Which Texas home loan is right for me?
Posted On April 22, 2012
Which Texas home loan is right for me ?
| Years you plan to stay in the home | Recommended program |
|---|---|
| 1-3 years | 3/1 ARM, 1 year ARM or 6 month ARM. Or a fixed rate if the ARM rate is not significantly lower |
| 3-5 years | 5/1 ARM or fixed if rate is close to the same |
| 5-7 years | 7/1 ARM, 30 year fixed of 15 year fixed |
| 7-10 years | 30 year fixed or 15 year fixed |
| 10+ years | 30 year fixed or 15 year fixed |
The difference between ARM and fixed rate APR’s varies. When the ARM interest rate is close to the fixed rate, it may be better to go fixed, even for shorter expected terms. In most cases we are currently suggestingthe fixed rate option
| Loan Program | Advantages | Disadvantages |
|---|---|---|
| Fixed Rate Mortgages30 year fixed15 year fixed | Monthly payments are fixed over the life of the loanInterest rate does not changeProtected if rates go upCan refinance if rates go downThis is often the best choice! | Possibly higher interest ratePossibly higher mortgage paymentsRate does not drop if interest rates improve |
| Loan Program | Advantages | Disadvantages |
| Adjustable Rate Mortgages (ARM)10/1 ARM7/1 ARM5/1 ARM3/1 ARM1 year ARM6 month ARM1 month ARM | Lower initial monthly paymentRates and payments may go down if rates improveYou may qualify for higher loan amounts30 year term, no balloon payment | More riskPayments may change over timePotential for higher payments if rates increaseExtra closing costs if you have to refinance if the rate goes up |
| Loan Program | Advantages | Disadvantages |
| Balloon Mortgages7 year5 year | Lower initial monthly paymentLower payment for a predetermined period of timeMany balloon mortgages offer the option to convert to a new loan after the initial term | Risk of rates being higher at the end of the initial fixed periodRisk of foreclosure if you cannot make balloon payment, refinance, or exercise the conversion optionBalloon payment requires you to sell or refinance after the term, as opposed to a 7/1 or 5/1 program with a 30 year term |
| Balloon mortgages are not commonly used currently. | ||
| Loan Program | Advantages | Disadvantages |
| First Time Buyer Programs | Lower down paymentEasier to qualifyLower rates may be availableGrant funds for downpayment assistance may be available | May be subject to income and property value limitationsSome government subsidized programs may generate a recapture tax if you sell the house too soonEducation courses may be required to qualify for these loans |
| Loan Program | Advantages | Disadvantages |
| Stated Income Programs | Don’t need to verify incomeFaster approvalGood for borrowers who may not qualify with a full income documentation program | Higher ratesPossibly higher down payment |
These programs have become less available and more tightly restricted. | ||
| Loan Program | Advantages | Disadvantages |
| Interest Only Programs | You have several payment optionsLower monthly paymentsQualify for a higher loan amountQualify at the interest only paymentOption to pay the full normal paymentInterest only payments for up to ten years | Higher ratesPrincipal loan balance will not decrease during the interest only payment periodPayment will be higher for the remaining termIn many cases you will want to refinance after the interest only period. This would result in another set of closing costs and rates may be less favorable when and if you refinance |
| In most cases we do not suggest this program. | ||
| Loan Program | Advantages | Disadvantages |
| No point, No fee Programs | No out-of-pocket loan costs at closingClosing costs are paid from the lender rebateLess money required to closeRefinance without increasing your loan amount | Higher ratesHigher paymentsSome lenders may have a short payoff penalty which is usually charged to the loan broker, but may be passed on to youSome require a prepayment penalty for the first one to five years |
| If you expect to have your loan open for a short term (1 to 5 years), a no point, no fee program may be best. If you expect you loan to be open for 5 or more years you will probably be better of to pay fees and points to get a lower rate (if you have the funds available). We can show you options with and without points. | ||
| Loan Program | Advantages | Disadvantages |
| Imperfect Credit Programs | Potential for reestablishing credit if you pay your mortgage on timeWhen used for debt consolidation, you may be able to reduce your monthly debt payment | Higher ratesTerms may not be as favorableHarder to get long-term fixed loansLoans may have prepayment penaltiesLarger down payment may be required |
| Loan Program | Advantages | Disadvantages |
| Home Equity Line of Credit | You only borrow what you needPay interest only on what you borrowFlexible access to fundsInterest may be tax deductibleMay be free of closing costsA good source for an emergency fund, if set up in advanceCan be used for debt consolidation and lower paymentsRates are usually lower than consumer loan or credit card rates | Rates can change. The maximum interest rate can be relatively highPayments can changeHarder to refinance your first mortgage |
| Texas currently has rules that limit the total mortgage size to 80% of the homes value when you take cash-out. At this time we are not offering HELOC’s. | ||
| Loan Program | Advantages | Disadvantages |
| Home Equity Fixed Loan | Fixed paymentsInterest may be tax deductibleGet cash out for any purpose | Higher interest rates compared to first mortgageHarder to refinance your first mortgageInterest is paid on the entire loan amount, compared to an equity line of credit |
In addition to our standard loan programs, you may benefit by obtaining one of our many special programs:
- Purchase your home with no down payment using Private Mortgage Insurance (PMI) or Lender-paid Mortgage Insurance (MI).
- Piggyback loans: 80-10-10 or 80-15-5. Avoid PMI payments by using Lender-paid MI.
At Texas Capital Mortgage we offer a free, no obligation consultation. Call Today!
Texas Capital Mortgage – 28 FM 1960 West – Houston, TX 77090
Office Phone: 1- 866-433-0500 toll free Fax: 832-565-1656
NMLS# 304162
We provide service for the entire state of Texas.
Our goal is to provide your with the best mortgage products with low rates and superior service. Call one of our experienced mortgage loan origionators for a rate quote or answers to your financing questions.
About The Author
