30-Year Fixed-Rate Mortgage
Traditionally, the 30-year fixed mortgage is possibly the most popular mortgage loan on the market. It is characterized by an interest rate and monthly payment that remains the same over the life of the loan. For example, if a 30-year mortgage with a fixed rate of 3.5% would stay at that rate for the entire 30 years despite many changes in the real estate trends. But if you got a mortgage with adjustable interest rates then your payments can go up and down depending on the market rates. So, if you are can lock a very low-interest rate when you get your mortgage then you are in a great position. Another thing that you need to know is that you will be paying more of the interest than the principal at the beginning of your loan payments but midway of the life of the loan this will be reversed.
Requirements to Qualify for a 30-year mortgage
- You need a minimum down payment of 3%.
- 620 is the minimum credit score required.
- Your debt-to-income ratio should be less than 50%. You can calculate your debt-to-income ratio (DTI) by adding all your debt payments and divide the total by your monthly pre-tax income.
- You need 2% to 6% cash in hand to cover the closing costs
Benefits
- It provides the lowest monthly installments than typical fixed-rate loans.
- This allows you more flexibility as you can pay off your mortgage any time without prepayment penalties. You could also pay off your mortgage before 30-years by just adding a few hundred dollars to your monthly payments against the principal amount.
- As the payments are predictable you can fund other priorities when your income increases like your retirement savings, vacations, home renovation, etc.
- Less stress as you need not worry about the rising market prices.
- As you qualify for a larger loan based on your ability to make payments it will allow you to buy a more expensive house.
- You can avoid mortgage insurance if you make a down payment of 20% or more.
- If mortgage rates sink you can refinance your primary home up to 97% of its value.
- You can purchase your primary home with a low down payment of 3%.
Cons of a 30-year fixed Mortgage
- The major drawback is that you are charged a higher interest rate.
- You pay an unbelievable amount (about 60% more) of interest than 15-year loans.
- You will build very little home equity as the lion’s share of your first 10 years of payments goes towards your interest.
If you keep your monthly payments low and do not intend to sell your home for many years than the 30-year fixed-rate mortgage will be the right loan for you.
If you have any more questions about the 30-year mortgage do consult our experts at (877) 877 7575
