Mortgage Questions, Answered

A mortgage is a loan used to buy a home. The lender pays the seller in full at closing, and you repay the lender with interest over a set term — most commonly 30 years. The home itself serves as the collateral.

That structure is what makes homeownership possible without having the full purchase price on hand, and it's why so much of the process focuses on establishing that you can comfortably make the payments.

Several, and they exist because borrowers are not interchangeable. The main programs are conventional, FHA, VA, USDA, jumbo, bank statement loans for self-employed borrowers, and reverse mortgages for homeowners 62 and older.

Each one was designed around a different financial situation, credit profile, and goal. Which one fits depends on credit score, available down payment, income and how it's documented, and how long you expect to own the home.

• Conventional — lower rates and fees for borrowers with solid credit who can put money down. Mortgage insurance can be removed once you reach 20% equity, which makes it the cheaper long-term option for many buyers.
• FHA — popular with first-time buyers for its lower down payment and more forgiving credit requirements. Mortgage insurance generally stays for the life of the loan.
• VA — competitive rates, zero-down options, and no monthly mortgage insurance for veterans, active-duty service members, and eligible surviving spouses.
• USDA — zero-down financing for eligible properties in rural areas and small towns, which covers a good deal of the Hill Country outside city limits.

Beyond those four, jumbo loans handle amounts above conforming limits, and bank statement programs qualify self-employed borrowers on deposits rather than tax returns.

FHA and conventional are the two most common starting points. Both allow low down payments, FHA is more flexible on credit, and conventional often costs less over time because its mortgage insurance can eventually come off.

The comparison matters more in Texas than elsewhere. Property taxes here are high enough that two loans with the same rate can produce noticeably different monthly payments once taxes and insurance are added, so the decision should be made on the full payment rather than the rate alone.

The programs themselves are national, but Texas changes both the math and, in one case, the rules.

Property taxes are among the highest in the country, which raises the monthly payment and reduces how much home a given income supports. The homestead exemption offsets part of that on a primary residence. Texas also has its own constitutional restrictions on borrowing against home equity that simply don't exist in other states.

The practical result is that national rules of thumb and out-of-state calculators tend to overstate what a Texas buyer can afford.

Yes, and it's worth the time. Comparing options side by side exposes what a rate quote hides on its own: the monthly payment, mortgage insurance, cash needed at closing, and total cost over the years you actually expect to own the home.

Chet works as a broker rather than for a single lender, so the comparison covers multiple lenders' pricing instead of one company's product menu.

A short conversation about your goals, budget, credit, and timeline usually narrows two dozen possibilities down to two or three that are realistic. From there the comparison becomes concrete — real numbers, not ranges.

There's no cost for that review and no obligation attached to it.

FHA tends to win when credit is under roughly 680 or the down payment is under 10%. It's more forgiving on both counts, but mortgage insurance generally stays on the loan permanently when you put less than 10% down.

Conventional usually costs less over time once credit reaches the high 600s or better, because its mortgage insurance can be removed at 20% equity rather than following the loan to payoff.

There's a third path many Texas buyers take: start with FHA to get into the home, then refinance to conventional once credit or equity improves. That only works if the numbers support it, so it's worth modeling before you commit.

A bank can offer you its own products. A broker shops wholesale pricing across many lenders and brings you what fits.

The practical difference shows up most for borrowers who don't fit a single narrow box — self-employed income, a credit profile in transition, an unusual property, or a tight timeline. One lender's decline is another lender's routine approval, and a broker can move the file rather than start over.

The comparison is worth making on total cost, not rate alone, since fee structures differ between the two. Chapter 5 of the guide covers the broker-versus-bank question in full.

Closing costs are the fees paid when the loan funds. They generally include lender fees, title company charges and title insurance, the appraisal, a survey, recording fees, prepaid interest, and the initial escrow deposit for property taxes and insurance.

As a rule of thumb they run about 2% to 5% of the purchase price, though in Texas the escrow deposit for taxes can push the total cash needed at closing above that range. Buyers and sellers are each responsible for different items, and seller contributions are sometimes negotiable.

You'll receive a Closing Disclosure itemizing every line at least three business days before closing.

Chapter 11 of the Texas Homebuyer's Resource Guide breaks every line item down in detail.

In the Kerrville and San Antonio area, closing costs generally land in that same 2% to 5% range. On a $300,000 purchase that works out to roughly $6,000 to $15,000, depending on loan type, lender fees, and whether the seller contributes.

The spread is wide because two items move a lot: title insurance, which is rate-regulated in Texas and scales with the purchase price, and the prepaid property tax deposit, which depends on where in the tax year you close. Closing in the fall generally means a larger escrow deposit than closing in the spring.

