The First-Time Homebuyer’s Guide to Austin: What to Know Before You Start

Buying your first home in Austin is one of the most exciting financial moves you can make. It can also feel overwhelming, especially if you’re not sure where to start. Between loan types, credit requirements, down payment options, and closing costs, there’s a lot to absorb before you ever set foot in a house.

This guide breaks it all down into plain language. No jargon, no pressure. Just the information you need to walk into the process with confidence.

Step 1: Know Where You Stand Financially

Before you start touring homes, get a clear picture of your financial situation. That means knowing your credit score, your monthly income, your existing debts, and how much cash you have available for a down payment and closing costs.

Lenders look at four main factors when you apply for a mortgage:

• Credit score: A score of 620 is the minimum for most conventional loans, but you’ll get better terms at 740 and above. FHA loans can go as low as 580 with a 3.5% down payment.
• Debt-to-income ratio (DTI): This is your monthly debt payments divided by your gross monthly income. Most lenders want to see a DTI below 43%, though some loan programs allow higher.
• Employment history: Lenders like to see two years of steady employment in the same field. W-2 employees with consistent income are generally straightforward to qualify.
• Assets: You’ll need funds for your down payment, closing costs (typically 2 to 5 percent of the loan amount), and cash reserves after closing.

If anything in that list gives you pause, that’s okay. This is what the pre-approval conversation is for. We work through it with you before you’re under any pressure.

Step 2: Understand Your Loan Options

Most first-time buyers in Austin use one of three loan types. Each has its own rules, benefits, and trade-offs.

Conventional Loans

Conventional loans follow guidelines set by Fannie Mae and Freddie Mac. They’re the most common loan type and work well for buyers with good credit (typically 680 or higher) and at least 3 to 5 percent down. If you put less than 20 percent down, you’ll pay private mortgage insurance (PMI) until you reach 20 percent equity.

Conventional loans offer flexibility: you can use them for primary homes, second homes, and investment properties. They’re also a strong choice if you want to avoid some of the upfront fees that come with government-backed loans.

FHA Loans

FHA loans are backed by the Federal Housing Administration and are designed with first-time buyers in mind. They allow lower credit scores (down to 580 with 3.5% down) and more flexible DTI requirements. The trade-off is mortgage insurance: FHA loans require both an upfront mortgage insurance premium (1.75% of the loan amount) and an annual premium that lasts the life of the loan in most cases.

For buyers with strong income but a credit history that’s still being built, FHA can be a great path. See our full breakdown of loan types here.

VA Loans

If you’re an eligible veteran, active-duty service member, or surviving spouse, the VA loan is one of the best deals in mortgage financing. No down payment required, no monthly mortgage insurance, and competitive rates. VA loans are issued by private lenders and guaranteed by the Department of Veterans Affairs.

If you’ve served, we’ll always look at your VA eligibility first. It’s almost always the best option available.

Step 3: Get Pre-Approved (Not Just Pre-Qualified)

There’s a difference between pre-qualification and pre-approval, and it matters in Austin’s market.

Pre-qualification is a quick, informal estimate based on numbers you share verbally or through a form. It gives you a rough idea of what you might qualify for, but sellers don’t take it seriously.

Pre-approval is a real underwriting review. We pull your credit, verify your income and assets, and issue a letter that tells sellers you’re a legitimate buyer with financing behind you. In a competitive market, that letter is the difference between having your offer considered and being passed over.

The pre-approval process typically takes 24 to 48 hours. Start your pre-approval here and we’ll walk you through it step by step.

Step 4: Understand What Goes Into Your Monthly Payment

Your mortgage payment is more than just principal and interest. Here’s what makes up your total monthly payment:

• Principal: The portion of your payment that reduces your loan balance
• Interest: The cost of borrowing, calculated as a percentage of your remaining balance
• Property taxes: In Texas, property taxes are paid through your mortgage escrow account. Travis County and surrounding areas have rates that vary by city and school district, generally in the 1.8 to 2.5% range annually.
• Homeowners insurance: Required by all lenders. Texas rates vary based on coverage, location, and home age.
• Mortgage insurance: Required on FHA loans and conventional loans with less than 20% down
• HOA fees: If the home is part of a homeowners association, these may or may not be included in your escrow

Understanding the full payment picture before you fall in love with a home is one of the most valuable things we do in the pre-approval conversation.

