Buying your first home in Texas

Texas has no state income tax. It pays for things through property tax instead, and property tax here is high compared with much of the country.

That matters when you buy, because taxes and homeowner's insurance are usually collected monthly along with the loan and held in an escrow account until the bills come due. So the figure you budget for is not only the loan — it is the loan plus the running cost of owning the house.

People moving here from a state with income tax often plan around the loan alone and get a surprise. People who grew up here usually know. If you are in the first group, ask what the taxes are on a specific house before you fall in love with it — the county appraisal district publishes them.

A lot of newer neighbourhoods around Montgomery and Conroe sit inside a Municipal Utility District. A MUD is a separate local entity that borrowed money to build the water, sewer and drainage for the development, and it repays that debt through its own tax on the homes inside it.

It appears as an extra line on the tax bill, on top of county and school taxes. Two houses that look identical, a few streets apart, can carry noticeably different tax bills because one is in a MUD and the other is not.

Ask whether a house is in a MUD before you make an offer, not after. It is not a reason to avoid a house — MUDs are why the neighbourhood has water — but it belongs in the arithmetic from the start, and a seller's listing will not always lead with it.

If the house is your primary residence, Texas lets you claim a homestead exemption. It lowers the taxable value of the home and limits how fast that value can rise year to year.

• You have to apply. It is not applied automatically because you bought a house.
• You apply through the county appraisal district where the house is, and there is no fee.
• Deadlines and rules change, so check the current ones with your county rather than trusting a forum post.
• Anybody charging you to file it is charging you for something free.

This is the most commonly missed thing on this list, and it costs money every year it is missed. Put it on the calendar for after you close.

Homeowner's insurance is required, and in Texas it is worth shopping properly rather than accepting the first quote.

• Wind and hail are sometimes excluded from a standard policy and covered separately, depending on where the house is.
• Flood is always a separate policy. A house outside a mapped flood zone can still flood, as this part of Texas has demonstrated more than once.
• Start getting quotes while you are under contract. Waiting until the week of closing narrows your options to whoever answers the phone.

• The option period

  Texas contracts usually include a short window, paid for, during which you can have the house inspected and walk away for any reason. It is the most useful protection you have. Use it to get a proper inspection, not a quick look.

• A title company closes the sale

  Not a lawyer, as in some states. They handle the title search, the paperwork and the money on closing day.

• Find out where you stand before you look at houses. Walking into an open house without knowing is how people fall for something they cannot buy.
• Ask about taxes and MUD status on any specific house before making an offer.
• Start saving your bank statements now — two months of them, all pages. It is the single most common hold-up.
• Once you are in a loan, talk to me before opening new credit, moving money around, or changing jobs.