15 Things You Should Know Before Buying a House in Austin
Are you paying a ton on rent? Do you plan on sticking around Austin for a while? Do you have a steady income?
If you answered yes to all of these questions, then you probably can and should consider buying. While a home is a large purchase, it is also a big investment in your future that builds equity over time.
What does that mean? Well, rent is money that you lose each month. But when you make a monthly payment on your mortgage, you’ll get that money back when you sell. And since homes appreciate value over time, you’ll end up making a profit!
Keep in mind before you start researching that there will come a point when you need to just jump in and start the conversation with a real estate agent and lender. You can estimate, budget, and plan all day, but a professional can walk you through the process based on your needs and financial situation. There’s a lot you can only learn through experience!
So read on for what you need to know before buying in Austin…
1. Should I Hire a Real Estate Agent?
Absolutely—hiring a real estate agent is one of the smartest moves you can make as a buyer or seller. A skilled agent brings expertise, strategy, and insight to the table, ensuring you make informed decisions throughout your real estate journey.
For buyers, an agent doesn’t just help you find homes—they guide you through complex processes like negotiating offers, navigating inspections, and understanding contracts, all while protecting your best interests. For sellers, an agent’s market knowledge ensures your home is priced competitively, marketed effectively, and positioned to attract the right buyers.
Most importantly, a great agent serves as your advocate, simplifying what can often feel like an overwhelming experience. In today’s competitive and fast-moving Austin market, having someone on your side who understands local trends, pitfalls, and opportunities can save you time, money, and stress. It’s not just about closing a deal—it’s about making the best decision for your future.
2. How Much Money Will I Need?
Although this is a job for your lender, I can tell you a few of the costs you will need to consider.
Cash to close: Cash to close is the amount of money you bring to closing, which includes your down payment, closing costs, and escrows for property taxes and homeowners insurance.
The following costs will be due on the day you close. Your title company will help set up closing and money wiring.
Down payment (3–20% of sale price)
Closing costs (2–5% of sale price)
Prepaids
These are costs associated with your home that need to be paid in advance when getting a loan that will accrue between the closing date and month-end.
Property Taxes
Homeowner’s Insurance
Mortgage Interest
Other Potential Costs that may be included in your closing costs:
Appraisal Fee
Credit Report Fee
Loan Origination Charge
Title Services & Lender’s Title Insurance Fees
Owner’s Title Insurance
Recording Charges
Wire Transfer Fee
Prepaid Mortgage Interest
Property Taxes
Prorated Taxes
Homeowners Insurance Reserves
County Property Tax Reserves
3. What is Earnest & Option Money?
Earnest Money: When reviewing the contract, one of the pages will discuss “option period” and “earnest money.” Earnest money is provided by the buyer so that the seller takes the offer seriously. You’re using these funds to show the seller you’re “earnest” about buying their house. Don’t confuse this with the down payment on the house. They are two separate things. The earnest money check is turned into the title company, who will hold it in an escrow account. You will lose the earnest money if you breach the contract. Otherwise, this is a deposit, and you will get it back, or it can be applied to your down payment amount at closing.
Option Money: The option period, along with the option check, buys you time to have home inspections done and negotiate any final terms or repairs with the seller. For example, if you have a seven-day option period written in the contract, you’ll have seven days to have your inspection completed, come up with repairs you want, and make negotiations with the seller. Unlike earnest money, you will not get this back unless you back out of the contract within those seven days. The option money is typically around $500-$2,000+, and you as the buyer, get to decide what amount and the number of days.
I’ve seen option period lengths as long as 12 days or as little as two days. It will depend on many things and can be used as a negotiation tactic if there are multiple offers. For example, shortening your option period as a buyer will make your offer more appealing if there are multiple. You have 48 hours to turn in earnest and option money checks.
4. Why Do I Keep Hearing I Need a 20% Down Payment?
When purchasing a property, the majority of the population won’t pay for a house in all cash and must go through a local lender or bank to borrow money. Buyers then need to consider how much money should be used as a down payment.
When I was growing up, my dad always told me it was best to have no less than a 20 percent down payment. His argument was he didn’t want to pay PMI (Private Mortgage Insurance). That cost is typically 0.5 to 1 percent of the loan amount (around $70-$200) and is charged to a buyer who puts less than 20 percent down on their home.
