Austin Mortgage Center - Home Loan Tools and Tips

This website is a service of the Home Buying Institute. It is a guide to Austin mortgage loans and lenders, and it's intended for home buyers and homeowners alike.

Are you planning to buy a home in Austin, Texas soon? Or maybe you want to refinance the home you currently have? In either case, you'll have to obtain an Austin mortgage loan to finance it. And that's what this guide is all about. On this website, you can learn about Austin lenders, mortgage brokers, average interest rates, types of home loans and more.

Your Home Loan Options

The first thing you need to do is determine what kind of mortgage loan you need. You need to determine what type of loan program you'll use, what kind of interest rate you want (fixed or variable), and how long the term will be. Here are some things you should know about the different types of Austin mortgages available:

Fixed-Rate Loans -- This is the most poplar loan option among home buyers and homeowners, when compared to the adjustable mortgage below. As the name suggests, this type of mortgage carries the same interest rate over the entire life of the loan. Borrowers typically choose between a 15-year or 30-year loan option, with the 30-year fixed mortgage being the most popular.

Adjustable-Rate Loans -- The ARM loan has received some bad press over the last few years. But they aren't inherently bad. They're just frequently misused. Most ARM loans today are hybrids that start off with a fixed rate for a few years, after which the rate adjusts. We only recommend using the adjustable-rate mortgage loan in short-stay situations. If you're going to be in the home for many years, you're probably better off with a fixed-rate mortgage.

FHA Loans -- The Federal Housing Administration is a federal agency that falls under the Department of Housing and Urban Development (HUD). The FHA insures mortgage loans made by direct lenders such as Citi and Wells Fargo. As a result of this government backing, these loans are generally easier to qualify for. For this reason, Austin FHA home loans appeal to borrowers with low income or less-than-perfect credit. Additionally, the down payment on an FHA loan is usually lower than its conventional counterpart (as little as 3.5%). Only home buyers can use these loans. Homeowners who want to refinance must use a conventional loan.

Conventional Loan -- This refers to any mortgage loan that is not insured or backed by the federal government.

These are not the only types of Austin mortgage loans available to you. There are other loan variations as well. But these are some of the most important concepts you need to know, as you continue your mortgage research.

How to Apply for Your Austin Mortgage

Let's talk briefly about the steps you will take when applying for a mortgage loan in Austin, Texas. The exact steps will vary depending on the lender you're using, the type of loan you choose and other factors. But the overall process is the same across the board. Let's start all the way at the beginning, with the financial self-assessment.

Here are the steps we recommend:

1. Establish a budget for yourself. This would be the maximum amount you can comfortably afford to pay toward your monthly mortgage payment.
2. Check your credit reports to make sure they are error-free. If you find any erroneous information, have it corrected ASAP. This can drag down your credit score, which in turn can hurt your chances of mortgage approval.
3. Check your credit score to find out where you stand. Austin mortgage lenders have different standards in this area, but it's safe to say you'll need at least a 620 credit score for most lenders.
4. Determine what type of mortgage loan you need. We touched on this above. Almost all lenders offer conventional mortgages, but only certain lenders offer FHA home loans.
5. Start rounding up your financial documents. Most mortgage lenders in Austin will request the same kinds of documents. These include your W-2 statements for the last couple of years, pay stubs for the last couple of months, banking statements and similar documents. The lender will tell you exactly what they need when you submit your loan application. They might have a list of these items on their website, as well.

Once you've completed these five steps, you're ready to apply for your Austin mortgage loan. This is a fairly straightforward process. You will fill out a loan application and provide the documents mentioned above.

Mortgage Loan FAQs

Through the Home Buying Institute, we have received hundreds of questions from home buyers in the Austin area. Most of these questions had to do with mortgages in some way. Here's a list of the more frequently asked questions from the last four years.

1. Am I limited to using Austin mortgage companies?

No. Even though you're buying a home (or refinancing) in Austin, you can lender based in any state. All of the big national lenders have offices in the Austin area, even though there headquarters are elsewhere. You can also apply for a home loan through a local bank or credit union. In fact, that's a good place start. If you have an existing relationship with a bank, you might get a better rate and more favorable terms.

2. Do I need to use a mortgage broker for my Austin home loan?

No, you don't. A broker is a middleman that gets paid a commission for matching borrowers with lenders. But you can apply for a mortgage by going directly to the lender. In some cases, mortgage brokers get paid a higher commission for putting people into certain types of loans. This makes them look out for the lender's interests, more than yours. This kind of incentive pay may soon be outlawed by the financial reform act. But for now, it's something you need to be aware of.

3. I want to refinance my Austin, Texas home. Where do I start?

First, you should figure out how much equity you have. You can do this by subtracting your mortgage balance from the current value of your home. Austin lenders will require you to have a certain amount of equity, before they offer you a refinance loan. Next, follow the mortgage application instructions covered above. Once you get an offer from the lender, you need to run the numbers to make sure refinancing works for you. If you're going to spend more in closing costs than what you save with the new loan, refinancing doesn't make sense.

4. Which type of mortgage loan is right for me?

This is something you must answer for yourself. The following rule of thumb will help you out. If you're planning to stay in the home (and hold the mortgage) for many years, then you're better off with a fixed-rate loan. It gives you the comfort of knowing your rate will never change. If you're only going to be in the home for a few years, you might be able to save money by using an adjustable-rate mortgage / ARM loan. If you have trouble qualifying for a conventional mortgage, you might want to consider using an FHA home loan. If you're a military member, you have the added option of using a VA loan to buy a house.

5. Where can I find current interest rates?

There are many websites that display current mortgage rates for Austin and other cities across the U.S. You can find them by doing a basic Google search. We recommend you start by looking at Freddie Mac's weekly survey of the primary mortgage market. Just keep in mind these websites are showing you average rates. The interest rate you end up with may be higher or lower than average, depending on your credit score and other factors.