Texas Mortgage Rates

Mortgage in Texas

Nowadays, mortgage loans have become the most popular homebuying options not only in Texas, but in all the United States. This is not surprising, since the estate market prices have reached sky-high levels (use our mortgage calculator to estimate your future expenses). In this article, some mortgage lenders operating in Texas are briefly reviewed, and frequently asked questions concerning home lending in Texas, are answered.

Credible mortgage lenders in Texas

AmeriSave

AmeriSave, one of the major online lenders, was founded in 2002 in Georgia, and has quickly expanded their reach nationwide since then (with the State of New York as the only exception) This Fannie Mae-approved lender is highly rated by various review platforms, among which are BBB (A+) and Trustpilot (4.3/5).

For a conforming loan, the advertised APR is 5.132%. However, the tempting offer requires a FICO score of at least 740 and a 20% down payment. In most cases, the rates offered to potential borrowers exceed the advertised values. The minimum credit score needed to obtain a conventional loan is 620.

As usual, government-backed plans (VA, USDA and FHA) are here to help Americans who have less than perfect credit scores (with the floor of 600). To get a jumbo mortgage, a FICO score of at least 700 and 20% upfront will be necessary.

D&H Lending

D&H Lending is a mortgage lender that has been operating since 2005 exclusively in the State of Texas. Although from the lender’s website it remains unclear if there are any adjustable-rate mortgage options available, the fixed loans come with appealing APRs. The lender advertises 5.110% APR for a 15-year fixed conventional loan, while the 30-year fixed loan option comes with a 5.846% APR (which is still highly lucrative).

For government-backed mortgage loans, the APRs are 5.801% and 6.747%, respectively. USDA-insured options, as well as jumbo loans are not presented.

All the available loan options come with lender fees varying from $2,395 to $5,469 depending on the loan type.

First Citizens Bank

First Citizens Bank, founded in 1898, is one of the largest and time-tested banks in all the United States. Luckily, its physical branches are available in Texas.

Conventional mortgages come with either fixed or adjustable rates. The minimum satisfactory requirements include at least two years of confirmed employment, a credit score of 620 or above, and a debt-to-income ratio (DTI) of 43% or less. The fixed APRs are as follows: 6.289% for a 15-year, 6.508% for a 20-year, and 6.728% for a 30-year mortgage (assuming 20% down payment and a good credit history). Notably, the bank motivates the borrowers by reducing the APR by approximately 0.3 – 0.5% in exchange for buying points (each one is earned by making upfront payments of 1% of the mortgage balance).

Besides, there are non-conforming loans amounting up to $3 million, and government-backed USDA, VA and FHA plans. Construction and renovation loan options are also presented.

Average Mortgage Rate in Texas from 1978 to 2018

The chart shows average conventional mortgage 30-Year Fixed Rates in Texas.

Source: Federal Housing Finance Agency Monthly Interest Rate Survey

Information about the Housing Market and Real Estate Prices in Texas

What factors should be considered when choosing a lender for a mortgage?

In order to find a lender who fits your bill, first of all, take note of the offered conditions. You are primarily interested in the effective APR, which includes both the interest rate and most fees calculated as a percentage of the principal you will be due every year. The rates can either be fixed at the moment of signing or fluctuate during the lifetime of the loan based on current market conditions for shorter mortgages.

ِAnother important point to consider is your lender’s fee schedule. Some lenders omit initial fees entirely; elsewhere, they can rake up to a fair share of the loan expenses. Make sure to take into account the potential application, underwriting, closing, and initiation fees, as well as insurance premiums and other expenses. Together with the down payment, these form the closing costs of the mortgage.

Many websites collect customer reviews and ratings, helping to gauge the creditor’s reputation. If a lender is known for subpar service or shady practices, it may prove less costly to avoid it from the start, even for an otherwise lucrative offer.

Last but not least, you need to satisfy the minimum requirements to be eligible for the loan of choice. The eligibility criteria include credit score, confirmation of employment and income.

Who is the top mortgage lender in Texas?

Big players are always hard to compete with. Rocket Mortgage, the largest online mortgage lender in the US, is not an exception here. Unsurprisingly, the lender accounts for a vast majority of the loans in Texas, as well as nationwide. Among other top-rated loan originators, PenFed Credit Union and AmeriSave should be also mentioned.

However, remember that choosing a lender only by name can sometimes turn into just paying more for a big known brand.