So, if your loan amount were $100,000, meaning you’re borrowing $100,000, you would pay at most $1,000 a year extra for PMI if you put less than 20 percent down.
Consider your situation. Do you want to tie up that much money—a 20 percent down payment? Or, is that your rainy-day fund? Think about how “liquid” you need your cash to be. Paying a 3 to 15 percent down payment may not be so bad! Think of the risk vs. return. Your lender will be the best resource to figure out what’s right for you.
5. Should I Buy or Rent?
Many discuss rising home costs in Austin, but rent is also going up. So, what is rent? Money you are never going to see again. If you’re financially capable of buying and planning to live in Austin for at least a couple of years, more often than not, it makes sense for you to buy. If you want to lower your monthly payment, you may consider getting a roommate, utilizing Airbnb, or short-term rentals programs like Homads.
6. Never Skip the Inspection
A home inspection is one of the most critical steps in the homebuying process—it’s your opportunity to uncover any hidden issues before you finalize your purchase. Even if the house looks perfect, there could be underlying problems that aren’t immediately visible, like structural issues, outdated wiring, or plumbing concerns.
The inspection report gives you valuable insight into the home’s condition and can serve as a powerful negotiation tool. If significant repairs are needed, you may be able to ask the seller to address them or provide a credit toward your closing costs.
Skipping the inspection could leave you with costly surprises after closing. For example, a failing HVAC system or roof might not reveal issues until months later, and those are expenses you’ll be responsible for as the new homeowner.
If you’re buying a new construction home, you might think an inspection isn’t necessary, but even brand-new houses can have oversights or defects.
An inspection also provides peace of mind. Knowing what you’re walking into—whether it’s a fixer-upper with a to-do list or a move-in-ready dream home—helps you make an informed decision. Consider the inspection an investment in your future homeownership journey.
7. Will the Seller Pay My Closing Costs in Austin?
Yes, it’s possible—and even probable—that the seller could cover some or even all of your closing costs in Austin, depending on the current market conditions. In a more balanced or buyer-friendly market, sellers are often willing to offer concessions, such as covering a percentage of your closing costs, to make their property more appealing.
This is especially common if the home has been on the market for a while or if there are no competing offers. By negotiating with your real estate agent, you can request that the seller contribute to these costs as part of your offer. While not guaranteed, it’s a common strategy to help reduce the upfront expenses of buying a home. It’s just another reason working with a knowledgeable agent can make a big difference in your home-buying experience!
8. Define Your Must Haves & Deal Breakers
Before you start house hunting, take some time to figure out what truly matters to you in a home. Creating a clear list of “must-haves” versus “nice-to-haves” will save you time and help you stay focused during your search.
Your must-haves are the non-negotiables—the things your home absolutely needs to support your lifestyle and long-term goals. This might include:
• A specific number of bedrooms or bathrooms for your family or future plans.
• A big yard for your pets or gardening dreams.
• A location in a particular school district, neighborhood, or commute radius.
• A home office if remote work is a priority.
On the other hand, “nice-to-haves” are the features that would be great but aren’t dealbreakers, like a pool, walk-in closets, or a specific aesthetic style. By identifying these separately, you can weigh trade-offs more easily when you find a home that checks some but not all the boxes.
It’s important to be realistic about your budget and the current market conditions. You may not find a home that has everything you want, but defining your priorities ensures you don’t get swept away by features that look nice but don’t meet your needs.
Need help refining your list or deciding what’s realistic in the Austin market? Working with a real estate expert can help you clarify your priorities and balance your wish list with the options available.
9. Do All Austin HOAs Have the Same Rules?
No. In Texas, the condo contracts require that the seller discloses Homeowners Association Information to a prospective buyer after they go under contract. A buyer has the right to terminate within six days after the condominium documents and resale certificate are delivered. Your real estate agent can help answer some of the questions about the HOA before you go under contract. Remember, your option period is a way to pull out of the contract no matter what. The only penalty is losing your option money check.
10. What are Deed Restrictions?
When you buy a home, there may be certain conditions that prohibit you from doing certain things. These stipulations are known as deed restrictions. Properties that don’t have an HOA still have deed restrictions, but the enforcement may not be as strict as it would be with an HOA. In short, your neighbor would have to hire a lawyer to enforce something. Common deed restrictions include:
How or if you can rent out your home.
The number of rooms you can add on.
