Home Buying Checklist: 25 Steps for Texas Buyers

The Home Buying Checklist: 25 Steps, in the Order They Happen

A good home buying checklist is worth more than any single piece of advice about buying a house, because most of what goes wrong in a purchase is a sequencing problem. Buyers tour homes before they have spoken to a lender. They fall for the house first and look at the neighborhood second. They rush the option period and find out about the foundation afterward.

This is the order we actually work in with buyers around Katy, Fulshear and Fort Bend County: twenty-five steps grouped into the three phases of a purchase — getting your money in order, finding the house, and closing on it. Some steps take months, some take an afternoon, and the value is in doing them in sequence rather than in doing all of them.

Where Texas works differently from the rest of the country — the option period, the Seller’s Disclosure, how buyer representation is documented here — it is called out as we reach it.

1. Research How Long The Home Buying Process Takes

It is a good idea to have a realistic expectation when it comes to buying a home. Many steps are involved in this process, and you want to make sure that you have enough time to get it all accomplished. For most home buyers, the bulk of the time is spent in their search for the perfect home to call their own. This process could take just a few weeks or as long as a year and a half.

Locally, the part of the home buying checklist that stretches longest is almost always the search itself. Contract to close in Fort Bend County typically runs about 30 to 45 days once financing is conventional and the appraisal cooperates — the months come before that, not after.

In a buyer’s market, lots of homes are available for sale. As a result, you can expect to find one that meets your needs quickly. In a seller’s market, more buyers exist than homes. Your search for a dream home is likely to take longer or result in a less-than-perfect purchase. Once your offer on the house is accepted, actually buying a home should take between several weeks and a few months.

[wpl_widget_instance id=”wpl_carousel_widget-10″]

2. Look at Your Credit Report

Before you call up a real estate company and ask for an agent to show you homes, take the time to obtain a copy of your credit report. You can get a free copy from each of the three nationwide credit reporting agencies – TransUnion, Experian, and Equifax. You probably only need one report to review your most current activity as well as your old credit history. Look over the credit report for mistakes and contact the credit reporting agency to notify it of any errors you find. A single mistake can lower your score by as much as 100 or more points.

What is My Home Worth In Today’s Market

3. Find Your Credit Score

The credit report is not going to contain your credit score. However, this number is going to impact how much you can borrow as well as influence the interest rate you are offered. Therefore, it is essential to find out what your credit score is. Typically, you can obtain your credit score from several different companies for free or for a small fee. You may even be able to get this number from your credit card company for free.

A score of 750 or more is considered to be an excellent rating. If your credit score is much lower than 700 to 750, you need to start working at trying to improve it. Ideally, you should begin this task at least three to six months before you intend to apply for pre-approval on your mortgage loan.

4. Work to Improve Your Credit Score

If your credit score is in the 600s, you should be able to pull it up to the 700s with a little effort. Here are the steps you need to take to improve your credit score:

•  Start paying off your debt by spending a little extra on each bill

•  Avoid making new purchases

•  Make your payments on time

•  Don’t acquire any new credit or store cards

•  Don’t max out on any of your credit cards

•  Avoid buying a new car or truck and taking a loan to finance it

What is My Home Worth In Today’s Market

5. Figure Out How Much You Can Afford

Two line items that surprise buyers moving here from out of state. Texas has no state income tax, but property tax rates are high, and in many newer Fort Bend County subdivisions a MUD assessment sits on top of the base rate. Windstorm and hail coverage also prices differently on the Gulf Coast than it does inland. Ask for the actual tax bill and the actual insurance quote on any specific house before you decide it fits your budget — not the county average.

It is essential to calculate how much money you can afford to pay toward home ownership before you begin looking for a house. Not only must you be able to provide the monthly mortgage payment but you must also be able to pay all of the bills associated with owning a home. Typical expenditures include property taxes, home insurance, water, electric, heating, gas, oil, telephone, and cable bills. If you don’t want to add the numbers with pen and paper to figure this out, use a specialized calculator designed for this purpose. You can search for this style of calculator using one of the phrases “home affordability calculator” or “mortgage affordability calculator.” Understanding how much money you can afford to put toward a monthly mortgage gives you a good idea as to how much you can buy.

