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So you want to buy a home in Houston?
Sure, you can just walk into an open house and put down a bid. But you’d be living a lot smarter if you built a network of trusted real estate professionals who can help you purchase the right home.
Experts say you should never navigate the home-buying scene by yourself as a first-time home-buyer. There are a lot of hidden catches and things you need to set straight before you can settle into your new place.
In the first of a series from the Houston Chronicle, Houston How To will walk you through the process of buying your first home and general estimates for a timeline.
The homebuying forecast in Houston:
In Houston, the housing market is looking, well, fantastic.
Mortgage rates are expected to be low in 2020, which encourages home sales. In early January, federally backed mortgage company Freddie Mac forecast that low rates for home loans are expected to continue through 2020, with an average interest rate of 3.8 percent for 30-year fixed rate mortgage rates.
“People buy a home for so many different reasons, whether it’s the aspect of investment or maybe the legacy of ‘I grew up in a home that was owned, I’d like to raise family in a home,’” said Omar Enriquez, who manages affordable housing applications at Amegy Bank. “We live in a city where homeownership is just so possible.”
According to the Houston Association of Realtors, single-family home sale rates are ticking up, with homes in the $250,000 to $500,000 range doing particularly well.
“It’s a market where interest rates are at an all-time low, you can get into a house with low to no down payment and it’ll be cheaper than renting,” said Thai Klam, chairman of the Houston Association of Realtors’ Technology Advisory Group.
When and where to start:
To begin, you’ll likely start by looking at homes online. Type in desired zip codes, or look at a map of the Houston area to find current listings on sites like the Houston Association of Realtors, Zillow and Trulia. These sites also allow more advanced searches based on drive time to an employer, subdivisions or amenities like swimming pools.
We've got a few resources of our own. Chron.com has a HAR search widget atop its real estate page. And if you're old-school, the Sunday print edition's Homes section is full of listings from across the city. There's also our annual home price survey.
Most homebuyers should start the process of looking at homes and connecting with real estate professionals at least six to 12 months prior to purchasing, Enriquez said. That gives time for leases to end and prospective owners to bring up credit scores.
When you’ve narrowed down a selection of neighborhoods or communities, figured out your budget and decide on your must-haves, you’ll want to reach out to two people: a real estate agent or a loan officer.
The real estate agent, who may also be a realtor certified by the National Association of Realtors or a broker who can also advise on financial and legal aspects of a sale, is a professional licensed to help people purchase sand sell housing.
Ideally, this agent will specialize in home buying in your preferred neighborhoods. It’s like taking a vacation abroad: if you want the true experience, you want advice from someone who lives and breathes it rather than a tourist who has only stopped by briefly.
You can save some cash and do the process yourself, but real estate professionals say that’s frustrating for buyers, sellers and the experts who later come in to help with the financial aspect of homebuying. Plus, working with a real estate agent gives you a leg up — they might know about properties soon to come on the market that aren’t yet listed.
Otherwise, start with a loan officer from a financial institution who looks at mortgage applications, determining who’s eligible for a home loan. They can pre-qualify you, requiring an interview to determine if you’re a good candidate to purchase property, or pre-approve you, asking you to bring in financial documents to prove your income, assets and existing debt. The former is quicker, but the latter shows that you are serious about moving in.
Note that you have options to get a loan from a local lender, the federal government or online banks. Online banks like Ally Bank can streamline the process of pre-approvals for loans. Fees and other costs are provided upfront, which can be a big bonus for homebuyers seeking transparency during the process, company officials said.
iBuyers, or internet-based national real estate companies that buy and list homes for sellers who want to avoid the traditional process, have made it easier to buy a home online. Unlike their “cash for homes” counterparts seen on street signs in many Houston neighborhoods, they get choosy about what types and conditions of homes they’ll buy.
If you have a minimum credit score of 580 and can afford a 3.5 percent down payment, you qualify for a home loan under the Federal Housing Administration.
And it’s never too soon to ask for help, said Jennifer Hughes Hernandez, a senior loan officer at Legacy Mutual.
“The first point you think you might want to buy something, definitely reach out and ask colleagues, neighbors, family members or a Realtor,” Hernandez said. “I definitely recommend that rather than just scrolling online and just applying online.”
What’s next?
After that, a good real estate agent or loan officer can refer you to other people in the buying process who will help you close on a home that’s right for you. Because these professionals will be in constant communication the months before closing a sale, it’s key to get a group of people who get along well, Hernandez said. You should always double check those referrals on review sites like the Better Business Bureau to make sure that other homebuyers trust their work. Know that you can always choose your own agents and contractors — you don’t have to accept every referral from your real estate agent or loan officer.
You’ll be in touch with several others in the course of your buying process:
Insurance agent: lenders usually require first-time homebuyers to have homeowners’ insurance, and can recommend a local agent who will provide affordable options
Surveyor: a professional who can accurately define the boundaries of a property and prove to a loan officer its actual worth.
Home inspector: an inspector looks at a home’s structure for major problems; specialists can provide pest reports and mold inspections — key in flood-prone Houston
Contractor: business owners who do home renovation and repair work; their specialties can span anything from general work to landscaping to plumbing
Title agent: a representative with a title company who confirms the legitimacy of ownership of property.
Those people will keep you on track with your schedule for purchasing a home.
“The first time homebuyer who has 1,001 questions and we ask him for something and he takes three to five days to respond?” said Chad Helmcamp, president of BWC Lending. “In our business, you just can’t afford to lose one, much less two business days.”
The length of the process varies from buyer to buyer. Buyers who have some blips on their credit history will need to boost their credit score first if they want lower rates.
Once the finances are straightened out, a real estate agent will tour homes with you. Again, how long that takes can vary — some people fall in love with homes immediately, while others take a little longer to get it just right. Realtors say most homebuyers settle on a residence they love between one to four months into the search process.
After entering negotiations with the seller and settling on a price, a typical contract will take 30 to 45 days to close.
The closing date is the day the home becomes legally yours. At that point, it’s up to you if you want to do some renovations first or move in right away.
Just know that the real estate process may be lengthy, but every moment counts.
In part two of "Open House," the Houston Chronicle’s series on first-time homebuying, Houston How To will explore how a prospective homebuyer can get their finances in order and what financial programs can make owning your own place more affordable.
In part three of "Open House," the Houston Chronicle’s series on first-time homebuying, Houston How To gets into the good stuff: what to look for once you’re finally ready to check out homes.
In part four of "Open House," the Houston Chronicle’s series on first-time homebuying, Houston How To looks at closing and escrow, the most important part of the purchase.