Conventional mortgages often offer lower interest rates compared to VA, FHA, and jumbo loans. It follows guidelines according to the borrower’s financial situation and the total amount of the loan. A fixed rate mortgage is the most common kind of conventional home loan you can take.
A fixed rate home mortgage features interest rates that are fixed until it is paid in full. This means that for a pre-arranged specific period of time, interest and principal rates for your home mortgage will not increase. Fixed rate mortgage offers payment terms ranging from 15 to 30 years.
15 to 20 Years
If you choose the 15 to 200-year route, you’ll get higher monthly payments than with a 30-year plan. However, you’ll pay off your loan faster, providing you with lower interest rates because of the short period. With this term, you also get to quickly build equity for your home.
With a 30-year loan, you have lower monthly payments, but higher interest rates because of the prolonged period. However, this term is more popular than the shorter terms because the amount to be paid is stretched farther, thus lowering your mortgage amortization.
What to Remember
There is a certain limit to the amount of the loan you can take. This would depend on the type of house you’re buying or its location. You also have to pay a 5 to 20 percent down payment, and have a good credit history and score as a requirement.
Fixed rate mortgages have the best interest rates to offer. They can protect you from rising housing rates that occur in the market. What’s more, you won’t be surprised in case increase in rates happen. However, you have to keep in mind that this type of home mortgage doesn’t cover property taxes, association fees, and insurance premiums.
If you’re planning on keeping your home for 30 years or more, a fixed rate home mortgage is for you. If you intend to stay for a shorter time, you should consider renting or get another type of loan.