Fixed Rate Mortgage
As the name would suggest, the interest rate on a fixed rate mortgage stays the same throughout the life of the loan, and consequently, so do the minimum monthly payments.
The FHA’s fixed rate mortgages are a popular option for many homebuyers as they come with the same flexible guidelines as other FHA programs, namely the 3.5% down payment requirement and 580 minimum credit score. The fixed rate mortgages have either 15 or 30-year terms. While 30-year terms are the most popular, 15-year fixed rate mortgages typically have lower interest rates with higher monthly payments, but more of the money goes toward the principal every month.
Eligibility
In order to qualify for an FHA fixed rate mortgages, it’s important you know the basic requirements:
- Your debt-to-income ratio must fall at or under the FHA’s maximum qualifying ratio of 43%.
- You must have a credit score of at least 500.
- You qualify for a 3.5% down payment if your credit score is 580 or higher, or a 10% down payment if your credit score is between 500-579.
- The house you buy must be a 1- to 4-unit structure that serves as your primary residence and meets the FHA’s minimum property requirements.
The Pros
A fixed rate loan can be a surefire choice for many borrowers because of the certainty it comes with.
- A fixed rate loan means no surprises. You know exactly what your monthly payment is going to be for the life of the loan, making it easier for you to budget your income.
- Borrowers with fixed rate mortgages are protected from the uncertainty of a fluctuating market. Even if interest rates skyrocket, your rate is locked in for the entire term.
- The fixed rates make it easier to shop around for loans, because you can simply calculate your monthly payments and make the best choice.
The Cons
The inflexibility of fixed rate mortgages may not work out for all homebuyers.
- With fixed rate loans, timing can work against you. You may feel you’re getting a low rate at closing time, but a few months down the line the rates may drop further.
- Refinancing for a lower rate may be expensive and ultimately cost you more in the long run.
- Fixed rate mortgages generally have higher interest rates than ARMs, and if you end up selling or refinancing in the first few years, your interest payments would have to be higher.
FHA Loan Articles
February 26, 2021Many Americans go with FHA loans because there are a number of mortgage programs that can fit different needs. These programs include FHA Fixed Rate Loans, FHA Adjustable Rate Mortgages, FHA One-Time Close Loans, FHA Condo Loans, and several others.
February 21, 2021The new year came with some changes being made in the mortgage industry, particularly when it comes to Adjustable- Rate Mortgages, or ARMs. The interest rate you get with an ARM is based on an index and a margin which is disclosed when you apply for the loan.
February 6, 2021As an existing homeowner, you may want to take advantage of falling interest rates by refinancing your current mortgage. For many homeowners, the thought of going through the refinancing process can be tiresome. But an FHA Streamline Refinance could help you avoid the extra work.
January 30, 2021As your closing day gets closer and closer, you might start to feel a little nervous. Do you have everything you need? Will something delay the closing? These worries are natural, but the more prepared you are, the less overwhelming it will all seem.
January 16, 2021What you may not know that there are many different types of refinances and different benefits that come with them. The cash-out refinance, or cash-out refi, is one that many borrowers opt for, for several reasons.