Seller concessions, lender credits, and how the loan is structured can all reduce what you bring to the table. That's worth exploring before you write an offer, not after.

Discount points are an optional one-time fee paid at closing to buy down the interest rate. One point equals 1% of the loan amount and typically lowers the rate by somewhere between an eighth and a quarter of a percent.

Whether points make sense is a break-even question: divide what they cost by what they save each month, and see whether you'll own the home long enough to come out ahead.

Because lenders structure fees differently — one waives a fee and adds another, another quotes a low rate that assumes points — points are also a reason to compare total cost rather than rate alone.

The Annual Percentage Rate expresses your interest rate plus certain financing costs as a single yearly figure. Because it folds in points and prepaid finance charges, the APR is normally higher than the interest rate itself.

It appears on the Loan Estimate, the standardized form every lender must provide after you apply, and it's designed as a comparison tool. When a rate looks unusually good, the APR usually explains why.

One caveat: the APR calculation assumes you keep the loan for its full term. If you expect to move or refinance within a few years, compare the actual costs and payments too.

Yes. Once you've received a personalized quote, your rate can be locked for a set period, which protects you from market movement while the loan is processed. Some programs offer an extended lock with the ability to float down if rates improve before closing.

Keep in mind that quotes are personalized to your credit, loan type, and property. Rates reported in the news are averages and often stale by the time they're published — you can request today's rate for your own scenario.

Before locking, ask for a written term sheet showing the interest rate, loan term, estimated monthly payment including taxes and insurance, total cash to close, and an itemized breakdown of closing costs.

An appraisal is an independent opinion of the home's value, ordered by the lender to confirm the property supports the amount being borrowed against it. The buyer typically pays for it, often up front.

If the appraisal comes in below the contract price, the usual options are renegotiating with the seller, bringing additional cash to closing, or challenging the value with supporting sales data.

An appraisal is not a home inspection. It says nothing about the roof, the foundation, or the plumbing — that's a separate report, and worth ordering.

Chapters 9 and 10 of the guide walk through both in depth.

Most borrowers should expect to provide recent pay stubs, two years of W-2s or tax returns, roughly two months of bank and asset statements, photo identification, and details on current debts.

Self-employed borrowers, retirees, and commission-based borrowers document income differently. If your tax returns don't reflect your actual cash flow, bank statement programs exist for exactly that reason.

Chapter 7 of the guide has the full checklist to gather before you apply.

Most loans close in 30 to 45 days from a complete application. The timeline moves with loan type, appraisal scheduling, and — more than anything else — how quickly requested documents come back.

Getting pre-approved before you shop removes most of the front-end delay, since the underwriting work is already done by the time you're under contract.

A fixed-rate loan keeps the same principal and interest payment for the life of the loan. An adjustable-rate mortgage offers a lower fixed rate for an initial period — commonly five, seven, or ten years — then adjusts periodically within preset caps.

An ARM can work for a borrower who is genuinely confident they'll sell or refinance before the first adjustment. For anyone planning to stay put, the fixed rate is the safer default, and the certainty is usually worth the small premium.

The 15-year saves more, and it isn't close. It carries a lower interest rate and cuts the repayment period in half, which on a $300,000 loan can mean well over $100,000 less in total interest depending on the rate spread.

The catch is the payment, which typically runs 30% to 40% higher. That's a real constraint on cash flow, and it's a commitment you can't undo if income changes.

There's a middle path worth considering: take the 30-year for the flexibility, then pay extra toward principal when you can. You capture much of the interest savings without locking yourself into the higher required payment. The right answer depends on income stability, your other financial goals, and how long you plan to stay.

For an initial period, payments cover interest only. The payment is lower, but no principal is paid down, so no equity is built through payments — only through appreciation.

When the interest-only period ends, the payment increases, sometimes sharply, because the full balance now has to be repaid over the remaining term. These loans have limited availability and suit a narrow set of borrowers, usually those with irregular or bonus-heavy income and a clear plan for the reset.

Yes. Investment property financing generally requires a larger down payment — often 15% to 25% — along with stronger credit and cash reserves after closing, and it carries higher rates than a loan on a primary residence.

Projected rental income can sometimes help you qualify, depending on the program and the property.

Renovation loans, including FHA 203(k) and conventional renovation products, combine the purchase price and the cost of eligible repairs into a single loan sized on what the home will be worth after the work is done.

That makes an otherwise unfinanceable house workable — a well-located home in rough condition, for instance. The tradeoff is process: contractor bids, inspections, draw schedules, and a longer timeline than a standard purchase.