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
October 30, 2021The FHA Rehabilitation Loan program allows lenders to cover the purchase or refinance, as well as the rehabilitation of the home, as part of a single mortgage. This loan can be used to finance a property that is at least one year old with a total cost of repairs amounting to at least $5,000
October 16, 2021The FHA’s aim is to make homeownership more affordable and accessible for Americans, and it has been doing so for decades. It insures home loans made by FHA-approved lenders so borrowers can purchase single-family and multi-family homes in the US and its territories.
September 20, 2021A down payment is an upfront installment or part of a larger amount paid on a purchase. The remainder is paid off in separate installments, usually with interest, as part of a loan. The down payment represents your initial ownership stake in the home you continue to make payments on.
September 2, 2021For many first-time home buyers, the FHA loan is a popular option. With its lenient credit and income requirements, it appeals to young borrowers who don’t have an extensive credit history, or enough money saved up for a down payment.
July 30, 2021The FHA Streamline Refinance allows mortgage holders to refinance their home loan without going through the process of second appraisal. Since this is a step that was completed with the first FHA mortgage, the FHA waives it for the refinance
July 14, 2021Making the decision to buy a house is a big one, followed by the choice of which house to buy. The next biggest decision you make is going to be the type of home loan you need to go through with the purchase. One option for financing your home is an FHA loan.