Texas first-time homebuyer programs

In common parlance, the term ‘first-time homebuyer’ refers to a person who has never owned a home (formally called a primary residence). However, the relevant definition in the United States, as specified by the Department of Housing and Urban Development, is broader and includes people who haven’t owned their primary residence for the last three years, as well as divorced single parents who shared the ownership with their spouse and residents of properties built in violation of the state codes.

On the federal level, there are multiple agencies that cover lenders with insurance in exchange for granting loans under relaxed conditions for select categories of borrowers. These may include first-timers, low-income families, Armed Forces veterans and their families, etc. The most widely available of these are FHA loans. Pretty much everyone willing to pay the insurance premium is welcome to take them. Given 10% down, even applicants with an abysmal credit score (500+) may be eligible. If your score is at least 580, on the other hand, you can get away with a down payment of 3.5%. The lower limit is thus much lower than typically required for conventional mortgages – on both counts. Lest you think this is free lunch, however: the effective APR is likely to be higher because of the added insurance. If lenders are willing to trust you anyway, there are many better options around.

Active and retired members of the Armed Forces, as well family members of deceased servicemen qualify for VA-backed loans. In this case, borrowers are not required to pay anything upfront. Penalties for early payoffs are disallowed. Lenders are free to impose their own requirements, but typically these are less strict compared to conventional ones.

A third option of this kind exists due to the Department of Agriculture and its aspiration to promote rural development. They are more selective than FHA, in that the properties must be located in designated rural areas, and the buyers sit in the lower or middle income percentiles. Again, the lenders are allowed to set additional restrictions. Such loans also require no down payment.

As an alternative to the above federal programs, local administrations often provide extra opportunities for their vulnerable citizens. In the state of Texas, this is TDHCA.

Through a network of certified lenders, they equip eligible first-time homebuyers (and veterans) with affordable and highly accessible 30-year fixed-rate mortgages. However, simply not owning a home does not suffice: the program is strictly aimed at people of modest means. In most of the state, the combined income of the signing parties may not exceed $85,300, while the value of the property must fall under $349,525. The limits are tweaked on a per-country basis to reflect the differences in supply and demand. Some areas are also specifically targeted with relaxed requirements. The down payment can make up as little as 2% of such loans, but borrowers who meet a stronger standard can apply for assistance with that, too, from the same agency.

How do I get pre-approved for a house in TX?

While a pre-approval letter is technically optional, it is no secret that home sellers see its absence as a strong negative signal. Pre-approval is supposed to ensure the sincerity of the borrower’s interest and ability to put forth the funds. Because of the nature of the document, it has an expiration date between 30 and 90 days.

To get pre-approved for a mortgage loan, the potential borrower needs to confirm their financial status. This requires proof of employment and income, credit score, recent pay stubs and tax receipts, as well as W-2 forms for the last two years. Moreover, a preliminarily filled out URLA form (Uniform Residential Loan Application) must be provided.

What do I need to qualify for a mortgage in Texas?

In general, to obtain a loan you must convince the lender that you will be able to repay it. The usual conditions for conventional mortgages involve a 620+ credit score and a debt-to-income ratio that does not exceed 45%. Additional requirements have been imposed by the federal government in the aftermath of the 2008 financial crisis for loans selling on the secondary market. Specifically, the income must be confirmed using tax returns, W-2 forms, or pay stubs, with debt obligations making up no more than half of it. If you are unable to meet these requirements, it’s still possible that some lenders will accommodate you (for instance, by providing self-employed persons with alternative avenues for income verification), but be prepared to pay extra to offset the additional risks. The same applies in case of a questionable credit history, such as recent bankruptcy or foreclosure. Relaxed requirements are also characteristic of all federal-backed loans.

On top of that, you must have enough money at hand to deposit the initial payment and possible lender fees. The required amount ranges from zero to 10% or more depending on the lender and other circumstances. It’s possible that you qualify for a local down payment assistance program, allowing to spread this payment over time, too.

What is the maximum mortgage duration in TX?

The criteria for qualified mortgages, as set by federal agencies, specify that they may not last longer than 30 years. Beyond that point you’re dealing with non-qualified mortgages. Because these come with fewer safeguards for the lender, they tend to be harder to find and qualify for. The extra risk also pushes the interest rate up. Many such offers are actually traditional 30-year mortgages with an interest-only period, e.g. NewFi’s 40-year option.

What is the mortgage rate right now in Texas?

At the time of writing, the average mortgage rate in Texas for conventional fixed-rate mortgages for 15 and 30 years is 5.62% and 6.47%, respectively. Depending on your circumstances, property involved, and choice of lender the actual APR may stray from this mathematical average in either direction. The most trustworthy lenders typically provide online tools to calculate the projected rates beforehand.