Planning to buy your first home in Texas, but you’re struggling to find the best mortgage lender? You’re in the right place!
It’s much more fun to browse through home offers and attend open houses than it is to research your mortgage. After all, what’s not to like about house hunting? You get to feast your eyes on beautiful homes and imagine your family living in them.
While all that sounds exciting, it’s the financing bit that is likely to hang you up and prevent you from getting your dream house. This is where Texas mortgage lenders will be your financial friend.
But how do you know which one is the best fit for your situation? In addition, you might save a few bucks by comparing multiple mortgage lenders, but the real question is, what should you look for in a lender, beyond costs?
Here is what you need to know when you’re choosing a mortgage lender in Texas.
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Evaluate Your Financial Situation
Understanding where you are financially will help determine the type of mortgage you want and the Texas mortgage lenders that specialize in that type of mortgage.
It’s critical for you to know:
Your credit score. Most lenders will demand a credit score of at least 620. If your score is higher, say 750+, you shouldn’t have a difficult time finding a lender. But if it’s on the lower side, your options will go down.
Your debt-to-income ratio is a measure of the amount of your income every month that goes toward financing your debts, including your current mortgage. Lenders prefer that your potential housing costs not exceed 28% of your monthly gross income, and your total debt payments not go beyond 36% of your income. However, expect some lenders and types of loans to be more flexible.
Your savings balance. You’ll have to demonstrate an ability to make a down payment and closing costs without exhausting your emergency fund. In addition, you’ll have to set aside some money for repairs and home maintenance after moving in. But if you need a lender who will help you make a down payment, it’s best to know that early.
Your budget for buying the house. It’s helpful to have an overall sense of how much you want to spend on your home. This will also help you select a type of mortgage.
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Understand Your Mortgage Options
After analyzing your financial standing, use that information to choose the best type of home loan for you. Common options you might qualify for include:
Conventional loans
There are home loans offered by private Texas mortgage lenders, typically with strict requirements. Nevertheless, you can get these loans with as little as 3% down, but you have to be ready to pay for private mortgage insurance (PMI) until you get to 20% equity in the home. Fortunately, almost all home loan lenders in Texas issue these loans.
Jumbo loans
These loans will be your go-to option if you’re buying a home in the more expensive suburbs of Texas. However, keep in mind that jumbo loans are harder to qualify for than standard conventional or government-backed mortgages.
Government-backed loans
These include the FHA, VA, and USDA loans. Government-backed home loans usually have less strict terms than conventional loans, and sometimes you won’t be asked to make a down payment.
You may not find lenders offering all of these loan types, so narrowing down the one you want will help you narrow down your search for a lender, too.
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Shortlist A Few Lenders and Compare
Once you’ve settled on the type of mortgage you want, it’s time to begin your search for lenders that offer it. If you do not know where to start, consult with your current bank or SACCO, and ask your family and colleagues for recommendations. You can also browse the web for lender reviews.
While comparing the lenders, you will want to examine the following:
Lender type
You’ll come across many varieties of lenders, namely, but not limited to, large, national banks, and local credit unions based in your hometown. Lenders that work entirely online also exist.
Customer service options
Do not shortlist a lender without customer service options you can use to reach them. For example, if a lender does not have a phone or email contact, or their time-of-service conflicts with your work schedule, that lender might not be a good fit.
Sample rates
Some lenders, but not all, will display examples of their mortgage rates on their websites, which can give you a general feeling of whether a lender’s offerings are affordable before you proceed with your application.
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Getting Preapproved
Getting preapproved tells you how much you’re likely to borrow and helps you compare lenders in terms of rates, service, and technology. Once you’ve chosen a few lenders, you can begin the application.
Preapproval requires a thorough review of your finances. Be prepared to provide:
Photo IDs and Social Security numbers
Recent pay stubs
Tax returns and W-2s/1099s from the past two years
Bank and investment account statements from the last 60 days
A list of current debts
Employment history and employer contact info
Details on your down payment, including sources and gift letters if applicable
Note that pre-approval isn’t a loan guarantee. Final approval occurs after you apply for a mortgage on a specific home and undergo underwriting.
Conclusion
Finding the right mortgage lender in Texas involves much more than just looking for the lowest rate—it’s about choosing a lender that aligns with your financial situation, loan needs, and customer service expectations.
By understanding your finances, identifying the right mortgage type, comparing multiple lenders, and going through the preapproval process, you’ll be in a strong position to make an informed decision.