How Much Cash Do You Need to Buy a House in Texas?

Bucket 1: Your Down Payment

Your down payment depends largely on your financing.

Depending on eligibility and loan structure, examples include:

VA: potentially 0% down.

USDA: potentially 0% down.

FHA: as little as 3.5% for qualifying borrowers.

Conventional: down-payment requirements vary by loan product and borrower qualifications. Then programs through organizations such as TSAHC or TDHCA may provide assistance for eligible borrowers, but remember, down payment is only Bucket #1.

Bucket 2: Earnest Money

Earnest money is money delivered according to the terms of your purchase contract that demonstrates the buyer's commitment to the transaction. This is not an extra fee your REALTOR® keeps and it isn't automatically the same amount on every house. The amount can be negotiated as part of the offer. How earnest money is ultimately credited or handled depends on the contract and what happens with the transaction.

Bucket 3: Option Fee

Texas contracts may include an option period that gives the buyer a negotiated period during which the buyer has an unrestricted right to terminate under the contract terms. The option fee is negotiated too. This is another expense that may be due early in the transaction rather than waiting until closing day.

Bucket 4: Inspection

Please budget for your inspection. Your lender does not decide whether you should inspect a house. An appraisal and an inspection are not the same thing. The inspector is evaluating the home's condition for you. The appraisal primarily serves a different purpose in the mortgage process. Depending on the property, you may also choose additional inspections or evaluations. Budget for due diligence before you start shopping.

Bucket 5: Appraisal

If you're financing the purchase, your lender will generally require an appraisal when applicable to the loan. Ask your lender, is the appraisal paid upfront or collected another way? I don't want surprise expenses popping up after you're under contract.

Bucket 6: Closing Costs

This is the bucket buyers often underestimate. Closing costs can include expenses associated with originating the mortgage and completing the real estate transaction.

You may see things such as:

• Lender fees

• Title-related charges

• Appraisal-related charges

• Prepaid homeowners insurance

• Initial escrow deposits

• Prepaid interest

• Other settlement expenses

Your lender provides a Loan Estimate early in the mortgage process and a Closing Disclosure before closing that helps you understand the actual costs associated with the mortgage. Read them and ask questions when something doesn't make sense.

Bucket 7: Moving + Life After Closing

This one isn't on your Closing Disclosure, but it's on my list. You still have to move.

You may need:

• Movers

• Utility deposits

• Appliances

• Window coverings

• Lawn equipment

• Minor repairs

• Furniture

• HOA-related expenses

• An emergency fund

This is why I don't automatically want every available dollar going toward your purchase.

Getting the keys with $14 left in your checking account is not my definition of winning.

So How Do We Reduce Cash to Close?

Now we use everything you've learned throughout this series. Depending on your qualifications and transaction, potential resources can include:

Down Payment Assistance

Programs such as TSAHC and TDHCA may help eligible borrowers.

0%-Down Financing

Eligible USDA and VA borrowers may not need a traditional down payment.

Seller Contributions

Depending on the mortgage and transaction, a seller may agree to contribute toward allowable buyer closing costs.

Builder Incentives

New-construction builders may offer incentives toward closing costs, rate buydowns, upgrades or other expenses, often subject to terms such as using an affiliated or preferred lender/title provider.

Lender Credits

A lender may offer credits under certain financing structures, sometimes in exchange for a different interest rate or pricing structure.

Your Own Funds

Sometimes using some of your own funds produces the best overall mortgage.

And sometimes the strongest strategy uses a combination.

Don't Double Count Your Money

Here's a mistake I want you to avoid. You can't simply take $10,000 DPA plus $10,000 builder incentive plus $8,000 seller contribution and assume somebody is handing you a $28,000 check at closing. Each mortgage has rules regarding what costs can be paid, how credits are applied and how excess credits or assistance are treated. That's why we structure the financing and contract together.

The New Construction Question I Want You Asking

When a builder advertises "$20,000 toward closing costs," don't stop there. Ask, what do I have to do to receive it? Then ask, what's the interest rate? Then, can I use the incentive toward a rate buydown? Can it pay allowable closing costs? Can I combine it with outside assistance? What happens if I use my own lender? The incentive amount by itself doesn't tell you whether it's a good deal.

Build Your Personal Cash-to-Close Worksheet

Before we start touring houses, I want five numbers.

1. Maximum mortgage approval

What will the lender allow?

2. Comfortable monthly payment

What do you want to spend?

3. Available savings

How much money could you use without draining yourself?

4. Estimated assistance

What programs do you actually qualify for?

5. Emergency reserve after closing

How much money do you want left when the keys hit your hand?

Number five matters.

A lot.

Your lender's job is to determine whether you qualify for the mortgage. My job as a REALTOR® is different. I'm looking at how the financing interacts with the house. Property taxes, HOA, insurance considerations, seller negotiations, builder incentives, location, resale and your goals. Approval tells us what you can finance. Strategy helps us decide what you should buy.

Your Texas Homebuyer Assistance Roadmap

If you've read this entire series, here's what I want you to do next:

1. Review your credit and finances.

2. Talk with a knowledgeable mortgage lender.

3. Ask specifically about FHA, conventional, VA or USDA financing for which you may qualify.

4. Ask whether TSAHC or TDHCA assistance may apply.

5. Compare financing with assistance and without it.

6. Complete required homebuyer education if you're using an assistance program.

7. Establish your comfortable monthly payment.

8. Determine your estimated total cash to close.

9. Decide how much savings you want left AFTER closing.

10. Then interview REALTORS®.

If you've made it through this series, I hope you've learned one thing:

There isn't one road to homeownership. Your road may include FHA, it may include VA, it may be USDA, it may include TSAHC or TDHCA, it may be conventional financing and your own savings. Maybe after looking at everything, we decide your best move is to wait six months and prepare. That's okay too. I don't want to help you just buy a house. I want to help you understand what you're doing, why you're doing it and whether the numbers make sense for the life you're trying to build.

This series is provided for educational purposes and is not mortgage, legal, financial or tax advice. Mortgage programs, interest rates, assistance amounts, funding availability and eligibility requirements can change. Verify current information with the applicable agency and qualified participating lender.