Step 5: Know the Austin Market Before You Shop

Austin’s real estate market has a personality of its own. Here’s what first-time buyers should know right now:

Inventory has improved significantly from the tight conditions of 2021 and 2022. As of early 2026, there are over 14,000 active listings in the greater Austin area, and the median days-on-market has stretched to around 90 days. That’s good news for buyers. You have more options and more time to make thoughtful decisions.

Median home prices in the Austin metro are currently around $440,000, down modestly from the peak years. That means buyers who were priced out before are worth looking again now.

Spring is historically the most active season in Austin real estate. Sellers who list in April and May tend to price higher, knowing there’s more demand. Being pre-approved and ready to move when the right home hits the market is a real competitive advantage.

Step 6: Budget for Closing Costs

Closing costs often catch first-time buyers off guard. Plan for 2 to 5 percent of the loan amount in addition to your down payment. In Texas, buyers typically pay for things like:

• Loan origination fees
• Title insurance and title search fees
• Appraisal fee
• Survey
• Prepaid interest (from closing to first payment)
• Escrow setup for taxes and insurance

Some of these costs can be negotiated with sellers in the form of seller concessions, especially in today’s market where sellers are more motivated to close deals. We’ll show you how to structure your offer to potentially offset some of these expenses.

Step 7: Already Have a Quote? Get a Second Look

If you’ve already been shopping around and have a Loan Estimate from another lender, don’t make a final decision before comparing it. Our Second Look program is designed specifically for this: upload your existing Loan Estimate and we’ll give you a side-by-side comparison within 24 hours.

No pressure. No obligation. Just clarity. Because a small difference in rate or fees can add up to thousands of dollars over the life of your loan.

Work Directly with Someone Who Knows the Process

There’s a difference between working with a large bank where your file passes through a team of 20 people, and working directly with an experienced mortgage professional who stays with you from application to closing. At Mortgage Austin, you get one point of contact who knows your file, your goals, and your timeline.

That matters most when questions come up, when timelines get tight, and when you need a straight answer fast.

Reach out today and let’s talk through your situation. There’s no cost to the conversation, and you’ll walk away knowing exactly where you stand.

Frequently Asked Questions

How much do I need for a down payment as a first-time buyer in Austin?

It depends on the loan type. Conventional loans start at 3% down for first-time buyers. FHA loans require 3.5% with a 580 or higher credit score. VA loans (for eligible veterans) require zero down. You’ll also need to budget separately for closing costs, which typically run 2 to 5 percent of the loan amount.

What credit score do I need to buy a home in Austin?

A minimum of 580 for FHA loans and 620 for conventional loans. But to get the most favorable terms and avoid higher fees, a score of 740 or above is ideal. If your score needs work, we can help you create a plan to get there.

How long does the mortgage process take?

Most purchases close in 21 to 45 days from the time you go under contract. The pre-approval process itself takes 24 to 48 hours. Getting pre-approved before you start shopping puts you in the best position to move quickly when you find the right home.

Is it still a good time to buy in Austin in 2026?

For buyers who are financially ready, yes. Inventory is higher than it’s been in years, sellers are more willing to negotiate, and prices have come down from their 2022 peak. Mortgage rates have also moderated compared to the highs of 2023 and 2024. Waiting for a “perfect” moment rarely works out; the right time is when your personal situation is ready.

What is the Second Look program?

If you’ve received a Loan Estimate from another lender, our Second Look program lets you upload that document and we’ll provide a detailed comparison within 24 hours. It’s a free, no-obligation way to make sure you’re not leaving money on the table. Learn more here.

Ferrando Financial LLC | NMLS# 2403080 | Licensed in Texas | Equal Housing Opportunity