What is a fixed-rate mortgage?

Fixed-rate mortgages are a great option to help potential homebuyers feel secure in their home loan. 

Having a fixed-rate mortgage means that the interest rate borrowers pay on their mortgage will stay the same through the life of their loan. This allows homeowner to better plan and budget for their monthly payments, without surprises in their interest payments. 

To get a fixed-rate mortgage and the stability they offer, start a home loan application. 

A fixed-rate mortgage works by offering those looking to buy a home consistent and predictable monthly payments on their home loan. 

When borrowers get a fixed-rate mortgage, they will be told what rate they are approved for and will keep this rate for the life of their loan. 

For most, getting a mortgage could be a big monetary investment in their future. Knowing how much you will pay for the life of your loan could be helpful in planning for your investment and future. 

Those debating whether a fixed-rate or adjustable-rate mortgage is best for them will have to consider their main difference: your interest rates on an adjustable-rate mortgage will change while fixed rates stay the same. 

An adjustable-rate mortgage (ARM) will track current mortgage rates and change your rate to match. While ARMs could lower your mortgage payments if rates drop, your payments could also rise without much warning.  

Adjustable-rate mortgages can make predicting your future monthly mortgage payments difficult. So, why choose an adjustable-rate mortgage over a fixed-rate mortgage? ARMs can come with a period at the beginning of the loan where your rates are fixed at a lower rate than other loan types. 

There are two major types of fixed-rate mortgages: 15 years and 30 years. 

30-year fixed-rate mortgages are a popular option for many homeowners as they provide stabile, affordable monthly mortgage payments for the life of the loan. 

A 15-year fixed-rate mortgage is a great option for borrowers looking to pay off their home faster while keeping all monthly mortgage payments the same. Monthly mortgage payments with a 15-year fixed-rate mortgage will be higher than the 30-year alternative. 

Any loan type can come with their own benefits and drawbacks depending on what a borrower is looking for or needs, including a fixed-rate mortgage.  

• Predictable payments for the life of your loan.
• You don’t have to worry about interest rate increasing alongside mortgage rates.
• There are refinance opportunities if rates drop.

• If rates fall, you may miss out on those lower rates.
• Building equity can take long with a fixed-rate 30-year mortgage.

• Rates can be higher than at the start of an adjustable-rate mortgage.

There are several things that will determine the interest rate on a fixed-rate mortgage beyond where mortgage rates are when you originally get your home loan. 

When determining the exact interest rate on a mortgage, lenders will look at: 

• Credit score
• Income
• Employment history
• Deb-to-income (DTI) ratio

Lenders will also have their own criteria that determine a borrower’s rate. A higher credit score and lower DTI ratio could get a borrower better rates. 

Your monthly payments could change with a fixed-rate mortgage, even though your interest rate won’t. Changes in property taxes, homeowner’s insurance or with escrow accounts, if you have one, might alter your monthly payments. 

Whether a fixed-rate mortgage or an adjustable rate mortgage (ARM) is better for you is not always determined by when you get it, but more your exact situation and what you want to get out of your home loan. 

If you are looking for lower rates at the start of your home loan, an ARM might be a better option for you. If you are planning the future of your monthly payments, the stability of a fixed-rate mortgage might be your better option. 

If you are hoping to take advantage of rates while they are low, apply for a fixed-rate mortgage. After you are approved for your mortgage, request a rate lock from your lender. This will help ensure that you are able to secure the low rate.  

If you get a rate lock, you will have to make sure your loan closes before the lock expires. 

If you are hoping to get a fixed-rate mortgage, you can begin with an application for a home loan. 

When you begin a mortgage application, you will be connected with a trusted Loan Officer who can answer any questions about the application or a fixed-rate mortgage. If you are trying to take advantage of rates being low when you apply, ask about locking in your rate. 

Get connected with a Loan Officer and start the process of getting a fixed-rate mortgage when you start a home loan application. 

Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Refinancing your mortgage may increase costs over the term of your loan. Restrictions may apply.  

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