Mortgage Loans in Abilene, TX: The Ultimate Guide

Beginning your home search can be an exciting journey! If you plan to finance the purchase, you’ll need to look into mortgage loan possibilities in Abilene, TX, before you start looking for the perfect property.

However, not all house loans are the same. So, doing your homework before deciding will help you choose the best solution for your financial position and even save you money.

In addition, when you apply, you’ll know what to expect regarding guidelines.

Ready to apply for a home Loan? I’m a licensed mortgage loan officer serving Abilene, TX and I’d love to help you get pre-approved for a home. Call or text me at 325-261-0265 if you’re ready to get started or if you have any questions.

Types Of Mortgage Loans In Abilene, Tx

Conventional Loan

Conventional loans not backed by the federal government are classified as conforming or non-conforming.

Conforming Loans in Abilene, TX- As the name suggests, a conforming loan “conforms” to the Federal Housing Finance Agency’s (FHFA) set of guidelines, which include credit, debt, and loan amount.

The conforming loan limitations for 2022 are $647,200 in most places and $970,800 in more expensive areas.

Non-Conforming Loans – These loans do not meet FHFA requirements. Instead, they cater to borrowers looking to purchase more expensive homes or individuals with unique credit profiles.

Benefits of conventional loans

• It can be used for a primary residence, a secondary residence, or an investment property.

• Even if interest rates are slightly higher, overall borrowing expenses are lower than for other forms of mortgages.

• Once you’ve reached 20% equity, you can ask your lender to cancel private mortgage insurance (PMI) or refinance to get rid of it.

• On loans backed by Fannie Mae or Freddie Mac, you can put down as little as 3%.

• Sellers may contribute to closing costs.

Read Next: Top Mortgage Lenders in Abilene, TX

Cons of conventional loans

• A minimum FICO score of 620 or higher is frequently required (the same applies for refinancing)

• Higher down payment than some government loans

• A debt-to-income (DTI) ratio of no more than 43 percent is needed (50 percent in some instances)

• If your down payment is less than 20% of the sales price, you will almost certainly be required to pay PMI.

• Significant documentation is needed to verify income, assets, down payment, and employment.

Jumbo Loans in Abilene, TX

Jumbo mortgages are home loan products that exceed the FHFA’s borrowing limits. Jumbo loans are more widespread in higher-cost cities such as Los Angeles, San Francisco, New York City, and the state of Hawaii, where housing prices are frequently on the upper end.

The Benefits of Jumbo Loans

• Can borrow more money to buy a more expensive property
• Jumbo loan interest rates are often competitive with other conventional loan interest rates.
• This may be the only method for some borrowers to become homeowners in places with extraordinarily high housing values.

Jumbo Loan Disadvantages

• In many circumstances, a 10% to 20% down payment is required.
• A FICO score of 700 or better is typically required.
• A DTI ratio of more than 45 percent is not permitted.
• You must demonstrate that you have substantial assets in cash or savings accounts.
• Qualification usually necessitates more extensive documentation.

Government-backed Loans

The federal government is not a mortgage lender, but it does play a role in making homeownership more accessible to more Americans.

Mortgages are backed by three government agencies: the Federal Housing Administration (FHA), the United States Department of Agriculture (USDA), and the United States Department of Veterans Affairs (VA) (VA).

FHA loans in Abilene, TX

Backed by the FHA, these home loans have competitive interest rates and help make homeownership attainable for individuals who do not have a significant down payment or perfect credit.

To attain the FHA maximum of 96.5 percent financing with a 3.5 percent down payment, you’ll need a minimum FICO score of 580.

However, if you put down at least 10%, you can get as low as 500. In addition, FHA loans in Abilene, TX, need two mortgage insurance premiums, which can raise the overall cost of your mortgage. Finally, with an FHA loan, the house seller is permitted to pay closing costs.

USDA loans

USDA loans in Abilene, TX, assist moderate- to low-income borrowers who fulfill specified income criteria in purchasing properties in rural, USDA-eligible locations.

Some USDA loans do not demand a down payment for qualified borrowers. However, there are additional fees, such as an upfront fee of 1% of the loan amount (often financed with the loan) and an annual fee.

VA loans in Abilene, TX

VA loans offer flexible, low-interest mortgages to members of the United States military (active duty and veterans) and their families.

There is no minimum down payment, mortgage insurance, or credit score requirement, and closing fees are generally capped and may be reimbursed by the seller.

VA loans in Abilene, TX, have a financing fee, which is a percentage of the loan amount and can be paid at closing or rolled into the loan cost along with other closing charges.

Benefits of government-insured loans

• When you don’t qualify for a conventional loan, we can help you finance a home.

• Credit criteria have been lowered.

• There is no requirement for a significant down payment.

• Available to both repeat and first-time buyers

• VA loans do not require mortgage insurance and do not require a down payment.

The disadvantages of government-backed loans

• Mortgage insurance costs on FHA loans that cannot be canceled unless converted into a conventional mortgage

• In most places, FHA loan limitations are lower than conventional mortgage loan limits, restricting the available inventory to pick from.

• The borrower must reside in the property (although you may be able to finance a multi-unit building and rent out other units)

• This could result in higher total borrowing costs.

• Depending on the loan type, expect to supply additional papers to confirm eligibility.

Fixed-rate Mortgage

Fixed-rate mortgages in Abilene, TX have the same interest rate for the life of the loan, so your monthly mortgage payment will always be the same.

Fixed loans are typically available in 15 or 30 years, while some lenders enable borrowers to choose any period between eight and 30 years.

The Benefits of Fixed-Rate Mortgages

• Throughout the life of the loan, monthly principal and interest payments remain constant.
• It is easier to budget housing expenses from month to month.

Cons of Fixed-Rate Mortgages

• You’ll have to refinance to enjoy the cheaper rate if interest rates fall.
• Interest rates on fixed-rate mortgages are often higher than those on adjustable-rate mortgages (ARMs)

Adjustable-rate Mortgage (ARM) in Abilene

Unlike fixed-rate loans, the interest rates on adjustable-rate mortgages (ARMs) change with market conditions.

For example, many ARM products in Abilene, TX, feature a fixed interest rate for a few years before switching to a variable interest rate for the remainder of the period.

A 7-year/6-month ARM means that your rate will be fixed for the first seven years and adjust every six months after that.

Therefore, when considering an ARM, it’s critical to read the tiny print to understand how much your rate can rise and how much you could spend once the initial term expires.

ARM Advantages

• Lower fixed rate in the first few years of homeownership (though this isn’t a guarantee; 30-year fixed rates have recently been keeping up with 5/1 ARMs)
• Can save a significant amount of money on interest payments

The Downside of ARMs

• Monthly mortgage payments may become unaffordable, resulting in loan default.
• Home values may fall in a few years, making it more difficult to refinance or sell before the loan resets.

Next steps

Now that you’ve determined the best type of mortgage loan in Abilene, TX, for your home purchase, it’s time to get pre-approved for a home loan.

Ready to apply for a home Loan? I’m a licensed mortgage loan officer serving Abilene, TX and I’d love to help you get pre-approved for a home. Call or text me at 325-261-0265 if you’re ready to get started or if you have any questions.