First-Time Buyer FAQs

Short answer: 3-7% for most first-time buyers in DFW.

Real breakdown:

• FHA loans: 3.5% down (credit score 580+)
• Conventional loans: 3-5% down for first-time buyers
• VA loans: 0% down (for eligible veterans)
• USDA loans: 0% down (for eligible rural areas)

What about PMI? If you put down less than 20%, you'll pay Private Mortgage Insurance (PMI) until you reach 20% equity. Typical cost: $100-200/month. Many first-time buyers happily pay PMI to get into a home years earlier.

Budget 2-5% of the purchase price. On a $380K home, that's $7,600-$19,000.

What's included:

• Lender fees (origination, underwriting, processing): $1,500-3,000
• Title and escrow fees: $1,000-2,000
• Appraisal: $400-600
• Home inspection: $300-500
• Survey: $300-500
• Prepaid property taxes and insurance: varies
• HOA transfer fees (if applicable): $200-500

Can you negotiate closing costs? YES! You can ask the seller to pay part or all of your closing costs. In a buyer's market, this is common. In a competitive market, it's less likely but still possible.

Quick Rule: Most lenders approve you for homes where monthly payment (including taxes, insurance, HOA) is less than 28% of your gross monthly income.

Example: If you earn $75,000/year ($6,250/month), lenders typically approve payments up to $1,750/month. In DFW, that's roughly a $340,000 home with 3.5% down and today's rates.

Better approach: Calculate what monthly payment feels comfortable to YOU, then work backward to find your ideal purchase price. Our affordability calculator can help with this.

Don't forget:

• Property taxes (2-3% of home value annually in DFW)
• Homeowners insurance ($1,500-2,500/year typically)
• HOA fees (if applicable, $50-300+/month)
• Maintenance (budget 1% of home value annually)

Honest answer: It depends on YOUR situation, not "the market."

Buying makes sense if:

• You'll stay in the area 5+ years
• You can afford down payment + closing costs + emergency fund
• Your monthly payment would be similar to or less than rent
• You're financially stable (job, income, debt manageable)
• You want to build equity and wealth

Renting makes sense if:

• You might relocate in 1-3 years
• Your finances aren't quite ready yet
• You'd stretch too thin to buy comfortably
• You value flexibility over equity building
• You're in a temporary life phase

Yes! Gift money from family is commonly used and totally acceptable for down payments and closing costs.

Important rules:

• Must be a gift, not a loan (lender will require a gift letter)
• Must come from family member (parent, grandparent, sibling, spouse)
• Lender will need to document the paper trail
• Money should be in your account 60+ days before mortgage application (or properly documented as gift)

Gift letter must state:

• Amount of gift
• Relationship to buyer
• Statement that it's a gift with no expectation of repayment
• Donor's contact information

Big difference. One matters, one doesn't.

Pre-qualification:

• Based on self-reported information
• No verification of income, assets, or credit
• Takes 5 minutes
• Not worth much to sellers
• Just an estimate of what you might qualify for

Pre-approval:

• Lender verified everything (credit, income, assets)
• Reviewed actual documents (pay stubs, tax returns, bank statements)
• Pulled your credit report
• Gave you official approval letter stating exact amount
• Shows sellers you're a serious, qualified buyer

It depends on your debt-to-income (DTI) ratio.

DTI ratio = (monthly debt payments / gross monthly income) × 100

General guidelines:

• DTI under 30%: Focus on saving for down payment
• DTI 30-40%: Do both - split your extra money 50/50
• DTI over 40%: Focus on paying down debt first

Prioritize paying off:

• High-interest credit cards (16%+ interest)
• Small debts you can eliminate quickly (psychological wins)
• Debts that significantly impact DTI ratio

Don't rush to pay off:

• Low-interest student loans (4-6% rates)
• Car loans with decent rates
• Debts that don't heavily impact your DTI

Minimum scores by loan type:

• FHA loans: 580 (3.5% down) or 500-579 (10% down)
• Conventional loans: 620 (some lenders want 640+)
• VA loans: No official minimum, but most lenders want 620+
• USDA loans: 640 typically

How your score affects you:

• 760+: Best rates available
• 700-759: Good rates, small premium
• 660-699: Decent rates, noticeable difference
• 620-659: Higher rates, still approvable
• Below 620: Limited options, FHA likely best bet

Rate impact example: A 100-point difference (650 vs. 750) might mean 0.75-1.0% higher interest rate. On a $380K loan, that's $200-250 more per month or $72,000-90,000 over 30 years.

