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Texas HELOC Loans Explained

What is a HELOC Loan?

Get Pre-Qualified Speak To A Loan Officer

Can You Get a HELOC Loan in Texas?

Yes! In Texas, there are two main options for tapping into your equity in Texas: home equity loans and home equity lines of credit (HELOC).

If you choose a home equity loan, you will receive a lump sum of money that you can repay over time with fixed monthly payments. This option is ideal if you have a specific amount of cash in mind that you want or need to borrow. Additionally, home equity loans typically offer more affordable interest rates compared to credit cards, personal loans, or other financing options.


HELOCs in Texas

A HELOC, short for Home Equity Line of Credit, works similarly to a home equity loan. It allows you to borrow against the equity in your home and utilize your property as collateral. However, instead of receiving a one-time payment, you can borrow from a line of credit and repay it gradually. It is important to note that a HELOC carries similar risks to a home equity loan, including the potential for foreclosure.

HELOCs operate much like credit cards - they allow you to borrow up to a predefined limit as and when required, over a certain period. The key difference, however, is that interest is only accrued on the portion of the credit line you utilize.

Many HELOCs offer the benefit of only paying interest on the borrowed sum during the draw period, which typically extends from 5 to 10 years. Once the repayment period initiates (generally lasting 10 to 20 years), you will then begin repaying the borrowed amount plus accumulated interest.

Benefits of Choosing a HELOC

  • Flexibility: HELOCs are perfect if you are unsure about the funds needed for a given expense. With no obligation to commit to a lump sum, you can borrow only what is required during the draw period.
  • Low closing costs: With HELOCs from Flagstone Mortgage, you can expect lower closing costs and origination fees compared to traditional home equity loans.

Points to Consider Before Opting for a HELOC

  • Variable interest rates: It's worth noting that HELOCs generally employ variable interest rates, which means they may alter over the lifespan of the credit line. Consequently, your monthly payments may fluctuate, making planning for consistent repayment amounts more challenging.
  • Avoid Overspending: Given that you can borrow up to your credit limit, it's crucial to exercise discretion to avoid overspending and potentially compromising your financial security.
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HELOC Frequently Asked Questions

Q What is the difference between a HELOC and a Home Equity Loan?

A
A Home Equity Line of Credit (HELOC) and a Home Equity Loan both allow you to borrow against the equity in your home, but they function differently. A HELOC works similarly to a credit card where you have a credit limit and you can borrow as much as you need, up to that limit, during the draw period. You pay interest only on the amount you borrow. Conversely, a Home Equity Loan provides you with a lump sum of money upfront, and you repay the loan with fixed monthly payments over a set term.

Q How is the credit limit for a HELOC determined?

A
Your HELOC credit limit is typically determined based on the appraised value of your home, the outstanding balance on your mortgage, and your creditworthiness. Lenders generally permit you to borrow up to 85% of your home's appraised value, minus the amount owed on your mortgage.

Q Can the interest rate on my HELOC change and how often?

A
Yes, the interest rates on a HELOC are usually variable, meaning they can change over time. The frequency of change largely depends on the specific terms of your HELOC. Generally, the rate adjustments could occur monthly, quarterly, or annually, and they are typically tied to a public index like the prime rate.

Q What happens if I sell my home while I have a balance on my HELOC?

A

If you sell your home, you are generally required to pay off your HELOC in full from the proceeds of the sale. The HELOC is secured by your home, so selling the home means you no longer have the collateral that backs your line of credit.

How To Get A Mortgage in 5 Steps

Here's How We Close The Deal in 30 Days Or Less

Flagstone Mortgage provides a simple and easy-to-follow five-step process to help you obtain a mortgage and buy your dream home. This includes applying for preapproval, obtaining an approval letter, searching for a property, verifying the details, and closing the deal. Our personalized mortgage solutions and expert guidance make each step straightforward, so you can secure financing, find the right home, and complete the closing process with ease.

1

Get Pre-Qualified

2

Obtain Approval Letter

3

Search for a Property

4

Underwrite Your Loan

5

Closing The Deal

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Get Pre-Qualified

Apply for Mortgage Preapproval

The first step towards getting a mortgage is to apply for preapproval.