[wpl_widget_instance id=”wpl_carousel_widget-9″]

6. Gather Funds for a Down Payment

The size of your down payment not only affects how much your monthly mortgage payment is going to be but it also determines whether or not you are going to need to obtain private mortgage insurance. This type of insurance is also referred to as PMI. Avoiding PMI is as easy as providing 20 percent of the purchase price as your down payment. Private mortgage insurance can be costly, especially if you are buying an expensive home. Once you decide to buy a house, you should begin putting money away for your down payment. It’s important to realize that you are also going to need money to pay the closing fees attached to your settlement. You may want to create a separate saving account to save for these fees.

7. Create a Rainy Day Account

While you may not be able to predict an unexpected expense, you can almost certainly guarantee that you are going to have one. Saving up some extra cash for just such an emergency can help keep your finances in the black. Having money on hand that isn’t for your down payment also allows lenders to form a favorable opinion about your ability to repay your home loan.

8. Avoid Closing Out Credit Accounts

Your credit history is used to determine your credit score. If you close out too many accounts all at once, your credit score may drop as a result. If you do decide to close out a credit account, make sure that you select the credit card with the highest interest rates. Older cards have a lengthier financial history attached to them. Closing one of your oldest accounts may have the most significant impact on your credit score.

9. Avoid Opening New Credit Card Accounts

Whenever you open a new credit card account, you place yourself at risk of having a lower credit score. Having too much credit available can make it look like you are expecting to incur much debt. It can also encourage you to spend more money than you should, putting you at risk of falling into a financial pitfall. The most significant impact a new account is going to make is to drop your credit score a few points.

Rates move constantly, and no one can time them. What you can control is how many lenders you ask. The Consumer Financial Protection Bureau’s guidance on comparing Loan Estimates side by side is the single most useful free tool in this whole checklist.

10. Spread Your Debt Evenly Across Credit Accounts

Although not having any debt is favorable, few people can achieve this scenario. If you have more than one credit card, spreading your expenditures out across them can help improve your credit score. However, it is still essential to keep your balances as low as possible, particularly while trying to buy a home.

11. Don’t Quit Your Current Job

Lenders consider an applicant’s employment history before deciding whether or not to provide a home loan. While you can still obtain a loan if you have a varied list of jobs you’ve held, it is easier to get a mortgage if you can show that you’ve kept the same job steadily for some years. If you are self-employed, you can still get a mortgage as long as you have bank statements to validate your claims of income.

12. Read Up on Mortgages

The type of mortgage you obtain is going to influence your monthly payment amounts. With a fixed mortgage, the payment is always the same amount. You can select the term or number of years for your home loan. Typical mortgage terms include 15, 20, and 30 years, but longer and shorter times are also available.

On the other hand, if you obtain an adjustable rate mortgage, the monthly payment changes at several predetermined times because the interest rate on loan adjusts on an annual basis. Typically, you begin with a lower interest rate and finish with a higher percentage attached to your mortgage.

It is possible to obtain a hybrid loan that combines a fixed loan with an adjustable mortgage. With this type of home loan, the initial five years of the mortgage loan is a fixed interest rate. Once this term is satisfied, the loan becomes an adjustable mortgage, and the interest rate is adjusted annually for the remainder of the loan.

13. Pay Attention to Changes in Interest Rates

The interest rate attached to your mortgage has a significant impact on your monthly payment. Even a small percentage increase can influence how much money you can reasonably put toward a monthly mortgage payment. While you won’t be able to accurately predict just how much the interest rates are going to change. You may be able to determine whether they are going up or down in value. Having this information handy can help you decide when to begin the search for your dream home in earnest.

14. Find an Experienced Real Estate Agent

What changed in Texas. Buyer representation is now documented in writing before an agent shows you homes, and every agent must also give you the TREC Information About Brokerage Services form at first substantive contact. That form explains who the agent legally represents. Read it. It is one page, and it is the clearest disclosure in the whole transaction.

Finding an experienced real estate agent can minimize the stress and frustration that often accompanies searching for the home of your dreams. For the best results, you should look for someone who is willing to listen to your concerns, answer your questions, and find houses that meet the majority of your requirements. If the agent is more interested in trying to convince you why a home is ideal for you instead of finding one that is perfect, it is time to look for someone else to help you in your search for your dream home.

15. Compare Mortgages with Different Lenders

No matter where you currently live, you are probably going to discover that lenders vary in the interest rates they offer for home loans. The interest rate attached to your mortgage is going to impact your monthly payment. Therefore, you should compare the interest rates and terms offered by several lenders to find the one offering the lowest interest fees on mortgages.

