Buyer FAQs

Examine Your Finances

Q: How much house can I afford? A: This is determined by your overall finances and is different for each buyer. We recommend keeping housing expenses below 25% of your monthly gross income. That includes mortgage principal, interest, property taxes, home insurance, PMI and HOA fees.

Q: How much down payment is needed? A: Depending on your finances and loan option, the typical down payment can range from 3-20% of the purchase price.

Q: What are closing costs and how much should I expect to pay? A: As a home buyer in Texas, you can expect to pay between 3-5% of the loan amount of your new home. These costs are separate from the down payment and include a home inspection, loan application / processing fee, loan origination fee, prepaid interest on your mortgage, appraisal fee, tax service fee, private mortgage insurance (PMI), and a prepayment of your home owners insurance premium, property taxes and HOA fees.

Working with a Lender

Q: What is the difference between pre-qualification and pre-approval? A: Pre-qualification means a lender has done an initial calculation of how much money you might be eligible to borrow. You provide a lender your approximate income, the amount of debt you’re carrying, and other important details from you credit history. Pre-approval means your financial situation has been verified by the lender. You will fill out a mortgage loan application and provide supporting documentation. The lender will examine your financial situation including credit report, employment history, income, etc. and decide what interest rate to offer and the maximum amount you would be permitted to borrow. Although a pre-approval provides more certainty to a borrower than pre-qualification, it does not guarantee a mortgage loan.

Q: What is required for a mortgage pre-approval? A: W-2's for the previous two years; Paycheck stubs for the last 30 days; Employment history for the last two years; Checking & Savings account statements for the last two months; Statements for 401ks, stocks, and other investments; Signed federal tax returns from the last two years; Residency history over the last two years; Photo ID; Check or credit card information for credit report and appraisal fee.

Q: How long does it take to get a mortgage pre-approval? A: Typically between 1-10 business days to get approved for a mortgage.

Q: How long does a mortgage pre-approval last? A: Most mortgage pre-approval letters are good for up to 90 days.

Q: What type of mortgages are available to me? A: There are numerous types of mortgages available to meet everyone’s needs. The most common mortgage types for first-time home buyers are Conventional (fixed-rate or adjustable-rate), FHA, USDA, and VA. Your lender will be able to help guide and educate you on these and other options that may be available to you.

Q: What is mortgage insurance (MI) and is it required? A: Depending on your loan program or the amount of your down payment, you may be required to have MI. Anything less than 20% down requires MI. Because loans with small down payments involve more risk for the lender, they require insurance as a hedge against borrower default. The cost of MI varies according to your loan type, down payment, and credit score.

Q: What is included in a mortgage payment? A: Principal, interest, escrow (property taxes and homeowners insurance), mortgage insurance and HOA or Condominium fees.

During the Transaction

Q: What is earnest money? A: Also known as an escrow deposit, earnest money is an amount agreed to in the real estate contract that you will pay to the seller within 3 days after entering into a contract. This deposit is a show of “good faith” that you intend to purchase the property. If the deal closes, the earnest money is typically credited toward your down payment and other costs of buying the home. If the transaction doesn’t close, the terms of the contract determine who receives the earnest money.

Q: What is an option fee? A: An amount agreed to in the real estate contract that you will pay within 3 days after entering into a contract as consideration for the right to cancel a pending transaction within a certain number of days (aka “option period”). This fee is usually a small percentage of the total cost of the home, rarely exceeding $500. In exchange for the option fee, the buyer is allowed time to arrange safety and code inspections of the property they intend to purchase. Option fees are generally non-refundable if the buyer withdraws from the transaction.

Q: What happens if my appraisal comes in lower than the purchase price? A: When an appraisal comes in low, the buyer’s mortgage lender will not lend more than the appraised value. If this happens, there are a few actions you can take. (1) Parties can request a second look if a correction / revision is needed; (2) Buyer makes up the difference in cash; (3) Buyer and Seller renegotiate the purchase price; (4) Buyer exercises their appraisal contingency (if applicable); (5) Buyer walks away from the sale.

Q: How long does it take to close on a house? A: On average, it can take around 30-45 days to close. However, different factors can lengthen or shorten the timeline. These include: market conditions, length of time to process your loan, length of time to process title, the results of the home inspection, and appraisal.