Mortgages

Most people dream of owning a home, but it can be expensive. The median home price in the United States is currently $340,000. 

The good news is that when you buy a home, you can get a loan, called a mortgage. While you still need to pay some amount of money upfront—a down payment—it’s usually under 20% of the home’s total cost.

A mortgage is a loan for a house. It is a secured loan that uses your home as collateral, much like an auto loan would use your vehicle as collateral. That means that if you don’t make timely payments, the lender takes back the asset. In the case of a mortgage, you would lose your home.

If you are tired of renting and want to own a home, you may be able to do so with the help of a mortgage. The Empower Group can guide you through the various types of Texas mortgages.

The Mortgage Process

A mortgage works like any other type of loan. You get approved for a loan for a certain amount. You then repay the loan every month over a number of years (usually 15 or 30 years). Once you pay off the mortgage, you officially own your home.

You start the process by applying for a mortgage with a lender. You can do so even before you have chosen a home. This is called pre-approval. It shows sellers that you have the money to back up an offer, and in this housing market, that can be a huge advantage.

However, you don’t have to go with the first lender you apply with. You can apply with different lenders so you can compare rates and find the best one. 

During the application process, you will be asked to provide proof of income, so be prepared with W-2s, paycheck stubs, bank statements, and tax returns. The lender will also check your credit history and score. If your application is approved, the lender will offer you a loan with a set amount and interest rate. 

Different Types of Mortgages

There are several types of mortgages, but the most common ones have a term of 15 or 30 years. There are also mortgages with terms as little as five years and as long as 40 years. Keep in mind that while mortgages with longer terms come with lower monthly payments, you pay more in interest over the life of the loan.

Speaking of interest, you can choose from two options: fixed rate or variable rate. With a fixed rate mortgage, you are locked in with a set interest rate for the life of the loan. This means your monthly payment will always be the same. Most mortgages have a fixed rate.

With a variable rate mortgage, the interest rate is fixed for a certain period of time. This initial rate is often below regular market rates. It then changes based on interest rates in the real estate market. 

This means variable rate mortgages often start low and affordable and then rise later. While there are caps on how much the rate can rise each time, your payment each month could fluctuate widely and become unaffordable at some point.

Some less commonly used mortgages are interest-only mortgages and payment-option adjustable rate mortgages. These loans are complex and should be avoided unless you truly know what you’re doing, as the monthly payments can get pretty high. Many homeowners lost their homes in the early 2000s after opting for these types of mortgages. 

Considerations

Before you agree to a Texas mortgage, here are several things to consider.

• Focus on what you can afford. While you may be qualified for a $400,000 home, will the monthly payments work with your budget? Look at your income and expenses. Only you truly know how much you can spend.
• Don’t forget other costs. You’ll also need to consider property taxes, homeowner's insurance, and private mortgage insurance. They can increase your monthly mortgage payment by several hundred dollars or more, so make sure you can comfortably pay these expenses.
• Appraise your homes. You may also need to get an appraisal on the home you choose. That’s because the lender can’t lend you more than what the home is worth.

Contact Us Today

Stop wasting your money on rent. Texas mortgages can help you realize your dream of homeownership. There are several types of mortgages you may qualify for. Contact The Empower Group to learn more or start the mortgage process.