Jan

1

Low Fixed Rate Mortgage

Filed Under mortgage 

As short term interest rates rises, fixed rate mortgages are become more popular. Fixed rate mortgages are more stable, the payment does not change throughout the life of the loan.

Low fixed rate mortgages in the past have been the highest interest rate of any loan product. However as adjustable rate mortgages (ARM) have been increasing the relative increase in fixed rate mortgages has been small. The past popularity of ARMs was that for a small risk you were taking advantage of a huge difference in interest rate. It is just not the case any more. Fixed rate mortgages are becoming more popular because ARMs still have the same possible risks but little or no difference in rate. While ARMs generally still have lower rates that may not always be true, and has not always been true. It is possible and has happened in the past that fixed rates were lower than some ARMs.

A low fixed rate mortgage is great for borrowers who plan on staying the home for a longer length of time.

Low Fixed Rate Mortgage Loans are loans that are eligible to be delivered to FNMA/FHLMC, which in turn are sold to investors as low risk, income producing investments. Since low fixed rate mortgages can be sold on the secondary market immediately and banks can recoup their capital investments shortly after making the loans, and do not have to take 30 years to collect on their investments, all lender banks, regardless of their market capitalizations, offer this type of mortgages, thereby making the Prime Loan (Low Fixed Rate mortgages) market highly competitive. The underwriting guidelines of Low Fixed Rate mortgages are more stringent than other types of loans. In order for a loan applicant to qualify for the lowest fixed rate mortgage available, he should have a very good credit profile, preferably with credit scores of over 720 and without any adverse credit history. He should also be able to prove that his gross income is at least 2.5 times the total debt, including the proposed mortgage payments. He must also prove that he has enough money to put at least 20% of the house value as down payment, cover all closing costs, and left-over reserves equaling 3 to 6 months housing expenses after settlement. For homebuyers and homeowners who do not meet one or more of these criteria, many banks offer alternative loan programs.

If your current loan program is ARM (Adjustable rate mortgage) it might be a good idea to take advantage of the current low fixed rate mortgage and stop worrying about ever increasing rates.

A low fixed rate mortgage is nearly an oxymoron. Borrowers should realize than a 30 year fixed mortgage offers protection against rate increases, however this protection comes with a price. A 30 year fixed will have the highest interest rate of any loan product on the market.

Low fixed rate mortgages are best suited for the long term borrower. Although it seems most borrowers want a low interest rate for a long term, it is more likely to get a lower rate with an ARM (adjustable rate mortgage) product as the lender will tend to raise the rates for longer term loans.

Low fixed rate mortgages with the lowest rates are usually only offered to borrowers with excellent credit and who have a 20% or more down payment.

Is your rate too high? If you're looking to compare mortgage rates or to get a rate quote on a FHA loan start here


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