Texas is called the Lone Star state for a reason: It has a strong employment market, flourishing cities, and adequate space, making it a favorite for young professionals and first-time buyers. You’ll surely want to buy a house in Texas if you fall into any of these categories, and this article will show you how to go about it. “What if I have bad credit?”, you may ask. To answer that question, we have outlined steps that you can take to buy a house in Texas even if you have bad credit. You’ll also learn how to buy a house in Texas without the help of a realtor. What then, you might just be a few steps away from owning your dream house in Texas!
How To Buy A House in Texas
Here are steps you can take to buy a house in Texas.
#1. Examine Your Finances
The first step in the home-buying process is determining how much house you can afford. The simplest method to do this is to determine how much money you have saved for a down payment and how much you can afford in monthly payments.
#2. Obtain a mortgage preapproval
When you think you know what your budget is, it’s time to chat to a mortgage lender about how much you can really afford once they’ve looked over your financial status and given you some information about interest rates and how they’ll affect your possible payment. You should also inquire about Texas-specific programs that can assist you with your down payment, closing expenses, and taxes. Believe it or not, getting your mortgage approval early in the process will help you set your budget and demonstrate to the seller that you have the finances to finish the sale once you make an offer.
#3. Locate a Texas real estate agent.
You’re not sure where you want to live in town. A local real estate agent can be an essential resource for providing you with information about various communities. They may also assist you in evaluating the homes you’re considering to ensure you locate one that is a fair deal in comparison to the market. Make sure to request references and then inquire about their approach to finding a suitable personality fit.
#4. Begin your property search
With a budget in mind, you may search for homes in the neighborhoods you like more realistically. Your agent can provide you with all of the information you need about the facilities, schools, and other factors to help you make an informed decision. Many homes offer online video tours, allowing you to view the property from the comfort of your own couch.
#5. Make an offer on the home you desire
Once you’ve found the ideal property, your agent will assist you in drafting a written offer that includes all of the crucial data, such as the price you’re offering and any stipulations, such as whether you have a home to sell.
#6. Request a home inspection and appraisal
An official inspection should always be performed by an independent third party. That’s because even the most perfect-looking property could be hiding something – and it could be costly to fix, such as a roof that needs to be replaced or a foundation that’s collecting water. An inspection will provide you with peace of mind that the house is in good condition and/or allow you to negotiate the price to pay any necessary repairs.
#7. Set up escrow and complete your transaction
Texas is an “escrow state,” which means you’ll have to put money down even before the purchase is legally closed. As you complete your transaction, an escrow account keeps the money and documents secure with a third party.
How To Buy A House In Texas With Bad Credit
You probably heard that it’s impossible to buy a house in Texas if you have bad credit. Now, while it will be much easier to buy a house if you have good credit, it’s not entirely impossible if you have bad credit. If you have bad credit, here are a few steps you can take to improve your chances of buying a house in Texas:
#1. Check Your Credit Score
The first step in applying for a mortgage is to determine your FICO credit score. You don’t want to go through the agony of shopping for a property only to be turned down because of your bad credit. Credit Karma and FicoScore both provide free access to your credit score.
Knowing your credit ratings will assist you in the following ways:
- Make a firm decision on the type of loan program you want to use. Loan programs such as FHA, which need a “minimum” credit score of 580, may be a decent option.
- Identify and correct the negative factors affecting your score.
Most Texas lenders look at Equifax, Experian, and TransUnion credit reports, as well as your FICO ratings based on these reports. They rely on your middle score. So, if you have 720, 680, and 620 credit scores, the lender will usually make their decision on the 680 scores.
#2. Repair and Improve Your Credit Score
When you receive your credit report, you should investigate why it is low and what is causing it. Most times, it will be one of the following:
- You have numerous late payments.
- You need sufficient credit.
- Accounts that are being collected
- You have used all of your credit cards.
- You have been through bankruptcy or foreclosure.
Now that you’ve figured out what’s causing your bad credit, you need to figure out how to fix it or improve it. You may take the following steps to easily repair your credit:
Dispute any errors on your report.
If there are any bills or items that you do not recognize, it is best to report them to the credit bureaus.
Clear Your Late Payments
On-time payments account for 35% of the credit score. If you see a string of late payments on your record, pay them off as soon as possible. The debt terms might be negotiated with the lender.
Pay down your credit card amount because it has a negative impact on your credit utilization ratio.
Get your collections accounts removed.
You can respectfully request that the creditor do a pay for delete for you. To have your credit score improve, you must eliminate your collection accounts.
#3. Apply To Lenders Who Require A Low Credit Score
If you want to buy a house in Texas but have bad credit, you should look into mortgage programs with low credit criteria. The Federal Housing Administration (FHA) loans, which are administered by FHA-approved lenders, are an excellent example.
To qualify for an FHA loan, you must have a credit score of 580 with a 3.5 percent downpayment or 500 with a 10% downpayment. While FHA loans have a maximum loan amount that varies based on where you buy your property, they are still your best chance when buying a home with bad credit.
#4. Look For a Cosigner Who Has A Good Credit Score
This is one of the less-traveled paths for people trying to buy a house with bad credit. If you have bad credit but want to buy a house in Texas, you can get a cosigner mortgage. It entails having a friend or relative cosign on your house loan to assist you to qualify.
