Chapter 6: Step 1 – Get Your Finances in Order
Before you look at a single house, you need to get your finances in order. This is the most important step in the entire home-buying process.
Why? Because you need to know exactly how much house you can afford before you fall in love with a home you can’t buy.
Step 1: Check Your Credit Score
Your credit score determines:
- Whether you qualify for a mortgage
- What interest rate you’ll get
- How much you’ll pay in fees
| Credit Score | What It Means |
|---|---|
| 740+ | Excellent – you’ll get the best rates |
| 700–739 | Good – you’ll get good rates |
| 620–699 | Fair – you’ll get higher rates |
| Below 620 | Poor – you may struggle to get a mortgage |
Action: Check your credit score for free at AnnualCreditReport.com or through your bank. If it’s low, work on improving it before applying for a mortgage.
Step 2: Get Pre-Approved (Not Pre-Qualified)
Pre-qualification = A rough estimate of what you can afford (based on what you tell the lender). It’s not a guarantee.
Pre-approval = The lender verifies your income, assets, and credit. They give you a written commitment for a specific loan amount. This is what you need.
Why Pre-Approval Matters:
- Sellers take you seriously
- You know your exact budget
- You can move fast when you find the right home
- It speeds up the closing process
Action: Contact at least 2-3 lenders and get pre-approved. Compare their rates and fees.
Step 3: Understand Your Down Payment
| Loan Type | Minimum Down Payment |
|---|---|
| Conventional Loan | 3%–5% |
| FHA Loan | 3.5% |
| VA Loan | 0% (for veterans) |
| USDA Loan | 0% (rural areas) |
| Jumbo Loan | 10%–20% |
Example:
If you’re buying a $400,000 home with a 3% down payment, you’ll need **$12,000** upfront.
Pro Tip: A larger down payment means:
- Lower monthly payments
- No private mortgage insurance (PMI) if you put 20% down
- Better interest rates
Step 4: Budget for Closing Costs
Closing costs are 2%–5% of the purchase price. On a $400,000 home, that’s **$8,000–$20,000**.
What Closing Costs Include:
- Loan origination fees
- Appraisal fee
- Title search and insurance
- Attorney fees
- Recording fees
- Inspection fees
- Prepaid taxes and insurance
Action: Ask your lender for a Loan Estimate – it breaks down all your closing costs.
Step 5: Know Your Monthly Payment
Your monthly mortgage payment includes:
| Component | What It Is |
|---|---|
| Principal | The amount you borrowed |
| Interest | The cost of borrowing money |
| Taxes | Property taxes (Texas has higher property taxes but no state income tax) |
| Insurance | Homeowners insurance |
| PMI | Private mortgage insurance (if you put less than 20% down) |
Example:
$400,000 home, 6% interest, 20% down ($80,000), 30-year loan:
- Monthly payment: ~$1,920 (principal + interest)
- Plus taxes and insurance: ~$2,500–$3,000 total
Action: Use a mortgage calculator to estimate your monthly payment. Include taxes and insurance – many buyers forget this!
Step 6: Save for Your Emergency Fund
Buying a home comes with unexpected expenses:
- Repairs
- Maintenance
- HOA fees
- New furniture
- Moving costs
Action: Have at least 3–6 months of living expenses saved after you buy the home.
Quick Checklist: Are You Ready?
| Question | Yes/No |
|---|---|
| Do you know your credit score? | ☐ |
| Are you pre-approved with a lender? | ☐ |
| Do you have your down payment saved? | ☐ |
| Do you have closing costs saved? | ☐ |
| Do you have an emergency fund? | ☐ |
📚 DFW Real Estate Buyer’s Guide – Free Chapter Series
Your step-by-step roadmap to buying a home in Dallas-Fort Worth. Whether you’re a first-time buyer, relocating from another state, or upgrading to your dream home, these chapters will guide you through every step of the process.
Part 1: Getting Started
📄 Chapter 1: The Best DFW Neighborhoods for You
From Frisco to Southlake to Dallas – find the right area for your lifestyle and budget.
📄 Chapter 2: Urban DFW vs. Suburban DFW
City living or suburban comfort? We break down the pros and cons of each.
Part 2: Understanding Property Types
📄 Chapter 3: What is a Co-op?
Co-ops are rare in Texas, but here’s what you need to know if you encounter one.
📄 Chapter 4: What is a Condo?
Understanding condominium ownership, HOA fees, and financing requirements.
📄 Chapter 5: Co-op vs. Condo – Which One Should You Choose?
A side-by-side comparison to help you decide.
Part 3: The Buying Process
📄 Chapter 6: Step 1 – Get Your Finances in Order
Pre-approval, down payments, closing costs, and budgeting for your new home.
📄 Chapter 7: Step 2 – Build Your Team
Who you need on your side – lender, inspector, attorney, and more.
📄 Chapter 8: Step 3 – The Search Process
How to find the right home, what to look for, and how to stay organized.
📄 Chapter 9: Step 4 – Making an Offer
Negotiation strategies, contract terms, and the option period.
📄 Chapter 10: Step 5 – The Board Interview (Only for Co-ops)
If you’re buying a co-op, here’s how to ace the interview.
Bonus Guide
📄 Out-of-State Buyer’s Guide to DFW
Moving from California, New York, or Illinois? This guide covers property taxes, top suburbs, and everything you need to know about relocating to Dallas-Fort Worth.
Downloadable Resources (Coming Soon)
📄 Home Buying Checklist (PDF) – Visiting multiple homes? Use this checklist to keep track of what you see.
📄 Real Estate Terminology Cheat Sheet (PDF) – From “escrow” to “amortization” – understand the key terms.
Ready to Start Your Journey?
[🔍 View All DFW Listings Here →] (Link to your Search Homes page)
[📞 Have Questions? Contact Adam →] (Link to your Contact page)