Quick wins (30-90 days):

1. Pay down credit card balances

• Get utilization below 30% (ideally below 10%)
• This is the fastest way to boost your score
• Even paying down one card significantly helps

2. Check for errors on credit report

• Get free reports at AnnualCreditReport.com
• Dispute any errors you find
• 30% of reports contain errors!

3. Become authorized user

• Ask family member with excellent credit to add you
• Their good payment history helps your score
• Can boost score 20-50 points quickly

4. Don't close old credit cards

• Length of credit history matters
• Keep old cards open (even if you don't use them)

5. Set up autopay

• Payment history is 35% of your score
• Never miss a payment again

No! Checking your own credit is a "soft inquiry" and does NOT hurt your score.

Two types of inquiries:

Soft inquiries (no impact on score):

• Checking your own credit
• Pre-qualification offers
• Background checks by employers
• Insurance quote inquiries

Hard inquiries (small temporary impact):

• Mortgage application
• Credit card application
• Auto loan application
• Personal loan application

Where to check your credit for free:

• AnnualCreditReport.com (official site for full reports)
• Credit Karma (free monitoring)
• Many banks and credit cards offer free FICO scores

Total timeline: 12-24 months on average

Breakdown:

• Exploration & decision (1-3 months): Deciding if you're ready, initial research
• Financial preparation (3-9 months): Building credit, saving down payment, getting pre-approved
• House hunting (1-6 months): Looking at homes, making offers (highly variable!)
• Under contract to closing (30-45 days): Inspection, appraisal, underwriting, closing

Can you speed it up? Yes, if you:

• Already have good credit (680+)
• Already have down payment saved
• Already have stable income
• Are flexible on home requirements
• Buy in less competitive market

First: If you get rejected, it's not the end of the world. It's information.

Common reasons for rejection:

• Credit score too low → Work on improving it for 3-6 months
• DTI ratio too high → Pay down debt or increase income
• Insufficient down payment → Save more or explore down payment assistance
• Employment history too short → Wait until you hit 2 years or explain situation
• Recent credit issues → Wait for negative marks to age off

What to do if rejected:

• Get written explanation (lenders must provide this)
• Create specific improvement plan
• Set timeline for re-applying (typically 3-6 months)
• Consider working with different lender (standards vary)
• Look into first-time buyer assistance programs

Yes, things will go wrong. That's homeownership. Here's how to protect yourself:

Before buying:

• Get thorough home inspection: Don't skip this! Worth every penny.
• Consider specialized inspections: Foundation (crucial in DFW!), sewer scope, roof certification
• Review seller disclosures carefully: Ask about everything
• Walk away if major issues: Option period is your safety net

After buying:

• Maintain emergency fund: 3-6 months expenses PLUS home repair fund
• Budget 1% of home value annually: For maintenance and repairs
• Do regular maintenance: Prevents big problems
• Consider home warranty: First year coverage (usually $500-800/year)

When major issues happen:

• Stay calm (it's fixable)
• Get multiple quotes
• Understand what's urgent vs. what can wait
• Use your emergency fund (this is what it's for!)
• Join homeowner groups for contractor recommendations

Because Texas has NO state income tax.

The state makes up for no income tax with higher property taxes. Average effective rate in DFW is 2-3% of assessed home value annually.

Example: $380K home = $7,600-11,400 per year in property taxes (or $633-950/month).

It varies by county:

• Collin County: ~2.5% effective rate
• Denton County: ~2.3% effective rate
• Dallas County: ~2.6% effective rate
• Tarrant County: ~2.4% effective rate

Ways to reduce your tax burden:

• Homestead exemption: Reduces taxable value (file ASAP after buying!)
• Over-65 exemption: If you qualify
• Protest your valuation: Challenge if assessment seems high
• Choose lower-tax areas: Research before buying