How Are Mortgage Rates Related To Home Buying in Texas?

When looking at buying a new home in Texas, people would consider a number of factors such as the price of the house, location, insurance cost or the maintenance cost. However, a very important factor that is mostly given only a second thought is the mortgage rates in the area. The mortgage rate is the annual rate of interest charged by a lender from the buyer for a loan given to purchase a house. Whether you choose to buy a house in Dallas or in Allen, mortgage rates would play a very important part in estimating the final cost of the house.

It is also important to understand that changes in the mortgage rates do not affect only the home buyers by changing their cost. It also affects home sellers. As an example, if the mortgage rate is higher in Frisco as compared to Prosper, then less number of people would be interested in buying a house in Frisco as compared to Prosper because of the higher mortgage cost associated with a Frisco house, and this would adversely affect the Frisco sellers.

Factors affecting the Mortgage Rate

  • Location: Mortgage rates vary depending on the location of the house. There would be a difference in the mortgage rate between Plano and McKinney or between Dallas and Allen.
  • Time of purchase: Mortgage rates change on a daily basis, even though the change may not always be substantial every day. Thus, to estimate the exact cost of buying a home in Texas, the calculation should be done on the day of taking the mortgage itself.
  • Loan Duration: The tenure of the mortgage taken by the borrower also affects the mortgage rate. Usually, smaller duration loans are associated with a higher mortgage rate as compared to those with a longer duration.
  • Down Payment: The mortgage rate would depend on the down payment amount that the borrower gives at the time of availing the loan. The amount of down payment required also differs from area to area, and from lender to lender. For example, a lender in Frisco might want a higher down payment as compared to the same lender in Prosper and thus impacting the mortgage rate.
  • Credit Score: The credit score or credit rating of the buyer/borrower also plays a very important role in the mortgage rate. Better the credit score, lower is the mortgage rate offered by the lender and vice versa. The credit score is determined by a number of factors such as the credit amount, payment trends and credit default history of the borrowers. Thus, in order to avail a mortgage at a low rate, home buyers should always keep their credit score in check.
  • Choice of lender: If you are looking at buying a new construction home, then you should also know that the builders work directly with some lenders to close their sale. If you chose the builder’s lender over your lender, the builder’s lender could offer you more incentives such as paying the cost of the title insurance and other closing costs (which could be up to $10,000 in some cases). However, your own lender may offer a lower mortgage rate to win your business and compete with the builder’s lender. Thus, you must weigh all these costs and benefits properly before deciding who to borrow from.


How to calculate the mortgage rate?

You can calculate the mortgage rate on your loan easily any time by using a mortgage calculator. You just need to enter the amount of the loan, duration, and the down payment amount to get the estimated rate. However, be aware that if you do not have a good credit score, then this rate could vary.

Once you have an estimate of the mortgage rate, you would be easily able to estimate the actual cost of purchasing your dream home in Texas.


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