Before you start shopping for homes, understand where you stand financially and what you can afford.

Step 1: Assess Your Financial Readiness

Calculate your monthly income, existing debts, and available savings. Lenders typically use a debt-to-income ratio (DTI) of 43–45% as a maximum threshold, though FHA, VA, and some conventional options allow up to 50%.

Key Financial Metrics:

• Monthly gross income (before taxes)
• Current monthly debt payments (credit cards, car loans, student loans)
• Available cash for down payment and closing costs
• Emergency fund (lenders like to see 2–3 months reserves)

Step 2: Check Your Credit Score

• 740+: Best rates and terms
• 680–739: Good rates, most programs available
• 620–679: Conventional loans, slightly higher rates
• 580–619: FHA loans available
• 500–579: FHA with 10% down

Step 3: Understand Debt-to-Income Ratio (DTI)

Formula: (Total Monthly Debt + Proposed Housing Payment) ÷ Gross Monthly Income = DTI

Most loans require DTI below 43%. The 28/36 Rule says housing costs should not exceed 28% of gross income, and total debt should not exceed 36%.

Texas-Specific Considerations

• Property taxes average 1.6–1.8% of home value annually
• No state income tax means more take-home pay
• Homestead exemption reduces property tax burden
• Hill Country properties may have well and septic requirements

Your credit score is one of the most important factors in getting approved and determining your interest rate.

What Makes Up Your FICO Score

• Payment History (35%): Have you paid bills on time?
• Credit Utilization (30%): How much of your available credit are you using?
• Length of Credit History (15%): How long have you had credit?
• New Credit (10%): Recent inquiries and new accounts
• Credit Mix (10%): Variety of credit types

How to Improve Your Score

1. Pay all bills on time (set up automatic payments)
2. Reduce credit card balances below 30% of limits
3. Don’t close old credit cards
4. Dispute any errors on your credit report
5. Avoid opening new credit before applying for a mortgage

Quick Score Boost Strategies

30-Day Plan:

• Pay down credit cards to below 10% utilization
• Become an authorized user on a family member’s old card
• Request credit limit increases (don’t use the extra credit)

60-Day Plan:

• Pay off collections under $500
• Set up automatic payments
• Get a free credit report from AnnualCreditReport.com and dispute errors

You probably need less than you think. Here’s what you need on a $300,000 home:

• FHA Loan: 3.5% = $10,500
• Conventional First-Time Buyer: 3% = $9,000
• VA Loan (Veterans): 0% = $0
• USDA Loan (Rural): 0% = $0

Don’t forget closing costs: typically 2–5% of purchase price. Many buyers use seller concessions and Texas down payment assistance to reduce cash needed at closing.

Saving Strategies

1. Automate Your Savings

Set up automatic transfers on payday. Start with $200–500/month.

2. Use the 50/30/20 Rule

• 50% needs (housing, food, utilities)
• 30% wants (dining, entertainment)
• 20% savings/debt (your down payment fund)

3. Deposit Windfalls

Tax refunds, bonuses, gifts — put 50%+ toward your down payment fund.

Texas Down Payment Assistance

• My First Texas Home: Up to 5% of the mortgage amount
• TSAHC: Grants and low-interest loans
• Many Texas cities offer additional local programs

Coast2Coast Mortgage offers a home affordability calculator to help you estimate based on income, debts, down payment, and other factors.

What You’ll Need

• Annual or monthly income
• Monthly debt payments
• Estimated down payment
• Credit score range
• Property tax estimate (use 1.5–2% if unknown)
• Homeowners insurance estimate (use 0.5–0.6% if no quote)

FHA Loans

Best for: First-time buyers, lower credit. Only 3.5% down with 580+ credit. Mortgage insurance required for life of loan. Lower loan limits ($541,287 in most Texas counties).

Conventional Loans

Best for: Good credit, 3–5% down. PMI removable at 20% equity. Higher loan limits ($832,750). Typically requires 620+ credit score.

VA Loans

Best for: Veterans, active military, eligible spouses. 0% down, no mortgage insurance, competitive rates. VA funding fee applies (2.3% first use, waived for disabled veterans).

USDA Loans

Best for: Rural and suburban areas. 0% down, low mortgage insurance. Much of the Texas Hill Country qualifies — including parts of Kerrville, Boerne, and Fredericksburg.

Mortgage Broker vs. Bank

Coast2Coast Mortgage is a wholesale mortgage broker — we work with a large network of wholesale lenders to find the best fit for your profile, rather than offering only one lender’s products. This often means more flexibility for credit variations, self-employed income, and unique property types.

Getting pre-approved is your first official step. It shows sellers you’re serious and defines your buying power.

