Houston is an ideal place for homeownership. When you combine the city’s affordability and robust economy with the overall favorable environment for home ownership—interest rates are still historically low—buying your first home in Houston is definitely worth considering. In this article we’ll look at why buying a home in Houston is a good idea, whether you’re looking to buy a home in Northwest Houston, the Heights, Uptown, Midtown or anywhere in between. Then, we’ll help you assess your own readiness for homeownership. Finally, we’ll walk you through the mortgage application and qualification process so you are ready to begin the home buying process.
Of course, if you’re already living in Houston, you know all this. And buying a house is about more than the desirability of the overall city, or even of specific neighborhoods. First and foremost, it’s about where you are, financially and otherwise. Let’s talk about you and how we can help you attain your goal of homeownership, as well as any other financial goals you may have.
Emotional and financial preparedness is a huge part of home buying decisions. Let’s take a look at where you are, and whether you are ready to buy a house.
Is the time right for you to become a homeowner? At Central Bank, we understand that buying a home isn’t just about finances. Family considerations, job stability, and other factors will influence your decision. Come talk to our Houston-based loan officers--we understand the local real estate market and we can help you reach the best decision for you. Relationship-focused banking and individualized service are at the heart of everything we do.
If you’re on solid financial footing, and you (and your family members) are in agreement you’re ready to take the next steps toward home ownership.
First, you’ll need to see what kind of house you can afford.
Lenders work with what are called “front-end” and “back-end” ratios to determine whether you can afford a house. 40/45 is a typical ratio. Let’s look at what that means.
To put these sample figures in context, the average home price in Houston is $290,000 according to the Houston Chronicle. If you have a 20% down payment, you would take out a $232,000 loan. If the $290,000 home had $5800 in annual property taxes (most Houston homes have property taxes between 2% and 3% of the purchase price), your mortgage payment would break down as follows (assuming a $1000/year insurance policy and an interest rate of 4.5 percent.)
Purchase price: $232,000
30-year mortgage at 4.5%, monthly payment: $1175.51.
Monthly tax payment: $483.33/month
Total payment: $1175.51 + $83.33 + $483.33 = $1742.17
So, this house would be considered affordable, though homebuyers should take their own spending into account as well, in order to determine whether a house is truly affordable. Contact us for more information about the mortgage prequalification and preapproval process.
Your mortgage lender will pre-approve you for a loan amount based on the method described above. Note that realtors will usually ask for your pre-approval letter prior to showing you homes—they will not want to show you houses that you are unable to afford. This is why it’s important to start the homebuying process with your bank, before you set up home visits.
One way to create order in your home buying process is to create a systematic approach with a checklist, including potential neighborhoods, and a notebook to write down all of your observations concerning the houses you see.
Your realtor will help you compose a competitive offer for the property based on the condition of the house and current market conditions. Your mortgage lender will have the house appraised to ensure your loan doesn’t exceed market value.
Prior to closing, you have the option of hiring a local property inspector (see the searchable directory here) to provide a thorough report on the house’s condition and any potential issues. You’ll also want to find an insurance company to provide homeowner’s insurance prior to closing.
The seller also provides a disclosure statement regarding the condition of the property, although these can be of variable detail and value. This is why a property inspection is recommended.
During this time, you will want to try and avoid any major new purchases, particularly on credit.
The most important thing to remember on closing day, which is usually held at the real estate office of the seller’s agent, is that you’ll be signing a lot of documents. You’ll also need to bring multiple forms of identification. Additionally, if the closing costs are different from your estimate, you may need to bring additional money beyond the cashier’s check you will have drawn from your final estimate. On the other hand, you may get some money back. Be sure to ask your realtor during closing if you have any concerns about the documents you are signing. And then, the keys are yours!
Since 1956, Central Bank has been helping Houston residents become homeowners. Partner with your community bank for all of your mortgage and banking needs. Want to learn more about the financing portion of the home-buying process? Our Houston loan officers are here to help. Give us a call at 832.485.2300 or visit one of our four branches in Houston today.