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Explaining Mortgage Rates for Borrowers in Texas

texas man reclining on a cocuh with cactus pillows reading a red book about mortgage ratesMortgage rates are a hot topic for borrowers in Texas. Everyone wants to get the best mortgage rate possible when they’re getting ready to take out a loan for their home purchase.

Here are a few helpful reminders to keep in mind about mortgage rates in Texas:

1. Mortgage rates will vary depending on the loan type.

There are many different types of mortgage loans available to borrowers in Texas. Each loan has a variety of factors that influence the rate borrowers will receive. For example, fixed-rate loans tend to have higher rates initially, however, the rate stays the same for the duration of the loan. Adjustable Rate Mortgages (ARMs) are initially fixed for a set period of time, and then adjust according to a market index. When that initial fixed period ends, rates will either increase or decrease. These loans also carry three types of “caps” to prevent the interest rate from fluctuating too drastically.

The length of the loan also plays a role in the rate. Shorter-term loans, such as 15-year or 20-year loans, can have better (lower) rates in comparison to the longer 30-year loan.

2. Higher credit scores can help borrowers get lower rates.

The credit score that borrowers see on sites like Credit Karma, is different than the credit score that mortgage companies and lenders will pull. A borrower’s credit score is determined from three different places: Equifax, TransUnion, and Experian. If borrowers pay their bills on time and have smaller amounts of debt, they will likely have a higher credit score, which will help them secure a lower rate.

Credit reports and information from third-parties cannot be verified 100% of the time. Always make sure to consult with a trusted mortgage lender when it comes to credit information.

3. Consider all loan types when planning to take out a mortgage

A 30-year fixed-rate mortgage is common when it comes to loan types. It works for many types of borrowers in Texas, like those who do not want higher monthly payments that are typical of 15-year loans. The 30-year fixed-rate mortgages tend to have a slightly higher rate, but a lower overall monthly payment that is consistent over the life of the loan.

For borrowers who have shorter timelines or anticipate moving or refinancing their home in the nearer future, an ARM is an excellent option to secure a lower rate in the Texas market. There are a variety of ARM options, including Hybrid ARMs that have a fixed rate for an introductory period before adjusting. ARMs have a set, fixed, lower monthly payment during the fixed introductory period (for example, the first five 5 years for a 5/1 ARM, then after the fixed introductory period, the rate will continue to adjust every year until the loan is paid off.

Because of this, it is important to know how long you plan to live in your current home, or if you know you will want to refinance into a fixed-rate loan within the first few years.

If you would like more information about rates and the best loan products for you, please contact us to talk through your options. You can reach us at (855) 855-4491 or jvmteam@jvmlending.com, or by going here.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167