The ever growing Texas is on the rise.
Due to its immense industrial and economic growth, home prices have also been on the rise in the city, and any aspiring homeowner flocking to the city in search of new jobs that are being created every day, need to have a good look at financing options for their future property and consider a fixed rate mortgage loan.
The most common form of mortgage in Texas is a fixed rate mortgage loan. This type of loan offers a fixed rate of interest throughout the term of the loan, which means you will be paying the same amount each month, as compared to an Adjustable Rate Mortgage where the rates fluctuate according to the interest rates dictated by market conditions. All the eligibility criteria of a conventional loan will be applied, with lenders looking at your debt-to-income ratio, credit history, and middle FICO score, along with job and income history.
Apart from this main factor, which serves to make the fixed rate loans more stable and thus more appealing, there are other ways this can benefit you as well, especially when you take the loan term into consideration.
If you’re planning to stay in this house for a long period of time, it is a good idea to take a fixed rate mortgage. A 30-year term will result in smaller payments per month as the amount will be spread over a longer timeline, and you will not have to worry about the mortgage monthly costs rising eventually as they will with an Adjustable Rate Mortgage.
If you have your heart set on a nice house in a good neighborhood, but the concerned about costs of the overall loan, you can always go for a 15-year fixed rate mortgage loan which always almost mean a lower interest rate but your overall payment will be slightly higher than a 30-year fixed mortgage. You can, of course, compare the monthly payments of this with that of a 30-year loan to determine which one is more feasible. Your debt-to-income ratio must allow you to pay your monthly mortgage while having enough left over to cover living and homeownership costs.
The reason why most people shy away from fixed-rate mortgages is that of their higher interest rate as compared to an adjustable rate mortgage, which is justified by the lower risk the loans carry for the borrower. Homeowners can plan budgets more effectively, knowing exactly what they will be paying for the duration of the entire loan term. This is especially good for people without a definite future plan, as it provides flexibility to their future decisions.
However, in recent years the difference between the interest rate for both types of loans has narrowed, with a fixed rate mortgage at its lowest level than ever, it makes a lot more sense to go for a fixed rate than an adjustable rate mortgage.
While the Adjustable Rate Mortgage may have its temporary appeal, with lower initial payments and lower interest rates, it is always better not to gamble with the market and pick the safer option that is offered by Fixed Rate Mortgages. Many families are at the risk of facing foreclosure when the interest rates shoot up and the mortgage payments go out of hand. For a stable future in the great metropolis of Texas, the fixed rate mortgage is the best option out there.