Finding the Best Fixed-Rate Mortgage Loans

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In this article, we will talk about the fixed-rate mortgage loan and why it's a good idea for home buyers in most situations. I'll also explain how you can get the best deals on a fixed loan to save yourself some money over the long term.

What Is a Fixed-Rate Mortgage Loan?

As the name suggests, a fixed-rate loan is one that keeps the same interest rate over the entire life or "term" of the loan. This obviously makes it different from the second-most-common type of home loan, which is the adjustable-rate mortgage or ARM loan.

For example, if you take out a 30-year fixed-rate mortgage loan with an interest rate of 5.5%, it will keep that interest rate for 30 years -- unless you refinance loan at a later date. That is the meaning of the word "fixed" in the context of this article. In a moment, I'll offer some tips for finding the best fixed-rate mortgage loans available. But before that, we should talk about the benefits of this financing option.

The Benefits of Going Fixed

By now, you probably already realize the main benefit of using a fixed mortgage loan, as opposed to an adjustable one. It's the predictability you enjoy over the life of the loan, and it's a big advantage. With the fixed-rate mortgage, there are no surprises down the road. The rate you start with is the rate you end with, even if it's decades later.

Of course, you'll pay a premium for this type of predictability. The average interest rate for a fixed mortgage is generally higher than the average rate on an adjustable loan. But in my opinion, the benefits of a fixed mortgage far outweigh the drawbacks.

Take a look at the economic situation in our country was in during 2008 - 2009. A lot of people used adjustable mortgages and found themselves in situations where they could not refinance or sell the home, so they were forced to endure the adjustment phase of their loan. When the interest rates adjusted upward, as they so often do, many people found they could no longer afford their homes. This played a major role in the foreclosure crisis that spread throughout our economy, fueling a full-scale economic recession.

This is why I feel a fixed-rate mortgage loan is the best option for most home buyers, especially those who are going to live in the home for a long period of time.

How to Get the Best Rates

So, I've convinced you that going fixed is the best way to go. What next? How do you find the best fixed-rate mortgage loans in today's economy? Where do you go to find the best deals from lenders? Well, there are a few things that you need to know before you start shopping for a loan.

The first thing you need to realize is that mortgage lenders evaluate borrowers on an individual basis, based on a variety of factors. These factors include the borrower's credit score, income level, current level of debt, and the affordability of the home loan they're trying to obtain. So even if a particular lender advertises that they have the best rates around on fixed-rate mortgage loan, it doesn't necessarily mean that everybody is going to qualify for those best rates. It all comes down to how well you qualify, given the lender's evaluating criteria.

This is why we so often stress the importance of keeping a good credit score. This is one of the best things you can do to improve your chances of getting a good rate on the loan. So before you go any further, you might want to check your credit score and see where you stand. And if you need help improving your credit, you'll find plenty of articles on that in the credit section of our website.

Taking these preliminary steps early on will help you find, and get approved for, the best fixed-rate mortgage loans around. In other words, good credit is key to saving money on a home loan. So it's worth pursuing!

Using the Internet to Find the Best Deals

Another strategy we recommend is to use the Internet to find the best deals on a fixed loan. By starting this process online, you can save yourself a lot of time and energy. For example, by using the website offered on our mortgage quotes page, you can fill out a single form and get feedback from several mortgage companies at once. This is obviously better than driving all around town or making a dozen phone calls. It's also an easy way to compare different offers and terms, with the ultimate goal of finding the best fixed-rate mortgage loan for yourself.

Establish Your Budget Before Getting a Mortgage Loan

Lastly, I want to stress the importance of setting a home-buying budget for yourself before you start talking to mortgage lenders. A lot of home buyers approach lenders before they've established a budget, thinking that the mortgage lender will tell them how much they can afford. But this is backwards. A lender cannot tell you how much you can afford to pay each month. Only you can decide that for yourself.

Sure, the lender can tell you how much they're willing to loan you, and what kind of rate they're willing to offer. But that's about it. It's even possible to get approved for a loan that's too big for you, and it happens all the time. Keep this in mind when shopping for the best fixed-rate mortgage loan, and when buying a home.

Conclusion and Going Forward

We talked about a lot in this article, so let's recap some of the key points.

  • A fixed mortgage has many benefits and advantages over an adjustable loan. Yes, you'll probably pay a premium for the predictability of a fixed-rate loan, but in my opinion it's worth it.
  • The rate you start with is the rate you end with, even if the term of the loan is for 15 or 30 years down the road. This is significant.
  • The Internet can help you find the best deals on a fixed mortgage loan. It saves you time, while allowing you to compare multiple offers from different lenders.
  • Your credit score is one of the key components of mortgage qualification. So you should find out where you stand right now in terms of your credit, and make improvements if needed.
  • And lastly, you should establish a budget for yourself before you start talking to lenders. This will prevent you from taking on more of a loan than you can afford.

I hope this article helps you find the best deals on the fixed-rate mortgage loan, and I wish you all the best with your home buying process. We have a variety of other articles on this website on the subject and related subjects, so be sure to spend some time browsing the information available.