Landscaping: what you can plant or how you maintain your lawn.
The style of homes allowed.
If you can run a business from home.
Rules about pets.
Exterior paint colors.
Fees for road maintenance or amenities.
11. Should I Build a New Home on an Empty Lot?
When it comes to building a home, finding the right lot may seem like a chore. What many people don’t realize is that sometimes builders own multiple lots in many different neighborhoods. They may even have access to “unlisted” lots through their neighborhood relationships. It’s very important to find reputable builders. A few important things to know about your builder:
How many homes is the builder working on at once? How are the projects managed?
How many homes does the builder complete in a year? Include start and completion times.
Does the builder use the same sub-contractors?
How does the builder bid your homes? Fixed cost? Cost plus?
How is client communication handled through the process?
And many more! Your real estate agent will help you pick the right builder for your wants and needs. It’s very important to have them by your side to make sure timelines are being met, and somebody is looking out for your best interests.
12. How do I Handle Property Taxes?
Austin doesn’t have state income tax, so you’ll find that our property taxes are quite high relative to other states. Most find that no income tax combined with higher property taxes it comes out to be about the same. The 2.1 to 2.4% range is a pretty average tax rate for Austin, but it can be anywhere between 1.8 to 3.3%. You often see 3% or more in new developments; usually this is tacked on toward the infrastructure of the development. You can find out how much you will pay in yearly taxes by multiplying the tax rate by the sale price. If you use our home search, there is a mortgage calculator built in that will show you what your mortgage payment is, including the tax rate. Remember, your monthly mortgage payment includes principal, interest, homeowners insurance, and property taxes.
13. What Are The “First Time Buyer Benefits”?
First time buyers are able to put as little as 3% down on their home purchase. This is in place to help folks without home equity to get into the housing market. It' might take you a while to save 20% down and in the meantime you’re missing out on building equity in your home!
You can also take up to $10,000 from your IRA without a penalty for early withdrawal, and a couple can use $20,000 combined.
We’ll send a couple lender contacts that have first-time buyer programs that you may be eligible for. They can assist with your down payment and possibly closing costs.
Even if you have owned a home before, you may still be eligible for first-time buyer benefits. For example, the federal government’s definition of a first-time homebuyer is someone who hasn’t owned a personal residence in the past three years.
14. What is Homestead Exemptions?
You can lower your taxes each year if you file an exemption on your primary residence. The only thing you need is a photo ID and proof of residence, and an application from your county of residence. It’s free to apply, and as of 2022, you can apply for a homestead exemption the same year you buy (in previous years, you had to be living in the home on January 1 of the year you applied).
Another common tax exemption is a home sale exclusion. To qualify, you need to live in your primary residence for at least two years out of the five years leading up to the sale. Up to $250,000 of profit from the sale of your home can be tax-free; $500,000 if you are married.
Some people avoid paying capital gains tax on their home by doing a 1031 exchange. This is when you use the proceeds from your house to buy another house that is of equal or greater value of the home you’re selling.
15. How Do I Handle Multiple Offers?
There can be multiple reasons a seller chooses another offer over yours, and you can never know exactly what the seller is thinking or know who your competition is.
In Austin, while you need to be prepared to pay full price or over asking price, don’t assume you will always do this. A lot of sellers get caught up in the hype they hear about Austin’s hot market, and they may think they can list their home for over market value. These homes will not sell quickly, and these homes will not be sold for over the asking price, or even near the asking price! Properties that will go into multiple offer situations are priced according to market value and in high demand neighborhoods.
When you put an offer on a home, it may be a good idea for your loan officer (lender) to call the seller’s agent, not only as a friendly introduction but to also reassure the seller’s real estate agent that you’re a qualified buyer. There are a lot of “over promise, under deliver” situations that can often occur with banks and lenders. If a potential buyer’s lender is the type of person to call and communicate well with me — major brownie points in my book! Everybody wants a smooth and easy transaction, and this will happen with a team who communicates well and often.
Other tactics to consider if you are in a multiple offer situation are:
Offering over list price.
Shortening your option period.
This will be discussed in more detail further along.
A quicker close. Make sure to clear this with your lender first.
Next Steps
If you have more questions please feel free to reach out! Even if you’re a long way from buying, or just curious, I don’t mind answering any questions you may have. Click here to search for Austin homes online.
