With so many mortgage options available to homebuyers, selecting the right home loan and interest option is tricky. For the most part, homebuyers recognize the importance of getting a good or low interest rate on their loan. Buyers with a low credit score can expect higher rates. Depending on the severity of bad credit, a high interest rate can increase a monthly mortgage payment by $50 to $200. Understandably, buyers do everything in their power to negotiate a lower rate. Often times, getting a low rate mortgage involves delaying the buying process and allowing time to improve credit. Moreover, some buyers opt for adjustable rate mortgages, interest only, and so worth.
Despite the popularity of choosing adjustable rate mortgages and other new interest options, obtaining a fixed rate mortgage is likely the safest mortgage choice. Before choosing a mortgage loan, seriously consider the advantages and disadvantages of a fixed rate mortgage.
Reasons to Apply for a Fixed Rate Home Loan
When discussing loan options with a mortgage broker or local banker, homebuyers are likely persuaded to choose loan options that amount to a cheaper mortgage payment. While lower payments offer short-term benefits, the long term effect could be financially draining. For example, adjustable rate mortgages are appealing to persons hoping to acquire a low interest rate. However, low rates are not guaranteed, which mean your mortgage payment will fluctuate.
If choosing a fixed rate mortgage, you receive predictable monthly payments. Therefore, when and if housing market rates begin to increase, those who choose fixed rate mortgages are not affected.
Downside to Fixed Rate Home Loans
Because of current low rates, most buyers are opting for fixed rates. However, fixed rates are typically higher than adjustable rate mortgages. Thus, buyers will pay slightly higher mortgages. Also, because fixed rate mortgages do not fluctuate, buyers will not benefit from future declining rates. In this instance, a refinancing would be the only alternative for achieving lower rates.
Tips for Getting a Low Fixed Mortgage Rate
The key to getting a fixed home mortgage loan is acquiring a low rate. Unfortunately, a large percentage of homebuyers will not qualify for superb rates. Before applying for a mortgage, it helps to obtain a copy of your credit report. If necessary, make improvements to quickly boost credit score. This can be done by simply paying bills on time, avoiding late fees, reducing debts, and limiting credit inquiries.