Austin Mortgage Loans - Get Home Loan Advice

Planning to buy a home in Austin, Texas in the near future? Then like most people, you will probably need an Austin mortgage loan to help pay for the home. This is a topic that requires plenty of research on your part, and our guide to Austin home loans is a great place to start!

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More Information on Austin Mortgage Loans

In recent years, Austin, Texas has become quite the hot spot for buying real estate. The favorable home prices in Austin, combined with all the great things the city has to offer, have fueled the Austin real estate scene for some time.

In fact, during those times when other cities had fallen into housing slumps, the Austin real estate market was going strong. As the housing market grows, so too does the need for consumer-oriented information and advice. That's where this guide to Austin mortgage loans comes into the picture.

For most home buyers in Austin, the purchase of a new home is only possible by taking out a mortgage loan. That is, unless you've just won the lottery. If you're a recent lottery winner, feel free to skip this guide to Austin home loans. Otherwise, keep reading for some helpful information on choosing your next mortgage loan!

Shopping for a home loan is Austin is a major financial move that requires careful consideration. After all, the mortgage you choose will stay with you for quite some time — until you either (A) sell the home, (B) pay off the entire mortgage loan, or (C) refinance the loan and take on a new one. Education is the key to choosing the Austin mortgage loan that's right or you. So let's get right to it.

What Exactly is a Mortgage?

In order to kick this tutorial off properly, we have to start with the basics. Of all the books and articles I've read on the subject of home loans, the best mortgage definition I've read was in Home Buying for Dummies, by Eric Tyson and Ray Brown.

In their book, Tyson and Brown state that "a mortgage is nothing more than a loan that you obtain to close the gap between the cash you have for a down payment and the purchase price of the home..."

You have a certain amount of money. The home costs a certain (larger) amount of money. The home mortgage loan covers the distance between the two.

It's important to start thinking in these "distance" terms, because a lot can happen to the economy during the life of your home mortgage loan. How much these factors affect your mortgage depends on the type of mortgage loan you choose. Aha! Now it all starts to come together.

Primary Parts of a Home Loan

1. Size of the loan (the principal amount)
2. Interest rate on the loan
3. Term (or length) of the loan

Let's take a closer look at these mortgage loan ingredients:

• The Size of the Mortgage Loan - The size of your loan will primarily depend on your budget, your credit, and how much of a down payment you can afford. This is also referred to as the "principal" part of your mortgage loan, which is the main loan amount not including interest.
• The Interest Rate - This is the amount of interest charged on a monthly mortgage payment. It is a percentage of the principal loan amount. To find the current interest rates, you can start by visiting Bankrate.com or Interest.com. Keep in mind that the rate you are offered will depend on your credit history, your credit score, and other factors specific to you as an individual consumer.
• The Term / Length of the Loan - When talking about Austin home loans, the word "term" can mean two things. For one, the "terms" of your mortgage can refer to the specific conditions of the loan. The "term" of the mortgage can also mean the length of the loan. The term of a mortgage refers to the number of years the mortgage is established for. Mortgage terms are generally 15, 20, 30 and 40 years. The vast majority of Austin mortgage loans are of the 30-year, fixed-rate variety.

The Primary Types of Loans

There are actually many different types of mortgage loans. But most of them can be placed into two major categories — adjustable-rate or fixed-rate. When buying real estate in Austin and choosing a mortgage loan, it's critical that you understand the differences between these types of loans, as well as the various pros and cons associated with them.

Fixed-Rate Mortgage Loan: Pros & Cons

As you might have guessed, a fixed-rate mortgage loan keeps the same interest rate over the entire life (or "term") of the loan. And, because the interest rate is a component of the monthly mortgage payment, those payments will never change either. You can see the value in such a loan.

With a fixed-rate mortgage, certainty is the primary benefit. You can be certain that the interest rate on your loan will remain the same, regardless of what rollercoasters the economy endures. The downside is that you'll pay a premium for this predictability, in the form of a higher interest rate.

When an Austin mortgage lender grants a fixed-rate mortgage to a borrower for a long period of time (such as the 30-year norm), that lender takes on a certain amount of risk. If, for example, the prime interest rate rises sharply during the life of the loan, you will not have to pay the difference -- but the mortgage lender (or whomever they sold the loan to) will have to absorb it. This is why Austin mortgage lenders typically charge a higher interest rate on fixed-rate loans than they do for adjustable-rate loans (next topic).

Learn More About Fixed-Rate Loans

• Fixed-Rate Mortgages: Pros and Cons
• Which Fixed-Rate Mortgage Do I Want?

Adjustable-Rate Mortgage (ARM) Loan: Pros & Cons

Now that we have discussed the fixed-rate mortgage, you can probably guess what the adjustable-rate mortgage (ARM) loan is all about. With an adjustable mortgage, the interest rate is periodically adjusted based on national indexes and interest rate trends. Generally speaking, these adjustments will mean a larger mortgage payment (as the result of a higher interest rate).

ARM loans typically start off with a fixed interest rate for an initial period of time, usually for the first 3, 5 or 7 years. The introductory rate during this period will often be lower than the rate on a traditional fixed-rate mortgage, which is obviously something that appeals to many home buyers. After the initial period, however, the mortgage loan will go through the first in a series of adjustments (hence the name).

The downside, of course, is that you can never predict how the interest rate will adjust, or how much larger your mortgage payment will be as a result of the adjustment. So in a sense, you can of the initial period (with the relatively lower rate) as a reward for the uncertainty of the adjustable period (during which the rate might increase).

Learn More About ARMs

• A Guide to the ARM Loan
• Adjustable Rate Mortgages 101
• Consumer Handbook on Adjustable-Rate Mortgages

What's Best For You?

So which type of Austin home loan is the best one for your financial situation? Should you choose a fixed-rate mortgage or an ARM? Only you, as the home buyer, can answer this question with any certainty. But there are certain rules-of-thumb you can steer by:

For example, if you plan to live in the home (and maintain the mortgage loan) for many years, than a fixed-rate mortgage is probably the best choice for the long haul. If you plan to stay in the home for many years, a fixed-rate mortgage loan might be best for you. On the other hand, if you'll only be in the home for a few years before selling the home (or refinancing the mortgage loan), then an ARM loan might be a good way to save money during those years.

Austin Mortgage Brokers vs. Primary Lenders

I'd like to wrap up our discussion of Austin home loans by explaining the difference between a mortgage broker and a primary lender. When shopping for a home loan, you'll need to understand the difference between these two types of mortgage professionals (as it applies to you, the home buyer).

Here is the major difference between:

• The primary lender represents a single lending institution (such as a bank or mortgage company). Hence the word "primary." Therefore, the primary lender can only offer your mortgage products from the lending institution they work for.
• A mortgage broker, on the other hand, can represent more than one lending institution. In this way, a mortgage broker can offer loan products and programs from several different lenders. So by working with a broker, you'll typically have more options to choose from

Continue Your Education

This tutorial is certainly not meant to be a comprehensive guide to Austin, Texas mortgage loans and lenders. It's a complex topic that deserves some continued research on your part. After all, that home loan will stay with you for some time — until you pay it off, sell the home, or refinance the mortgage loan. So you should take what you've learned from this tutorial and build upon that knowledge with further research. Be a smart consumer, look out for your financial interests, and take charge of your mortgage education.

With that said, we hope this article helps you choose the Austin home mortgage loan that's right for you!

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