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
June 16, 2022It’s a great option to consider if you want to build your dream home on your own land instead of buying someone else’s already-lived-in house. FHA One-Time Close mortgages are also referred to as single-close construction loans--you’ll see these terms used interchangeably.
May 7, 2022The appraisal process is a very important part of buying a home. When you are budgeting and planning for your loan, you may want to set aside some extra funds in case there are corrections required as the result of an appraisal.
April 12, 2022There is a major question some new borrowers have about home loans in general, that also applies to construction loans in particular. If you want to apply for an FHA One-Time Close construction loan, there are certain rules about loan funding that you should know about.
March 30, 2022Once you’ve decided that you’ll be purchasing a home, one of the first questions you need to ask yourself is what kind of mortgage you’ll be using to finance it. When it comes to shopping for a home loan, there are a number of options to consider.
March 3, 2022Savvy homeowners make it a point to monitor interest rates so they can take advantage of a drop. Many choose to refinance their mortgages to capitalize on falling rates and lower their monthly payments and save on interest.
February 24, 2022One of the major hurdles that keeps families from purchasing a home is the need for a down payment. The FHA’s goal is to offer more homebuying opportunities to low- and moderate-income Americans and set more easily achievable down payment requirements for borrowers.
