The year 2015 has seen the cost of renting in Texas skyrocket, pushing more people into considering home ownership. This is according to Lawrence Yun, chief economist at the National Association of Realtors, who further adds that economic forces such as faster economic growth and an improved U.S. labor market are conspiring to increase mortgage rates in the U.S. Due to this and many other factors affecting mortgages, first time homeowners need to carefully assess and consider a variety of options before settling as they apply for mortgages in various states including Texas.
Annual Percentage Rate (APR)
The APR includes the upfront costs of the mortgage, to help you compare mortgages with different closing costs. A lower percentage rate means a cheaper mortgage rate.
Type of Mortgage
In Texas, one can choose either a home equity loan, home equity line of credit (HELOC), or first mortgage among other types of mortgages. A home equity mortgage is a second mortgage that usually comes with fixed interest rates, regular payments, set pay-off duration and is basically used to raise money for one-time expenses. Unfortunately though, the home equity mortgage has a higher interest rate than first mortgage. The HELOC, on the other hand, is characterized by low monthly payments and an adjustable interest rate.
Second mortgages have two main advantages- their interest rates are lower and can be funded without affecting first mortgages. Unfortunately though, homeowners who go for them increase the risk of foreclosure. Experts advise homeowners considering this option to budget carefully in order to reduce the risks as much as possible. In addition to that, people with low, fixed rates on their first mortgages are advised to choose home equity loans as opposed to refinance mortgages.
Texas has a wide range of Adjustable-Rate Mortgages (ARM). These loans normally start with low, fixed rates which operate for up to 5 years. After this period elapses, the interest rates become adjustable at regular intervals.
ARMS are suitable for people who require the lowest possible payments when taking out a loan but expect to afford larger payments later.
The popularity of property in Texas has had a significant influence on the mortgage rates. Currently, Single-Family Homes (SFH) constitute 81.5% of purchased or refinanced homes in Texas. The average property values, average annual property taxes and average mortgage balance for these are $138,403, $4264.12 and $101521.77 respectively.
Planned Unit Development homes (PUD) are the second most popular properties at 10.4%, while condominiums take up 4.2% of the overall mortgages. Town homes are the least popular, with 3.9% of refinanced or purchased homes.
In terms of mortgage and refinance types, the 30-year Fixed-Rate Mortgage (FRM) is the most popular at 68.76%, followed by the 15-year FRM at 20.82%, and 20-year FRM at 4.22%.
To get the best mortgage rates in Texas, one can experiment with online mortgage calculators to compare quotes and make free inquiries. Alternatively, one can directly contact lenders by searching the Texas broker directory to find qualified, reliable and authentic lenders.