Fixed Rate Mortgages
What are fixed mortgage rate loan programs?
As the name suggests, fixed rate mortgage is a type of home loan program where the mortgage interest rate remains the same throughout the term of the mortgage unlike other kinds of loans where the interest rates may adjust. Fixed monthly payment for a fixed rate mortgage is the amount that a borrower pays every month through the term of the mortgage. This ensures that the mortgage is fully paid off with interest at the end of the term.
In the U.S. fixed rate mortgages are the most popular type of loans for buying home. 30-year fixed rate mortgage 15-year fixed rate mortgage are the most common terms. Shorter terms of 10 year or 15 year are also available.
What are the benefits of getting a fixed mortgage rate program?
While there are different kinds of home loan programs available, fixed rate mortgage has its share of advantages. Mortgage interest rates are volatile; they can increase or decrease in no time. This change can make a vast difference in your mortgage payment. The biggest advantage of fixed rate mortgage is set mortgage interest rate.
A borrower who takes out a fixed rate mortgage knows that his mortgage interest rate is fixed for the tenure of the loan. There is no fear of increased mortgage interest rates, and therefore, he can plan his monthly budget accordingly.
Those who take out adjustable rate mortgage, sometimes have to face foreclosure due to non-payment. This happens because of high mortgage interest rate. So, if you intend to reside in your home for long, you should opt for fixed-rate mortgage home loan program.
Who qualifies for a fixed mortgage rate program?
If you have a great credit history, any lender or mortgage company will be happy to serve you. On the contrary, if you have bad credit, lenders may consider you a risk and you might have limited options to get a home loan.
Before getting any home loan program, the first question that pops up in your mind is how much you can afford. Your gross income is the determining factor while taking out a fixed rate mortgage. As a general rule, your monthly mortgage payment should not be more than 28% of your gross income.
The lender or mortgage companies you are seeking to take out a fixed rate mortgage will analyze your debt-to-income ratio. It should not be more than 36% of your gross income.
So, do some homework; use a mortgage calculator to find out where you stand. Know whether you qualify for the mortgage you are considering and debt-to-income ratio you can afford.