If you’re planning to buy a new house in Houston, chances are very slim that you can afford the price upfront and will have to take a home mortgage loan to fill in the financial gap standing between you and your cherished dream of owning a new home. The Houston mortgage market is hot at the moment with different government and private money lending programs and facilities. Diving into the deep end of this market without any knowledge and preparation might be very frustrating, so we’ll run down the basic queries you may come across in the market to make things easier for you.
Pre-approval and Pre-qualification
These two terms are commonly thrown around by professionals in the real estate and mortgage industries. Pre-qualifying for a mortgage means that you passed the initial screening process for getting a loan approval which requires minimum documentation. Pre-approval is the documentation that a loan applicant receives from a bank upon detailed scrutiny of various documents like tax records, employment records, credit history, etc. The advantage of getting these two things done is that you’re considered a serious buyer by all parties involved in the transaction. Pre-approval is one step further in the process than prequalification and gives you a better idea of how much house you can afford.
Range of Rates
The range of rates for a home loan varies according to the type of loan the applicant has applied for. In case of VA and FHA loans, interest rates can range anywhere between 0.125% to 0.250% lower than conventional loans, while in case of conventional loans, the figures may fluctuate between 0.75% to 1.25% higher than government insured or guaranteed loans. These ranges should be studied and kept in mind by potential buyers as unlike a lot of other markets there is no daily or general standard for the market to compare. Homebuyers can watch the bond market, specifically the 10-year Treasury bond as it directly impacts mortgage rates.
Refinancing is a popular option chosen by many people with Houston home mortgages to pay off their loans quicker and cheaper. It’s the process of financing the same mortgage again with lower rates which are smaller than the original one, resulting in less payment in interest on the overall mortgage. This option is popular because it lets people pay off their loans faster or cheaper. The only other alternative to this for paying off the loan faster is by paying more on the principal amount every month.
Fannie Mae and Freddie Mac
Two familiar names you’ll come across the mortgage market are Fannie Mae and Freddie Mac. These two are government-sponsored private GSEs that buy mortgages off from banks and lenders, allowing the creditors some breathing room if they deem it doable.
You should have gotten the basics of the standard terms and phrases used in the mortgage market from this article. For further clarification, don’t hesitate to reach out to a mortgage lender to get the ball rolling on your Houston mortgage application.