Buying a home is one of the biggest purchases most people will ever make, so it’s no wonder people take their time to make sure they’re getting a great deal. Prospective Texas homebuyers spend hours poring over MLS sites and home listings comparing pricing, square footage, number of bedrooms, school districts and so on, to make sure they are getting the most bang for their buck. They read articles and listen to news stories about whether or not this is a “buyer’s market,” or if this is the best time to invest in real estate.
An important consideration to make when seeking a great deal is not only the price of the property, but also the price of purchasing that property, or the interest rate on the mortgage loan. Simply put, the interest rate is the percentage of the loan amount the bank or lender is charging a buyer to borrow the money for the purchase, so the lower the rate the better the deal. But how can you make sure you’re getting the best deal? Trulia recently shared some tips for securing the best interest rates that are good rules of thumb for anyone shopping for a home loan. These tips include boosting your credit score and paying down as much debt as possible, lowering your debt-to-income ratio. In the shorter term, however, lower mortgage rates can be achieved by considering different types of home loans.
First, while the majority of borrowers will likely consider a 30-year fixed mortgage, there are other options. According to Trulia’s article, a 15-year fixed mortgage can offer interest rates up to 0.8% lower than a 30-year loan. While the amount paid toward the principal each month will be higher, the interest amount will be lower, and the insurance and tax payments stay the same, regardless of the loan term. This means homebuyers in Texas who choose a 15-year fixed-rate mortgage pay less over time.
Texas borrowers can also consider an adjustable-rate mortgage, or ARM, for a lower interest rate. With an ARM, an introductory rate is locked in for a period of time, maybe 3 or 5 years, and then it adjusts according to the market, though there is a cap on the adjustment. The introductory rate can be even lower than a 15-year fixed rate. This can be a good option for buyers who plan to sell before the end of the introductory period, but Trulia’s article warns that homebuyers considering this type of mortgage should be confident they can shoulder a higher payment once the loan adjusts, just in case.
Shopping around and discussing your options with a professional are the best ways to make sure to get a good deal, so when you start the search for your dream home, also start searching for the best mortgage and the lowest rates. Learn more about types of mortgage loans available to Texans, compare mortgage rates or get advice from an expert at LoneStarFinancing.com.