So, you’ve saved up some money and you think you’re ready to buy a house in Texas.
Congratulations! You’re about to make one of the biggest and best investments you’ll ever make in your lifetime.
Contrary to popular belief, you don’t have to have hundreds of thousands of dollars saved to put a contract down on your first home. In fact, you could snag the entry-level home of your dreams with just a few thousand on hand.
Take it from my friend Jack, who bought his house for just about $5,000. How in the world could he do it?
Disclaimer: This article uses information from the time of recording, which occurred before the spike in interest rates. Some of this information is subject to change based on current interest rate levels.
As a veteran, he took advantage of the VA Home Loan, which let him off the hook for putting a down payment. After a lengthy search process, he was able to find a $220,000 house that perfectly fit his needs.
In terms of his costs, he first had to take care of earnest money and options fees.
Earnest was 1%, so that’s about $2,200 right there. Once he forks over options, which is about $150, there’s a total of about $2,350.
Next, he did what most homeowners should always do: hire an inspector. This step ensures that there aren’t any major risks or damages to the home that you’re not aware of. For Jack, this cost $300, bringing the total up to $2,650.
Finally, he paid $1,500 to a title company, which brings the total amount to about $4,200 from contract to close in buying a house.
Now, I know what you might be thinking — Tom, of course he could pull that off with a VA loan. There’s no way I could buy a house at a comparable amount if I’m not a veteran.
Well, you might want to think again. Here’s a way that you can afford an entry-level home in Texas without needing too much saved up on hand.
The Conventional 97
Did you know that you can get a mortgage with a down payment as low as 3%?
You heard that right. It’s the conventional 97 loan program that allows you to pursue this option as a first-time buyer. You’ll also typically need a credit score of at least 620, a two-year employment history, a steady income, and a debt-to-income ratio below 43%.
Let’s say you pursue this program and find that a $200,000 house catches your eye. A 3% down payment would only require $6,000. When you combine that with all the other expenses that Jack similarly paid, the grand total would be $6,000 + $4,600 = $10,400.
In other words, you could live in a wonderful entry-level home for less than $11,000.
A Conventional Down Payment
Even if you don’t qualify for the conventional 97, a typical conventional loan would still allow you to make a down payment at around 5%. Combined with the other expenses, the total cost would be $15,000. It isn’t a far outcry from the $11,000 that you can pay with a conventional 97.
The moral of the story is simple. If you want to buy a house in Texas and you’ve got $10,000 to $15,000 saved, you can make it work.
You’ll also get to enjoy additional benefits from making this investment, like tax benefits, depreciation, and equity that can exponentially grow as you pay further into the home.
Of course, every situation varies from one prospective homebuyer to another. If you need some expert insight into your circumstances, then don’t hesitate to contact me here at Tom’s Texas Realty Group. I can’t wait to help you find the house of your dreams!
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