Tips on Picking a Fixed Rate Mortgage
With interest rates at their lowest levels in years, many Americans are looking to save money with a fixed-rate mortgage or FRM. These mortgages take a single interest rate and apply it to the life of your loan. FRM’s are among the safest mortgage options available to consumers because of a fixed monthly payment.
When choosing an FRM, the biggest decision is about the term. There are many different terms to choose from all ranging from 10 to 40 years. Shorter terms offer quicker owning possibilities and lower interest rates, but higher monthly payments. Longer terms offer lower monthly payments but overall higher interest rates. Assessing your financial situation is the best way to know which is right for you.
To assess your situation properly, you need to know several things. You need to understand how much down payment you have. If you can muster a large down payment, you will lower your overall monthly payments even on a shorter term, like 15 or 20 years. For those with less than a 10% down payment, 30 and 40 year FRMs are more likely to suit your needs. You also need to know your credit score. A higher score will result better terms generally and lower rates specifically. Also know your DTI, your debt-to-income ratio.
Picking the right mortgage for you isn’t always as simple as just knowing your down payment or monthly payment expectations. If you have other questions about choosing a fixed rate mortgage, be sure to ask Bill, the Bills.com expert.