16. Select a Mortgage Lender

Once you’ve done your research and found a lender offering the lowest rates, it is time to begin working with this company for pre-approval. Before you make your final decision, take a few moments to read the online reviews provided by other borrowers about each of the lenders you are considering. Doing so should help you to find the best lender for your needs. Ideally, it would be best if you look for a lender offering low-interest rates, transparency regarding fees, and quick turnaround time.

17. Go Through the Pre-approval Process for a Mortgage

Any offer that you make to buy a home is stronger if you have already gone through the pre-approval process for your loan. You have two options that you can choose. The first option involves a simple credit check and financial review to determine an estimate of how much money you can borrow.

The second option is an underwritten pre-approval that involves a more thorough investigation of your financial capabilities regarding a mortgage. This type of approval is looked upon more favorably by sellers than a fast pre-approval and should give you a better outlook on any house bid that you make. The underwritten pre-approval involves a credit check, fraud review, and an evaluation by both the lender and an underwriter for the loan.

18. Begin the Process of Picking a Neighborhood

Settling on the area before you start touring saves you from the most common regret we hear, which is loving a house and then living with a commute or a lot size that does not work. Write down the measurable criteria first: maximum drive time to work, which school district or attendance zone, lot size, whether you want an HOA, whether a MUD assessment is acceptable, and your ceiling on the all-in monthly payment once taxes and insurance are in it.

Keep the list factual and verifiable. Drive times, district boundaries, deed restrictions, tax rates and flood zone designations are all things you can look up and compare. That is the useful kind of criteria, and it is also the kind an agent can actually search on.

Once you have those aspects figure out, you can make a list of secondary features that are desirable but not necessary. For example, you may like the idea of having mature trees in the yard. But, they aren’t required for you to make an offer. Both of these lists guide your agent. As a result, more of the homes you look at should meet your specifications.

19. Figure Out the Type of Home You Want

It is important to let your real estate agent know if there are any styles of homes you don’t want to consider. For example, if you don’t want to live in a rancher, then you shouldn’t go to a showing for one. Figure out the different styles of construction that you are willing to consider and let your agent know.

You may also want to consider whether or not this is going to be a starter home or if it is going to be the forever home. If you are planning to live there for just a few years.  Then you can be more flexible with your choices.

20. Start Looking at Homes

Once you are ready to begin your search, let your agent know what your availability is. It is essential to look at as many homes as you can. Doing so allows you to avoid the regret that often follows when buyers purchase the first or second home that they see.

21. Make an Offer

Before you make an offer on a home. Take the time to evaluate the expense of making repairs or changes to the property. Speak with your agent to get an idea of the factors you should consider. Be sure to make the offer contingent on a home inspection.

22. Arrange for a Full Home Inspection During the Option Period

This is the step Texas does differently, and the most important line on the home buying checklist. Your option period is a negotiated window — commonly seven to ten days — during which you can terminate for any reason at all and lose only the option fee. Your inspection has to happen inside it, and so does any renegotiation that comes out of the report. Book the inspector the day the contract is executed, not the day before the option expires. Our home inspection checklist for Texas buyers and sellers covers what the report will and will not tell you.

You should also have the Seller’s Disclosure Notice by now. Texas sellers are required to disclose known defects, and the document is worth reading line by line against the inspection report — the gaps between the two are where the useful questions live.

Once the sellers accept your offer, you should arrange for an inspection of the entire home. Don’t take anything for granted. Even if you flushed the toilet and ran the shower, a plumbing problem could still exist. The inspector can evaluate the property’s structure, utilities, and safety issues. The inspection report is going to list any visible problems that have been discovered, giving you the information you need to move forward with your home purchase.

23. Pay for a Home Appraisal

A home appraisal is a critical component of getting a mortgage. It provides the lender with the current market value of the property. The home’s maximum financial cost is the collateral for your loan, and it determines how much money a lender is willing to loan you. The lender often arranges for the appraisal, but in most cases, the buyer pays the bill.

24. Attend the Closing

Finally, it is time to sign the papers. Make sure that you attend the closing with everything you need, including the check to cover the cost of your purchase. Once you take possession of the key to your new home, you are ready to go.

25. Move into Your Dream Home

Once you legally own the home, you can move all of your possessions into it. Before you put everything into place, take a few moments to look around and make sure that everything is in order. You also have the choice of cleaning your home yourself or hiring a professional service to do so before moving all of your possessions into the house.