Mortgage Loans for El Paso, Texas
The first step in searching
for a mortgage in El Paso, Texas is checking out current
interest rates and rate movements. Mortgage rates change
along with Wall Street securities and reflect the overall
rise and fall of interest rates. By watching the mortgage
rate trends and keeping informed about the economy and
key economic indicators, a borrower has a better chance
of obtaining better interest rates.
If you are a first time home buyer or have purchased many homes, the type of mortgage you select is very important in El Paso, Texas. If you are not a first time home buyer and have a home to sell, Click-here for information on how to sell your El Paso Texas home and pay NO listing commission to save thousands of dollars!
Below are the many types of mortgage loans available to the home buying consumer. There are many types of home mortgage loans within El Paso to select from with lots of different offers and home mortgage loan application decisions. In the past almost everyone applied for a 25, 29 or 30-year fixed interest rate home mortgage loan, the most common being a 30 year mortgage. Now, there are so many different options well targeted toward borrowers and individuals within El Paso, in different financial situations within the state of Texas.
ARM (Adjustable Rate Mortgage Loans)
If you think you are only going to be living in your home for a few years an Adjustable Rate Mortgage is the best option. An adjustable rate mortgage is also referred to by the acronym "ARM". ARMS's have a set interest rate and steady monthly payment for a number of years. The mortgage loan payment is usually based on the amount to payoff the entire mortgage balance at the end of the term, which is usually 30 yrs.
The most common types of ARMS are 1 yr, 3/1 yr, 5/1 yr and 7/1 yr ARM. After the initial period is over, the rate and term of the mortgage will be adjusted annually to current market mortgage rate if you do not refinance the loan. Most ARMs have caps on how much the interest rate may increase after the loan expires. ARMS are very popular because the rates are usually about 2-3% lower that a fixed rate which means lower payments. The less number of years usually means the lower interest rate. A 1 yr ARM will have a lower interest rate than a 5/1 year term. ARM.
Fixed Rate Mortgage Loan
If you know that you are going to be in the house for a number of years then a fixed rate mortgage is best. A fixed rate mortgage is the most common home finance method and usually are 15 yr or 30 yr mortgage loan. A fixed rate mortgage loan is good if you know you will be living in your home for a long time and you don't have to worry about your payment ever increasing. Monthly loan payments will be the same for the entire life of the loan. The first payment will be the same as the last payment.
If home mortgage interest rates increase you have an advantage because your loan interest rate is locked-in at a lower rate which means your mortgage loan payment will not increase. But alternatively if interest rates drop your rate will not go down unless you refinance your mortgage. Rates went up to 18% at one time and as low as 4% recently so it is hard to tell what will happen in the future.
A 15 year home mortgage will have a somewhat lower interest rate but higher monthly payments than a 30 year fixed mortgage rate. The advantages to this type of mortgage financing is that you will get more home-equity by paying down the principal balance. You also will have the loan paid off faster and will not have paid as much total interest when the loan ends. It could save you $100,000 or more in interest.
A 30 or 25 year year home mortgage loan will usually have a higher interest rate than a 15 year and a lower payment. This is a good type of loan to get if you are short on money or cannot qualify for the higher mortgage payment. If you start to make more money and want to pay off the mortgage balance faster you can always set up bi-weekly payments with your lender. You also can just pay more money every month and apply it to the principle balance. Mortgage lenders rarely impose a penalty for this.
Interest-only mortgages
An interest only mortgage is where the borrower only pays the interest on the loan each month. This means property debt never declines. Many borrowers get this type of loan because the rates are real low and the payment is low. An interest-only mortgage may be good if you expect to earn a lot more in a few years and know you will be able to afford a higher mortgage payment later on where you can always refinance your loan. Some El Paso homeowners may choose interest only mortgages because they are going to invest funds and make money on the savings on the difference between an interest-only mortgage and a regular amortizing house mortgage loan with principle and interest.
Below are many questions you should also ask the lender before making a decision.
Questions to ask your Lender:
- Are both fixed-rate and adjustable mortgage loans available?
- What is the interest rate?
- How long can I "lock-in" the financing at the current interest rate?
- Is a float down lock available in case rates drop after I have locked in?
- What are the other fees a lender may charge me in conjunction with my loan?
Are funds for a second mortgage available?
On adjustable loans:
- How often will the interest rate be adjusted?
- Is there a maximum limit on each rate change?
- How often will the monthly payment be adjusted?
- Is there a ceiling on payment adjustments?
- Can the term of the loan be extended?
- What is the maximum rate that can be charged over the life of the loan?
- Is there any potential for negative amortization?
- Is there a pre-payment penalty clause?
- This involves extra charges for paying off loan before maturity. About 80% of all loans in U.S. are paid off early.
- What is the "grace" period? How late can a monthly payment be made before a late charge is assessed?
- What will happen if a payment is missed?
- If you sell your house, will the new buyer (if he/she qualifies) be able to assume your mortgage at the same interest rate?
- Do you have to pay "points" to get your new mortgage? Usually lenders charge points for the cost of giving you a mortgage loan. A "point" is 1% of the loan.
- Will the lender require mortgage insurance?
- Is the loan serviced locally or is the servicing sold?
- Ask for a written "good faith deposit"