Preapproval is a thorough process where the lender evaluates your income, assets, and creditworthiness to determine how much they are willing to lend you.

Unlike prequalification, preapproval requires you to provide proof of your income and debt obligations, ensuring that you are eligible for the mortgage. Flagstone Mortgage's preapproval process is quick and easy, and it will help you understand the exact amount of money you can borrow.

Knowing this amount will make it easier for you to narrow down your property search and make you more attractive to sellers and real estate agents.

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Obtain Approval Letter

This Makes You A Competitive Buyer

Once you have found the ideal mortgage solution that aligns with your needs, you can apply online to see if you're approved. If approved, we will issue a Prequalified Approval Letter that you can use to start searching for a home.

To increase your chances of approval, you may consider reaching out to our Texas Home Loan Experts to discuss in greater detail your specific situation.

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Search for a Property

Find Your Dream Home

Now it's time for the exciting part - finding your dream home. We recommend enlisting the services of a local real estate agent to help you with your search, especially if you're a first-time homebuyer. A knowledgeable realtor can help you narrow down your search and find properties that fit your budget and preferences.

Once you've found the right home, your agent will assist you in submitting an offer and negotiating with the seller. If your offer is accepted, you'll be ready to move on to the final stages of the home-buying process.

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Underwrite Your Loan

Ensure The Numbers Match

During this stage, an underwriter takes a closer look at your financial and asset information to ensure that you meet the lender's requirements and can afford the mortgage you're applying for. The underwriter will also review the property details to ensure that the property meets the lender's requirements. If everything checks out, the underwriter will issue a loan approval, and you can move on to the final step, "Closing the Deal".

Additionally, your lender will verify the details of the property you're purchasing, which typically includes ordering an appraisal, verifying the title, and scheduling any necessary state-required inspections. Once the underwriting process is complete, you'll receive a Closing Disclosure document.

The Closing Disclosure document provides comprehensive information about your loan, including your monthly payments, interest rate, down payment, and closing costs.

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Closing The Deal

The Final Step

Once your loan is approved, Flagstone Mortgage will schedule a closing meeting where you'll have the chance to ask any last-minute questions about your loan. It's crucial to bring a valid photo ID and a cashier check or initiate a wire for your closing costs to ensure a smooth closing process.

During the closing, our team of experts will guide you through the process of signing the loan documents and completing the final paperwork. Once you've signed and the loan has been funded, you'll officially become a homeowner. At Flagstone Mortgage, we strive to make the closing process as stress-free and easy as possible, so you can focus on enjoying your new home.

Types of Mortgage Loans in Texas

At Flagstone Mortgage, we specialize in helping borrowers find the right mortgage loan for their unique situation. Whether you're a first-time homebuyer or an experienced homeowner, we can help you navigate the mortgage process and find the loan that's right for you.

Conventional Loans

These are mortgage loans that are not guaranteed by the government. They typically require a higher credit score and a larger down payment than government-backed loans.

See If You Qualify for a Conventional Loan

FHA Loans

These are government-backed loans that are insured by the Federal Housing Administration. They are available to borrowers with lower credit scores and down payments as low as 3.5%.

Learn More About the Benefits of FHA Loans

VA Loans

These are loans available to eligible veterans, active-duty service members, and their families. VA loans are guaranteed by the Department of Veterans Affairs and offer competitive interest rates and flexible terms.

Apply for a VA Loan Today

USDA Loans

These are loans that are guaranteed by the U.S. Department of Agriculture and are available to borrowers in rural areas. They offer low-interest rates and no down payment requirements.

Learn How USDA Loans Can Help You

Jumbo Loans

These are conventional loans that exceed the conforming loan limits set by Fannie Mae and Freddie Mac. They are designed for borrowers who need to finance higher-priced properties.

Find Out If a Jumbo Loan Works for You

Reverse Mortgage

A reverse mortgage is a loan available to homeowners, usually over the age of 62, that allows them to convert a portion of their home equity into cash. Unlike traditional mortgages, there are no monthly payments required, and the loan is repaid when the borrower moves out, sells the property, or passes away.

Find Out If You Qualify

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