Buying a home is probably one of the biggest, most important, and smartest financial decisions you will make in your life. There are several options as far as the terms of your fixed rate mortgage. The basic types of mortgage loans terms are a 30 Year Fixed Rate Mortgage, a 20 Year Fixed Rate Mortgage, and a 15 Year Fixed Rate Mortgage. Throughout those years, the interest rate and principal payments should remain the same. Escrow items such as property taxes, homeowners insurance, and your PMI (Private Mortgage Insurance) can go up but most generally your monthly payments will be very stable.
A 30 year fixed rate mortgage loan is the pretty much the maximum time you can get a home mortgage. With the 30 year fixed rate option, most generally your monthly payments are lower because you are financing for a longer period of time. This loan is the easiest fixed rate mortgage to qualify for and provides the maximum interest deduction for taxes. If you are planning to stay in your home for a long time this type of loan would be best for you. Be sure to visit our mortgage calculators so you will know what loan term and interest rate that you will be most comfortable with.
There are some advantages and disadvantages of financing your home on a 30 year fixed rate mortgage note. Some advantages are a 30 year fixed rate mortgage does offer you the lowest payment option. Also a 30 year fixed rate mortgage is probably the easiest to get approved for because it does lower you payments since you have more payments and with a fixed rate there aren't so many surprises. Most generally your payments should stay very close to being the same. Some disadvantages of financing your home on a 30 year fixed rate mortgage would be you are paying lots more in interest over the life of the loan. Also the interest rate that you would be paying on a 30 year fixed rate mortgage is usually higher than the 20 year fixed rate mortgage and the 15 year fixed rate mortgage options. For more information on the types of loans and which loan is best for you, please be sure to visit our "Which Loan Is Right For Me?"
In short, remember each type of loan has different reasons why you should or shouldn't choose them. The best thing to do is do some research before applying and find the best interest rate and loan term because this will help keep your payments lower but it could actually save thousands of dollars in finance charges over the life of your loan.
