Mortgage Rates Texas: Compare Rates From Major Lenders In The State
There are tons of reasons to live in Texas: houses are bigger, job opportunities are plenty, and residents don't have to pay state income tax. If you're also planning to buy a property in the Lone Star State, read on! We'll give you insider access to Texas mortgage rates and guide you through the home buying process.
Mortgage Loan Options In Texas
Not all home loans are created equal. The loan type will affect the eligibility requirements, borrower qualifications, and minimum down payment (DP) amount.
You can select from the following loan types:
Conventional mortgages refer to home loans that are not backed by the government. Most borrowers prefer this type of mortgage because it requires fewer documentary and eligibility requirements. It can also be used to purchase most types of real estate, like investment property.
Still, keep in mind that you need to have good credit to take out a conventional loan. You are also required to pay for private mortgage insurance (PMI)if you cannot make a minimum down payment (DP) of at least 20% of the purchase price.
This loan type can be further subdivided into the following:
Conforming loans: These loans follow conforming loan limits set by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). In 2021, the limit for borrowers buying real estate in Texas is $548,250, on par with the national average.
Nonconforming loans: Nonconforming loans cannot be sold to government-sponsored enterprises like Fannie Mae and Freddie Mac. Since these loans carry greater risk for the lender, they usually come with higher interest rates. Jumbo loans, which can be used to purchase a home in high-cost counties, fall under this category.
Government-backed mortgages refer to those that are insured by a federal entity. The most common government loan types are the following:
Federal Housing Administration (FHA) Loan: Texas FHA loans are designed to boost homeownership among low- and moderate-income families. While mortgage companies offer these loans at average mortgage rates, they require lower down payment amounts compared to conventional mortgages. The FHA loan limits for Texas are $356,362 for most counties and $416,300 for counties near bigger cities.
US Department of Agriculture (USDA) Loan: If you plan to purchase real estate in a rural or suburban area, USDA loans may be ideal for you. You can get this type of loan without making a down payment (DP).
Department of Veterans Affairs (VA) Loan: Texas VA loans enable members of the military, veterans, and their surviving spouses to buy a home with no down payment. This mortgage is also available at low interest rates.
The loan terms you choose will affect whether or not your mortgage and refinance rates can change. It will also affect how much interest will be charged to the principal.
Generally, you can choose between the following:
Fixed-Rate Loan Term
Fixed-rate loans have a consistent interest rate throughout the life of the loan. You can usually choose from a 10-, 15-, 20- or 30-year fixed-rate loan. Generally, the longer the repayment period, the higher the mortgage rate will be.
This type of loan is advantageous for borrowers because the monthly payment amount remains the same, making it easy to factor in their mortgage while budgeting.
Adjustable-Rate Loan Term
Adjustable-rate mortgages (ARMs) have an initial fixed period where the mortgage rate stays consistent. During this period, the lender will offer you below-market interest rates. Once it ends, the lender will adjust your rate based on a market index they choose.
Refinancing means paying off your current mortgage balance and replacing it with a new home loan. Most people choose to refinance to renegotiate their loan terms, cash in on their home equity, or take advantage of lower mortgage interest rates.
You can get refinancing from any lender, not just the lender that offered you your existing mortgage.
Today's Mortgage Rates In Texas
Before taking out a home loan, you should compare mortgage rates. This will help you pick a lender that offers the lowest price. Check the table below for more information on Texas mortgage and refinance rates.
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For personalized Texas mortgage rates, use the mortgage calculator at the top of this page. Simply enter the loan amount and your financial information, and the tool will automatically generate the latest rates.
Note that aside from Texas city mortgage rates, our tools also show you the annual percentage rate (APR). This includes the mortgage rate plus other charges, such as loan origination fees. This will give you a more accurate picture of how much your monthly payment amounts will be.
Homebuyer Assistance Programs In Texas
To save money on your Texas home, you should first check if there are loan programs that you're eligible for. Here are some homebuyer programs offered by the Texas Department of Housing and Community Affairs:
My First Texas Home Program: This program allows veterans and first-time homebuyers to get a 30-year, low-interest mortgage. It also includes DP and closing cost assistance.
My Choice Texas Home Program: Under this program, veterans and repeat homebuyers can get a 30-year, low-interest mortgage. They can also receive up to 5% DP and closing cost assistance.
