhoods that interest you, let your agent know and explain why you are interested in those neighborhoods.

It is also important to talk about your needs and wants, including the essential features and the characteristics of the house. Consider factors such as:

1. Type of house (single family, townhouse, condominium etc.)
2. Number of bedrooms and bathrooms
3. Square footage
4. Size of the lot and open area
5. The age and state of the house
6. Style and architecture
7. Parking and garage requirements
8. Energy conservation and environmentally friendly aspects
9. Common facilities (swimming pool, fitness center, clubhouse, etc.).

Be realistic about what you want and distinguish between the essentials and the extras. This will help your agent narrow down the search to properties that are most suitable for your needs and save you time as well. With the help of your agent, it is crucial to have a proper conversation regarding your preferences, budget, and the location in which you wish to find a home. Your agent will utilize this information to identify properties that meet your needs and help you navigate the process of searching for your ideal home in Houston.

Step 8: Explore Listings and Open Houses in Houston

buying home in Houston process

With your preferences, budget and location requirements clearly defined, it's time to start your home search seriously. There are several tools and resources available to help you find suitable properties in Houston, including online listings, open houses and your agent's expertise.

Online listings are a great place to start your search. Websites like (Houston Association of Realtors), Zillow, Redfin and have extensive databases of homes for sale in Houston. These sites allow you to search for properties by location, price, size and other criteria and often include photos, virtual tours and detailed property information.

Open houses are another valuable tool in your home search. These events, typically held on weekends, allow you to tour homes in person and get a feel for the layout, condition and neighborhood. Your agent can help you find open houses in your desired areas and may even be able to arrange private showings for properties that catch your eye.

Sometimes, the perfect home may not check every box on your wish list, but it may have other features or benefits that make it a great fit for your needs. Trust your instincts and your agent's guidance as you navigate the search process.

When you find a property that you love, act quickly. In a competitive market like Houston, desirable homes can sell fast. Work with your agent to schedule a private showing as soon as possible, and be prepared to make an offer if the home meets your needs and budget. By leveraging online listings, open houses and your agent's expertise, you'll be well-equipped to find suitable properties in Houston. Stay organized, communicate regularly with your agent and be ready to act when you find the right home for you.

Step 9: Negotiate the Offer Price with Your Agent

Once you have finally decided on a house in Houston, it is time to work with your agent to come up with a reasonable offer price. This is an important step in the home-buying process as it may affect the likelihood of your offer being accepted and protect your financial interests.

Firstly, your agent will carry out a comparative market analysis (CMA) of the property. This includes analyzing the market trends of comparable homes in the same area based on size, construction date, condition and features. The CMA will provide you with the current market value of the home and assist you in setting a reasonable offer price.

In addition to the CMA, your agent will consider other factors that may influence the offer price, such as:

1. The seller’s reason and time frame for the sale
2. The number of days the home has been listed for sale
3. If there have been any price drops or other alterations to the listing in the past few days
4. The viability of your funding and the probability of a successful closing

Using this information, your agent will assist you in formulating an offer plan. This may mean beginning with a lower price to allow for bargaining power or bidding a high price to win a bidding war. Your agent will also inform you of any contingencies or terms to include in the offer, such as inspection or financing.

When deciding how much to offer for a property, you need to be practical and not let your feelings affect your decision. As much as you may want a certain home, do not let yourself get carried away and spend more than you can afford.

In the end, your agent will play a crucial role in advising you on the right price to offer for the property. With the help of your agent and taking into account all the parameters listed above, you can make a confident and competitive offer for the house of your dreams in Houston.

Step 10: Important Contingencies to Include

When making an offer on a home in Houston, it is important to consider including contingencies that will help protect your investment. Two main contingencies that can be discussed here are the home inspection and the appraisal.

A home inspection contingency lets you get a professional inspection of the property before buying it. A licensed inspector will conduct a visual examination of the home’s structure, systems and components during an inspection to identify any defects or concerns. If the inspection shows major issues like a bad roof or bad wiring, you can use the contingency clause to demand repair, negotiate the price or even cancel the offer without losing your earnest money deposit.

An appraisal contingency is important because it ensures that if the property you have offered to purchase is appraised at less than the price you offered, you will not be forced to complete the purchase. When you obtain a mortgage, the lender will usually need an appraisal to make sure the property’s value matches the loan amount. If the appraisal is lower than the agreed price, the contingency enables you to discuss the issue with the seller and perhaps reach a new agreement or exit the contract without incurring fines.

Other contingencies you may want to consider include:

Financing contingency: Covers you in case your mortgage is canceled or you cannot obtain financing.

Sale of current home contingency: Enables you to retract your offer in case you are unable to sell your current home within a given period.

Title contingency: This means that the lawyer ensures that the seller has a valid and transferable legal document for the property in question before the sale is made.

Your agent will guide you on which contingencies are relevant to your case and will incorporate them into your offer. Remember that although contingencies provide some safety, they may also reduce the strength of your offer to sellers, especially when there is competition. Coordinate with your agent to ensure that you are not only shielding your interests but are also putting forward a robust bid.

Therefore, by including contingencies like home inspection and appraisal in your offer, you can proceed with the purchase with minimal risks and thus be certain of a smooth home-buying process in Houston.

Best Mortgage Rates in Houston

Step 11: Handling Repairs and Credits After Inspection

Depending on the results of the home inspection, you may need to discuss potential repairs or credit with the seller. In this case, it's important to involve your agent in negotiating for the necessary repairs or credit.

Your agent will review the inspection report with you and explain which problems are most urgent, how much it will cost to fix them and how they will affect your daily life in the house. Some problems cannot be ignored, such as a broken roof or a faulty heating and air conditioning system. Some may be critical and require immediate attention, while others may be minor touch-ups or fixes.

