Georgetown, Texas Mortgage Loans

Your Guide to Getting a Home Mortgage in Georgetown, TX

For years, the city of Georgetown, Texas has been a sleepy rural community of Central Texas, just north of Austin. But in recent years, the city has begun to grow in both size and complexity, while retaining the country charm that makes Georgetown a great place to live. This also makes Georgetown, Texas real estate a great investment!

For most people, buying a home also means shopping for a mortgage loan. Unless, of course, you've just won the lottery! So in this tutorial, we will talk about Georgetown, Texas mortgage loans from several angles — types of loans, mortgage terminology, applying for a mortgage loan and more.

The Primary Types of Mortgage 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 choosing your Georgetown, Texas 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

With this type of loan, the name says it all. This mortgage has a fixed interest rate that stays the same over the entire life of the loan. Because of this, the monthly payment remains the same over the term of the loan as well.

We just touched on the major advantage of the fixed-rate loan, and that is the certainty it provides. With this type of mortgage loan, you will always know what your interest rate will be in the future. Even if the economy goes through roller-coaster cycles that drive the prime interest rate up, the rate on your mortgage loan will stay the same (hence the term "fixed rate").

Does a fixed rate come with any disadvantages? Sure it does. There are pros and cons to every type of home loan, and that includes this one. The primary drawback of the fixed-rate mortgage is that you'll pay a premium for the predictability if offers. And this premium will come in the form of a higher interest rate. Here's why:

When you obtain a fixed-rate home loan from a Georgetown mortgage lender (or any mortgage lender for that matter), the lender takes on some financial risk. When the prime interest rate increases over the term of your fixed-rate mortgage, you don't have to pay the difference. That's the benefit of choosing this type of loan. But the lender will have to pay the difference, and this is why mortgage lenders typically charge higher interest on the fixed-rate loan than what they charge on adjustable-rate mortgages (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

This type of home mortgage loan will typically start off with a fixed interest rate for an initial period of time. This initial phase usually lasts for three, five or seven years. The interest rate will normally remain fixed during this initial period. After the three, five or seven-year mark, however, the interest rate will adjust or "reset" to a higher rate (in most cases).

The ARM loan can be appealing to many Georgetown home buyers, mainly because of the relatively low interest rate it offers during the first few years. Generally speaking, the mortgage rate on this type of loan will be lower than the rate on a traditional fixed-rate mortgage — buy only during the initial phase.

The downside, of course, is that this initial period of lower interest will not last for the entire life of the loan. On top of that, there is no way for you to predict what the interest rate will adjust to in the future (after the 3, 5 or 7-year mark), because you cannot predict what the prime interest rate will do. In most cases, the interest rate on an ARM loan will adjust to a higher interest rate after the adjustment point.

Learn More About ARMs

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

Choosing the Best Type of Loan for You

So which type of mortgage loan is best for your Georgetown home-buying needs? In truth, this is only a question that you, as the home buyer, can answer. But here's a good rule of thumb to go by. If you plan to stay in the home for many years, a fixed-rate mortgage loan might be best for you. However, if you only plan to stay in the home for a few years, then an ARM loan might be a good way to save some money during those years.

Georgetown Mortgage Lenders vs. Brokers

When shopping for a home mortgage loan to purchase a Georgetown, Texas home, you should understand the difference between a mortgage lender and a mortgage broker (as it applies to you, the home buyer).

Whenever you speak with a Georgetown mortgage professional, find out whether the person represents the lending institution directly (a primary lender) or represents multiple lending institutions (a mortgage broker).

Here is the major difference between a Georgetown, Texas mortgage lender and a mortgage broker:

• The primary lender will normally represent a single lending institution. Hence the word "primary." A primary mortgage lender can only offer mortgage programs from the particular bank / lending institution they represent.
• On the contrary, a mortgage broker can represent several lending institutions at the same time. Brokers can offer programs from multiple lenders, which means more options for you.

Continue Your Education

This article is by no means a comprehensive lesson on Georgetown, Texas mortgage loans and lenders. There are many other aspects of this topic that must be researched. After all, buying a home (and taking out a mortgage to pay for it) will probably be the largest financial move of your life. So you should take the knowledge you've gained from this article and expand upon it with continued research.

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

Related: Georgetown Real Estate Tutorial | Cedar Park Real Estate Guide