When our parents were buying their first home, there was only one way to finance the
purchase. They went down to the corner bank and asked for a 30 year mortgage. That was it. It
was common to stay in the same San Antonio or Austin house for the entire 30 years and they
celebrated the final payment. It’s just not the way financing works today.
First of all, it’s unusual for someone to keep a mortgage for 30 years. The average San Antonio
or Austin homeowner moves every 5-7 years. Even paying off a mortgage might not be
desirable as it’s one of the few tax breaks still available to the average person. Most financial
advisors suggest using a mortgage as a financial planning tool.
Things have definitely changed.
Depending on your needs there are a number of mortgage options you might consider, each
with its own advantages and disadvantages.
- Conventional: A conventional loan is still one of the most widely used types of
mortgage. A conventional loan is normally still designed to be paid off in 30 years with
equal monthly payments during the term of the loan. There are currently conventional
loans that require as little as 5% down, although 20% is still commonplace.
- FHA: An FHA loan is guaranteed by the Federal Housing Administration and is another
commonly used loan. FHA financing is attractive for a number of reasons, especially for
the first time home buyer. The down payment can be as little as 3.5% and that can be a
gift. FHA also typically does not have as stringent credit score requirements and other
traditional loan requirements. The loan limit varies by state and county, so check with
your lender about specific limits in your area.
- VA: VA (Veteran Affairs) is a loan program offered for Veterans and their spouses. This
loan allows the borrower to borrow 100% of the home’s value in the loan. While there
will be closing costs, there is no down payment required.
Your local San Antonio or Austin lender will also have more specialized options for you, such
as adjustable rate loans and 10 or 15 year loans. They can also explain the additional costs that
could be associated with each type of loan program. For instance, all loans with less than a
20% down payment will have Private Mortgage Insurance (PMI).
Part of purchasing a San Antonio or Austin home is to find the right financing. Your lender will
talk you through your options. If you have not already spoken to a lender, or if you need a
referral, your real estate agent is a great resource for you.