Once you have made your list of concerns, your agent will then relay these concerns to the seller and the seller’s agent. This may involve seeking the seller to make the repairs before the closing or seeking credit at the closing to make the repairs yourself.

When it comes to repairs or credit, it is advisable to be reasonable and compromising. On the one hand, you want to be confident that the home you are buying is safe, practical and suitable for your needs, and on the other hand, you do not want to lose the deal due to small problems. Your agent will assist you in determining the right course of action depending on the current market and the seller’s motivation level.

If the seller is willing to make repairs, it is advisable to specify the extent of the work to be done and any timelines or quality requirements in writing. If you are getting credit, ensure that the amount is enough to cater for the repairs and that it is well captured in the closing statement.

Sometimes, the seller may not be in a position to respond to the concerns raised or may not be willing to do so. If this happens, you will have to choose whether to go ahead with the purchase as it is, negotiate the price again or back out of the deal. Your agent will guide you through the different choices and factors that will best suit your needs and financial capacity.

By going to your agent and discussing repairs or credit after the home inspection, you can be sure that you are getting a good home and that your investment is secure. It is important to remain objective and focused on the task at hand, be prepared to give and take and use your agent to help you through the process.

Step 12: The Home Appraisal Process

buying home in Houston loan options

Once you've negotiated any repairs or credits and your offer has been accepted, your lender will order an appraisal to ensure that the agreed-upon price is reasonable and in line with the home's market value. This is an important step in the mortgage process, as it protects both you and the lender from overpaying for the property.

During the appraisal, a licensed appraiser will visit the home and assess its condition, features and amenities. They will also research recent sales of similar homes in the area to determine the property's fair market value. If the appraisal comes back at or above the agreed-upon price, the transaction can proceed as planned.

However, if the appraisal comes in lower than the purchase price, you may need to renegotiate with the seller. In this case, you can ask the seller to lower the price to match the appraised value or you can offer to pay the difference between the appraised value and the purchase price out of pocket. If you and the seller are unable to reach an agreement, you may need to exercise your appraisal contingency and walk away from the deal.

Your agent and lender will guide you through the appraisal process and help you navigate any challenges that arise. By ensuring that the agreed-upon price is reasonable and supported by the appraisal, you can move forward with your home purchase in Houston with confidence.

Step 13: Resolve Appraisal Issues in Houston

Your agent and lender will discuss the problem with you and come up with a solution that is suitable for all the parties involved.
Another way is to approach the seller and request them to reduce the price of the home to the appraised price. This can be a good solution if the seller is eager to sell the property and ready to compromise on the price.

Another option is to come up with the difference between the appraised value and the purchase price from your pocket. This may be possible if the difference is not very large and you have the funds to make up for it. But, you need to factor in the effect that this will have on your total budget and the mortgage repayments.

If you and the seller cannot come to a compromise, you may have to invoke your appraisal contingency clause and back out of the contract. Although this can be quite frustrating, it is crucial to understand that it is best not to purchase an overpriced home and end up struggling financially.

During the process, maintain frequent communication with your agent and lender and be ready to respond to any concerns that may come up with the appraisal. It is advisable to be proactive and engage with the other parties during the appraisal process to get closer to your dream of owning a house in Houston.

Step 14: Final Costs & Paperwork in Houston Home Closing

Besides, you will have to sign some documents which include the down payment, closing costs and other prepaid items like property taxes and home insurance premiums. Your lender will give you a final closing disclosure that includes all these costs at least three business days before your closing date.

It is crucial to get a homeowners insurance policy. Homeowners insurance is a type of insurance that protects homeowners against various perils such as fire, theft, vandalism or natural disasters.

When looking for homeowners insurance, it is advisable to compare the rates provided by different companies so that you can get the best deal that offers the best cover. It is always wise to check with your lender to find out if there are any specific requirements as to the type and amount of insurance coverage that you need to take.

Some key factors to consider when obtaining homeowners insurance include:

1. The amount of insurance for the structure of your home, your belongings and the amount of coverage for any legal claims against you
2. Deductibles, which are the amounts that you have to pay first before your insurance begins to cover your expenses
3. Other add-ons like flood insurance or umbrella liability coverage
4. Discounts for features like home security systems, smoke detectors or weatherproofing

Your insurance agent and lender can assist you with the process of getting homeowners insurance and guide you through the process. That way, you will be able to safeguard your investment and have no worries as you start a new life in Houston.

Step 15: New Home, New Start: Essential Moving Tips


The Step-by-Step Guide to Buying a Home in Houston

Ready to buy a house in Houston? This step-by-step guide simplifies the process and helps you find your dream home. Learn how to get pre-approved, search for listings, negotiate offers, and more. Start your Houston home buying journey today!

Frequently Asked Questions

How much do I need for a down payment on a home in Texas?

What are the closing costs for buying a home in Texas?

In Texas, closing costs can be between 2% and 5% of the home’s purchase price. These costs may include application fees, appraisal fees, title insurance and other incidental charges.

What are the most common mistakes to avoid when buying a home in Texas?

Common mistakes include not getting pre-approved for a mortgage, overlooking hidden costs, skipping home inspections, and making emotional rather than informed decisions.

Are you looking for a home mortgage loan?

Check out our fixed-rate mortgage. If you'd like more information, contact a PrimeWay Financial Representative today!

Author Bio

Laurie Masera Garza

Laurie is a digital marketing and social media maven who has more than 15 years of interactive multi-media experience under her belt. When she is not rocking the social media atmosphere, Laurie loves to find Houston’s hidden dining gems, but ask her about tacos. She loves tacos. In her spare time, Laurie loves creating, whether its art or memories.

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