Commonly Used Home Loans In Arlington TX

Jamie Ayala

Jamie Ayala

Jamie Ayala has been working as a Loan Processor at Rock Mortgage for more than 4 years. As a knowledgeable account executive he has had many years of customer service experience in the loan, information technology, and political industries. Recognized for demonstrating a natural aptitude for working with cross-functional teams, as well as for meeting deadlines and validating loan documents, Jamie has a verifyable history of consistently exceeded sales and performance goals. His professional focal points include loan processing, client negotiations, team collaboration, and project management.

If you are looking to finance a home, you want to make sure you choose the right one to meet your needs. As the Consumer Financial Protection Bureau points out, all home loan options consist of common elements — the loan term, the interest rate type, and the loan type — but also embody unique characteristics. With that in mind, consider these commonly used home loans in Arlington, Texas, and what each one entails.

Types of Home Loans in Arlington, TX

Conventional Mortgage

As you might infer by the name, conventional mortgages are the most common type of home loan one can get. With a conventional mortgage, your down payment can be as little as 3%, though you’d benefit from putting up a larger sum. This is because a down payment of less than 20% would require you to purchase private mortgage insurance, which protects the mortgage company should you fail to make payments on your home loan.

Bear in mind that conventional mortgages tend to have strict requirements concerning your credit profile. Generally speaking, a minimum credit score in the high-fair range (at least 620) and a low debt-to-income ratio are necessary to qualify.

Fixed-Rate Mortgage

A fixed-rate mortgage is a home loan whose interest rate and principal payment remain constant. That means your monthly loan payment is largely the same throughout the life of the loan, aside from minor fluctuations owing to insurance and property tax. The predictability of a fixed-rate mortgage makes it ideal from a budgeting perspective. For the same reason, it is an attractive home loan option for those who are certain of the permanence of their living arrangements.

However, those who live in areas with high-interest rates are wise to avoid fixed-rate mortgages. If the rates are high, they will remain so as long as you are paying off the loan. In the end, you will have paid more than you’d have liked.

Adjustable-Rate Mortgage

An alternative to a fixed-rate mortgage is an adjustable-rate mortgage — a home loan whose interest rate fluctuates in response to the market. Adjustable-rate mortgages are 30-year loans that begin with a fixed-rate period. Typically, the initial fixed-rate period lasts five to 10 years, during which time you’re paying an interest rate that is usually lower than that of a fully fixed-rate loan of the same term.

After the fixed-rate period, your interest rate rises or descends based on the market. If market rates go up or down, so do yours. Fortunately, there are rate caps that limit how much your interest rate may rise.

In the long term, adjustable-rate mortgages are much less predictable than fixed-rate mortgages. You could save money initially but then pay more than expected if the market fails to work in your favor.

Government-Backed Loans In Arlington, TX

Government-backed loans are those that are insured by a federal agency — namely the Federal Housing Administration, the United States Department of Agriculture, or the Department of Veterans Affairs. Each of these agencies has a loan type associated with it:

FHA Loan

Backed by the Federal Housing Administration, an FHA loan is attractive because of its relatively lenient requirements. Unlike a conventional mortgage, for example, an FHA loan may be attainable even with a fairly low credit score of around 580. Moreover, an FHA loan requires only a 3.5% down payment. If you put forward at least 10%, however, you could qualify for the loan with a credit score as low as 500.

USDA Loan

The United States Department of Agriculture is the agency that backs the USDA loan. One of the primary advantages of this type of loan is that you do not have to contribute a down payment. However, there are requirements that distinguish USDA loans from others — primarily that the home you want must be in an eligible rural area and you cannot earn more than 115% of the median income of that area.

VA Loan

VA loans, insured by the Department of Veterans Affairs, are available only to U.S. service members, veterans, and surviving spouses. Eligibility requirements vary to some degree depending on the period and context of one’s active-duty service or the circumstances of an enlisted spouse’s passing. With a VA loan, you owe no down payment and tend to receive better interest rates compared to other loan types. Other requirements may depend on the lender you choose.

Jumbo Loan

Jumbo loans are a financing option for high-value properties. Specifically, one would take out a jumbo loan if they need to borrow an amount exceeding the conforming loan limit of their county, as defined by the Federal Housing Finance Agency. In Tarrant County, which encompasses Arlington, the limit for 2022 is $647,2000.

The primary advantage of a jumbo loan is that it can cover the cost of an expensive home. Bear in mind, though, that the requirements are generally higher. You will need a relatively high credit score (at least 700), a low debt-to-income ratio, significant assets, and a fairly large down payment (between 10% and 30%).Knowing what home loan options are available to you in Arlington, Texas, is essential for making an informed decision about homeownership. We at Rock Mortgage can help you along the way. Get in touch with us today to discuss the home loan options we can offer you.