Texas Mortgage Credit Certificate Program: This lets veterans and first-time homebuyers receive tax credits on their property. Eligible applicants may get the credit certificate as part of the My First Texas Home Program or as a standalone option.
Steps To Buying Real Estate In Texas
Buying real estate can be nerve-racking, especially for first-timers. To help you understand the home buying and mortgage process, we've included a step-by-step guide below.
Step 1: Evaluate Your Finances
Paying off a mortgage can take decades. Before you take the plunge, you should check if you're financially capable of making this commitment. Here are some factors to consider:
Debt-to-income ratio: This refers to the percentage of your income you use to pay off debts. Most lenders prefer that you have a 43% debt-to-income ratio, including future mortgage payments.
Income: Keep in mind that some types of loans, like FHA loans, have income limits. You cannot apply for these types of loans if your income is above the threshold.
Credit score: To get a conventional loan, you'll need a minimum credit score of 620. If you have less-than-ideal credit, check if you are eligible for government-backed mortgages.
Down payment: Most lenders will require you to make a minimum DP of 20% of the purchase price. If you're unable to pay this amount, you will be required to pay mortgage insurance premiums. To avoid this, check if you qualify for repeat or first-time homebuyer programs that offer down payment assistance.
Step 2: Get A Preapproval Letter
Getting preapproved for a mortgage shows sellers that you are a serious buyer and that you can afford future payments. You can get a letter from any lender by going to their website and sending them your financial information.
Step 3: Look For A Real Estate Agent
Now, the fun part begins! Look for a real estate agent who is licensed to operate in Texas. They can help you find homes in your ideal neighborhood while considering your wish list and your budget.
Once you find a property you like, ask your agent to draft an offer. Your agent can also help you negotiate with the seller and outbid other people who are interested in the property.
Step 4: Apply For A Mortgage
If the seller accepts your offer, congratulations! All you have to do now is to finance your home purchase. You can complete the mortgage process with the lender that gave you the preapproval letter, or you can look for other mortgage lenders.
As always, check our website for the latest Texas mortgage rates. This will let you see which mortgage company offers the cheapest home loan. Then, send your financial and personal documents to the lender you’ve chosen.
Step 5: Sign Your Contract
After the lender approves your application, they'll send you your mortgage contract. In Texas, you are required to hire a real estate attorney to help you review the documents. Go through each page with your lawyer so you fully understand the terms of your mortgage.
Once you sign the papers, you'll receive the keys to your new home. Just pack your bags and move in!
How To Get Better Mortgage Rates In Texas
All mortgages are composed of two parts: the principal and the interest. The former refers to the loan amount you borrowed to pay for your home. The interest refers to the fees you pay to the mortgage money for lending the money.
To save money on your home purchase, you need to lower the interest because this can compound your expenses significantly, especially with long-term loans. Here are some ways to lower your interest payments:
Before you apply for a mortgage, compare interest rates from multiple lenders. You should also check the loan origination fees and closing costs. This will give you a clear idea of which lender offers the best price.
To make this process simple for you, check the current Texas mortgage rates on our website, which has information on multiple lenders. That way, you don't need to check each lender's site one by one.
Buy Discount Points
Mortgage points (or discount points) are fees you pay directly to the lender in exchange for lower interest rates. Typically, each point costs 1% of the loan amount and provides a 0.25% rate reduction, although this will vary by lender.
By purchasing points, you pay more upfront but potentially save money in the long run. Your lender should show you potential savings figures to help you decide if you should buy points.
Boost Your Credit Score
Having a high credit score shows that you're a low-risk borrower. Usually, lenders reward people with high credit scores with lower mortgage rates. So, before applying for a mortgage, you can increase your credit score by doing the following:
Paying off your personal loans, credit cards, and student loans
Paying your bills on time
Reviewing your credit report for inaccurate/outdated information
Avoiding closing credit cards with unpaid loan balances
Having your own home in Texas doesn't have to be a dream forever. By following our step-by-step home buying guide, you can make that dream a reality! You can also use the tools on this page so you can compare rates from various lenders.
For more information on taking out a mortgage in Texas, get in touch with Wesley LLC! We'll make sure that homeownership is within your reach.