So, you’re ready to make a move to Austin, TX? You’re not alone! Greater Austin has grown nearly 35% over the past decade and now has a population over 2 million. Not surprisingly, the Austin real estate market has exploded accordingly. In such a competitive real estate market, how do you buy a house in Austin? We’re here with a helpful guide…
Step 1: Understand the Market
As of June 2019 there are over 2,900 homes for sale in the Austin area, with a median home price of $407,400. Defining the parameters of you Austin homes search will help you move through the process quicker. Answer these 5 questions before starting your search…
1.What’s my budget?
Austin has a higher cost of living than almost anywhere in Texas. So, for that reason, you should really stick to the 3x your income rule. You might be able to bend that rule in other parts of the state, but Austin isn’t one of them.
2. What part of Austin do I want to live?
Tip: Make sure to check traffic patterns from your potential home to your office. There may be thousands of Austin home listings, but not all will be geographically desirable to you.
3. What type of home am I looking for?
Did You Know: The vast majority of homes currently listed in Austin are single-family. Currently, there are less than 100 townhomes for sale in Austin, and only 15 active mobile homes for sale in Austin, according to Zillow. Condos can be another option, especially if you work in Austin’s popular downtown corridor. Three new buildings will be completed in Austin’s downton by 2019, but the average price is expected to remain around $495,000.
4. How quickly am I prepared to move?
Tip: A lot of homeowners want to sell their house fast in Austin. If you aren’t prepared to move right away, your offer may be viewed less favorably. Start the shopping process 3-6 months before you want to move. Get a sense of what you are looking for and where you want to live. Then, when you are ready to buy, you will be comfortable acting fast.
5. Am I prepared to make an offer?
This is the big one. From down payment, to mortgage, to contingencies, you want to have all your ducks in a row. Also, you need to decide if buying a home is a good idea for you personally. If you have followed Austin real estate news recently, you know that affordability is at an all-time low. Despite recent efforts to curb this trend, it’s not going to change overnight. Buying a home is a decision you shouldn’t take lightly.
Step 2: Get Your Financing In Order
Let’s talk dollars and cents. Remember, buying a new home in Austin is an investment, so making sure you understand the ins and outs of the financing side of the transaction is important.
Get pre-approved for a loan
Do I need to get pre-approved for a mortgage before finding my new home? YES! This goes back to being prepared to make an offer. You need to have a cursory understanding of the mortgage process, and the steps you need to take to get pre-approved. Start by researching your credit score, it can have a big impact on your mortgage interest rate.
Speaking of mortgage rates, make sure you are looking into how your rate will affect your monthly payment. Mortgage rates in Austin have been trending down over the past year, which is great for you as a buyer. As of June 2019, the average interest on a 30-year, fixed rate mortgage in Austin is 4.16%, which is down from 4.82% in December of last year. A dip like that could mean hundreds of dollars in savings per month for you as a new home buyer, and alter what you are able to afford.
Get your deposit ready
Experts typically recommend a 20% down payment on your new home. However, there are currently programs in place that would allow you to buy a home with as little as 3% down. Keep in mind that a downpayment less than 20% will typically also require a monthly PMI (Private Mortgage Insurance) payment, in addition to your mortgage payment. You can read more about the benefits of a larger down payment here.
Budget for moving and other costs.
The actual act of moving can also be costly. According to Unpakt, moving locally in Austin can cost up to $1,400 and storage costs can be upwards of $500/month.
Step 3: Find the right home
You’re ready to begin your Austin home search! This is the fun part. Make sure to cast a wide net and look for homes that meet your budget and geographic requirements. Search aggregators like Zillow or Trulia can be helpful, but also look for homes on non-traditional sites like REX that may have exclusive Austin home listings that fit your needs. Make to visit open houses in a variety of Austin neighborhoods like Tarrytown, Circle C and East 6th before you make a decision on a certain area. You might find that one are suits your needs better than you thought. Don’t forget to drive during rush hour to see what the traffic is really like.
What about finding an agent? You’re first inclination may be to go online and solicit the help of a local Austin realtor, or real estate agent. But, did you know that there are nearly 10,000 real estate agents in Austin alone? Finding the right agent is important. While buyers typically don’t incur a “fee” for working with an agent, there are costs associated with the transaction that you need to be aware of. Our suggestion is to meet/interview multiple agents or real estate companies and pick one that meets your needs. Don’t be part of the 65% of people who choose the first real estate agent they meet!
Step 4: Prepare an offer
You’ve done all the leg work, it’s time to make an offer on your dream home. Work with your agent to make a strong offer and make sure to include any contingencies you may have. Discuss what competition is out there and how you can best compete and make your offer stand out. You may also want to consider personalizing your offer with a letter to the seller explaining why you want to buy their home.
Step 5: Go through negotiations
Work with your agent to determine your negotiation strategy if your initial offer is countered, or if there are multiple offers on the table. Just remember to keep your budget in mind and don’t get in a bidding war that stretches your limits financially.
Step 6: Inspections, Escrow & Close
After negotiations are complete, you will enter into the escrow period. This is when all the financing, paperwork, and due diligence are finalized. Escrow can be an intimidating process, so we have put together this guide to help you through it.
Once you have an accepted offer, there are typically inspection contingencies in place to protect you from unforeseen issues with the home. It is up to you to contract a home inspector to take a detailed look and provide recommendations regarding the condition of the property. Once complete, you will be able to assess the findings and determine if any further repairs or negotiations are needed to account for any of these unknown variables.
After inspections are finalized, you’ll pay your closing costs and sign the paperwork.
Congratulations, you are now one of the many happy homeowners in Austin.