#5. Make A Significant Down Payment
If you have bad credit, making a big downpayment can improve your chances of securing a mortgage for your new house. Lenders typically provide better loan conditions to homebuyers who make a high downpayment. It lowers the percentage of your loan-to-value ratio, which makes the loan less risky for the lender.
If you qualify for an FHA loan, you only need 3.5 percent down if your credit score is 580 or higher, but 10 percent if it is below. A significant downpayment lowers your principal and mortgage payments and may help you acquire a cheaper interest rate.
Read Also: INHERITANCE TAX IN TEXAS: Everything You Should Know
How To Buy A House In Texas Without A Realtor
It’s relatively difficult to look for a property without the help of a professional. However, if you’ve decided to go on to buy a house in Texas without the help of a realtor, you can take the following steps:
#1. Submit a Mortgage Application
If you want to buy a house in Texas, especially without the assistance of a realtor, the first step is to obtain preapproval. A mortgage preapproval lets you know how much you can pay so you don’t look at houses that are out of your price range. It’s also a technique to demonstrate to sellers that you’re serious about making an offer; preapproval suggests that your financing is considerably less likely to fall through.
#2. Conduct Neighborhood Research
The second step you can take if you want to buy a house in Texas without a realtor is to conduct neighborhood research. Investigate the area you’re interested in. Consider the typical selling price in the area and what you value in a neighborhood.
Do you require quick access to public transportation? Do you want to live in a neighborhood with good public schools? Start by narrowing your search by neighborhood, and then look at properties for sale.
#3. Locate a Property
Once you’ve decided on a community, it’s time to start exploring available properties. Look for homes within your price range and create a running list of potential properties.
When you locate a home you like online, you can visit it virtually or in person, depending on the circumstances. Online postings often include the phone number of the owner or the agent, as well as a list of forthcoming open houses. If no open houses are scheduled, contact the agent to book a tour.
Take notice of the property’s condition as you walk around the house. Determine exactly what is included in the deal. You’ll need this information while deciding how much to offer.
#4. Request a Seller’s Disclosure.
A Seller’s Disclosure is a list of the home’s recognized flaws. Seller’s Disclosures may also include information on remodeling work done on the home by the seller.
The following items may appear on the Seller’s Disclosure statement:
- Problems with structure
- Problems with the plumbing, heating, or electrical systems
- Lead paint, radon, or asbestos contamination
- Termite or other wood-boring bug damage history
- Toxins found in the soil
- Water and mold damage
#5. Make a proposal
When you locate a property that you like and that is in good shape, it’s time to make an offer. Choosing how much to offer on a house might be difficult. Consider the pricing of other properties in the region, the length of time the home has been on the market, and the condition of the home.
In general, you should make an offer that is less than the amount of money you have been preapproved for. This will allow you to bargain.
#6. Engage the Services of a Lawyer and a Home Inspector
Inspections aren’t often required by your mortgage lender, but they can disclose hidden issues that the seller may be unaware of. A normal home inspection covers the home’s surface-level elements, such as its plumbing, structure, heating system, and so on.
To finalize your property sale and transfer your title, several states need you to hire a real estate attorney. Even in states where real estate attorneys are not necessary, a lawyer can assist you with paperwork and any legal ambiguities.
If the inspection reveals a problem with the house, you have a few options for negotiating with the seller:
- Request repairs. You can request that the seller address any issues with the house before closing.
- Request reimbursement. You can request reimbursement from the vendor for the cost of repairs. Because you chose the professional, this ensures that you will receive work from a high-quality contractor. However, you may have difficulty convincing a seller to pay a bill if they don’t know how much it will be.
- Request a discount. If extensive repairs are required, you can negotiate a price decrease with the vendor.
- Cancel the transaction. If you are unable to reach an agreement with the seller and the difficulties constitute a deal-breaker for you, you may cancel the sale.
Remember to bargain in writing and to retain records of any emails or other written communications between you and the seller. You may need to include an inspection contingency in your offer that allows you to terminate the sale if severe faults are discovered with the home.
#8. Complete Home Financing & Closing
When you and the seller have reached an agreement, it is time to close on the loan. Your lender will give you a Closing Disclosure as soon as the appraisal and underwriting are completed.
Your Closing Disclosure explains the terms of your loan, closing costs, interest rate, and other details. If everything looks good, contact your lender to set up a closing date. You are a homeowner once you have signed your loan and other needed closing documents.
It’s easy to buy a house in Texas, as you have seen from this article. We have also established that you can buy a house in Texas even with bad credit, more so, without a realtor. We hope that the steps we have outlined in this article will help you to fulfill your dreams of becoming a homeowner in Texas.
Frequently Asked Questions
What are the requirements to buy a home in Texas?
The requirements to buy a home in Texas include:
- A minimum credit score of 620.
- Borrowers must meet income and loan requirements.
- Property must be located in Texas and not exceed purchase price limits.
- The property must be a single-family home or a single-unit condominium.
- Some manufactured housing allowed
How much money do you need to buy a house in Texas?
Mortgage lenders in Texas often need you to deposit 20% of the purchase price as a down payment. That works out to $61,726 for a $308,628 property, which is the average home value in Texas.