What to Avoid After Pre-Approval

• Don’t make major purchases (cars, furniture)
• Don’t change jobs if possible
• Don’t open new credit accounts
• Don’t close existing credit accounts
• Don’t make large deposits without documentation
• Do continue paying all bills on time

Application Steps

• Complete online application (15–30 minutes)
• Credit check pulled by lender
• Document submission and verification
• Underwriting review
• Pre-approval letter issued

Documents You’ll Need

Income:

• Last 2 years W-2s
• Last 30 days pay stubs
• Last 2 years tax returns (if self-employed)
• Profit & Loss statement (if self-employed)

Assets:

• Last 2 months bank statements (all pages)
• Investment and retirement account statements
• Gift letter (if receiving down payment help from family)

Personal:

• Valid driver’s license or state ID
• Social Security number
• Divorce decree or child support docs (if applicable)

A licensed real estate agent gives you MLS access, neighborhood expertise, negotiation skills, and contract guidance — usually free to buyers (seller pays commission).

Texas-Specific Checklist

• Property tax rate in this specific area
• HOA fees and restrictions
• Flood zone status (critical in Texas)
• Well vs. city water
• Septic vs. sewer
• Foundation condition (Texas clay soil)

Red Flags to Watch For

• Foundation cracks (common in Texas clay soil)
• Signs of water damage or mold
• Outdated electrical systems
• Roof age over 15–20 years
• Deferred maintenance

Earnest Money

Typically 1–2% of purchase price. Shows you’re serious, held in escrow, applied to your down payment at closing. Example: $300,000 home = $3,000–$6,000.

Key Contingencies

• Financing Contingency: Protects you if loan falls through (21–30 days)
• Inspection Contingency: 7–10 days to hire a professional inspector
• Appraisal Contingency: Protects you if home appraises below offer price

Texas Option Period

A negotiated window (typically 7–10 days) to conduct due diligence. Costs $100–$500 paid to seller (non-refundable). You can terminate for ANY reason and recover earnest money during this period.

If the Appraisal Comes In Low

• Renegotiate the purchase price
• Bring additional cash to cover the gap
• Request seller concessions
• Walk away using your appraisal contingency

The home inspection reveals the property’s true condition before you finalize the deal. Cost: $300–$600. Schedule during your Option Period.

Closing costs in Texas typically range from 2% to 5% of the purchase price. On a $300,000 home: $6,000–$15,000.

Cash to Close vs. Down Payment

Cash to Close = Down payment + Closing costs + Prepaid items − Credits/Concessions.

Common Closing Cost Fees

• Origination fee (0.5–1%)
• Underwriting fee ($750–$1,300)
• Appraisal ($650–$750)
• Title insurance ($1,800–$2,500)
• Survey ($350–$600)
• First year homeowners insurance
• Property tax reserves (2–6 months)

How to Reduce Closing Costs

• Seller Concessions: Up to 3–9% depending on loan type
• Lender Credits: Accept slightly higher rate, lender covers costs
• Close Near Month-End: Reduces prepaid interest

Homeowners insurance is required by your lender. You cannot close without proof of coverage.

What’s Covered

• Dwelling (fire, wind, hail, lightning)
• Personal property (50–70% of dwelling coverage)
• Liability if someone is injured on your property
• Additional living expenses if home is uninhabitable

What’s NOT Covered

• Flood damage (requires separate policy)
• Earthquakes
• Normal wear and tear
• Pest damage

Texas-Specific Considerations

• Statewide average: $2,000–$4,000/year ($165–$330/month)
• Coastal areas may need separate TWIA wind coverage
• Flood insurance required in FEMA flood zones ($400–$2,000+/year)
• Start shopping 30–45 days before closing

In Texas, closings are handled by title companies. Typically 30–45 days after offer acceptance.

Closing Day Checklist

• Valid photo ID
• Certified or cashier’s check (or wire transfer)
• Homeowners insurance proof
• Utilities scheduled to transfer to your name

What You’ll Sign

• Promissory Note: Your promise to repay the loan
• Deed of Trust: Gives lender a lien on the property
• Closing Disclosure: Final breakdown of all costs
• Deed: Transfers ownership to you

Texas Property Tax Basics

• Average: 1.6–2.0% of home value annually
• $300,000 home = $4,800–$6,000/year ($400–$500/month)
• Tax bills mailed October; due January 31

Homestead Exemption (2026)

• Standard: $140,000 off taxable value for school taxes
• Over-65 or Disabled: Additional $60,000 + school tax ceiling
• Typical savings: $1,500–$3,000+/year
• Apply: File with County Appraisal District by April 30 after moving in
• Bring driver’s license showing property address

Common Eligibility Requirements

• First-time homebuyer (no ownership in past 3 years)
• Income limits often $75,000–$110,000+ (higher than most expect)
• Credit score minimum 620–640
• Homebuyer education course may be required
• Primary residence only

Common Myths

• "I make too much." Many counties allow $75,000–$110,000+.
• "I have to pay it back." Most are forgivable after 5–10 years.
• "It’s too complicated." Your lender handles the paperwork.