Types of Home Mortgage Loans in Dallas, Texas | Which One is Right for You?

Buying or building your own home in Texas is not an easy feat. Evaluating different financing options can especially be overwhelming for potential homeowners. 

Also, there are hundreds of mortgage companies out there. That means choosing the best mortgage company Dallas, TX isn’t going to be an easy task either. 

We have created this post to walk you through the different home mortgage options available in Texas. After reading this article, it would be easier for you to determine what works best for you. 

Conventional Loan

Conventional loans are also called fixed-rate mortgage loans. This is one of the most common types of home mortgage loans available in Texas. 

As their name hints, they’re standard loan programs that allow borrowers to borrow money on fixed interest rates. The loan tenure is pretty flexible too, ranging anywhere between 5 and 40 years.

These loans are not backed by the government. Hence, the limit may vary based on the state you’re planning to buy a new property in. 

In case a borrower wants to apply for an amount more than the stated limit, they may have to consider another type of home mortgage loan called Jumbo loans. 

FHA Loan

Popularly known as the Federal Housing Authority mortgage, FHA loans are guaranteed by the government and administered by the Department of Housing and Urban Development. 

This loan type is ideal for first-time homebuyers who don’t have a lot of savings to pay down payments. 

Also, there are not many formalities. The DTI requirement is low. Also, you can apply for this loan for a credit score as low as 500 (which is a plus, especially if you have a poor credit payment history).

The only downside of this option is it includes mortgage insurance. That means you’ll end up paying much higher monthly payments. 

VA Loan

VA loans are guaranteed by the U.S Department of Veteran Affairs. As their name suggests, these loans are issued to those US veterans who have served (or are currently serving) in the US military. 

This loan is beneficial for several reasons. First, anyone meeting the standard criterion can apply and get approved for this loan. Second, the borrowers can purchase the property in Dallas without making any down payment. 

The U.S. Department of Veteran Affairs will be responsible for reimbursing the lender in case of any default.

Adjustable-Rate Mortgage

The Adjustable-rate mortgage is another popular type of home mortgage in Texas where the interest rates and payments are fixed for the specific duration of a loan, followed by period rate adjustments.

The difference between ARM and the fixed-rate mortgage is that the latter keep the same rate for the life of the loan. 

With an ARM, the payment fluctuates with interest rate changes. 

In some cases, choosing ARM over any other financing solution could be the best financial decision. Just ensure to discuss benefits and risks with your lender before you apply for this type of mortgage. 

If you know you will be relocating in a few years or you’re sure of making the payment in the near future, there is no option as beneficial as ARM. 

Jumbo Loan

Looking to buy a home of your dreams in a vicinity where home prices are higher than other areas? Jumbo loans are the best option. 

These loans offer higher limits than conventional loan types. The FHA sets these limits.

The limits entirely depend on the type of property and location you’re interested in.

Because Jumbo loans offer additional advantages and higher limits, the interest rate on them is also higher than conventional loans. 

Higher interest rates are also because the lenders have to bear high risk in case of default or foreclosures. 

Balloon Mortgage

A balloon mortgage is another prominent type of home mortgage that is amortized over a set number of years (usually 30 or 15) for the initial few years. The balance will be covered at the time of maturity. 

This mortgage type isn’t as common as other types of mortgages. The borrowers mostly choose a refinancing route once they reach maturity. 

Buyers looking to invest in commercial real estate can benefit from this type of loan. 

The interest rate may be fixed or floating. For example, if you have applied for a balloon mortgage for 10-years. For the first 10 years, your payment will be amortized in 30 or 15 years. And you have to choose another refinancing option for the leftover payment. 

USDA Loan

USDA loans are administered by the USDA. In order to qualify for this type of loan, you have to fulfill specific income guidelines. 

Besides that, there are a few other requirements too. If all conditions are met, you will qualify for a zero-down payment loan.