Fixed Rate Mortgage (FRM)
Fixed rate Mortgage is a type of loan that maintains a specified interest rate for the lifetime (or maturity) of the mortgage.
According to the Federal National Mortgage Association, first-time buyers often choose to go with a fixed rate mortgage because they want low monthly payments throughout the loan term. Buyers can also reap the greatest cumulative tax deductions available over the loan term when applying for the fixed rate mortgage.
Of course there are cons: generally, lenders require 20% down payments on conventional fixed rate mortgages, while with the Federal Housing Administration insurance, for instance, only 5% is required. Private Mortgage Insurance (PMI) can also help buyers purchase a home with only a 10% down payment. While buyers purchase private mortgage insurance (PMI) through private companies, lenders normally acquire the insurance for the buyers. So, first-year premiums are usually between .35% and 1.65% of the total loan amount, and depending on policy requirements, buyers must pay the premiums either in advance or monthly.
A twist on the 30-year fixed rate mortgage is the shorter term fixed rate mortgage, with either a 10 or 15-year loan term.
Real Estate Advice:
Knowledge is the best insurance; read our Real Estate Glossary so you can get up to speed with the real estate lingo!
Or better yet: access The OFFICIAL Real Estate Agent Directory® and find a real estate agent to guide you through insurance options and much more!
Popular Mortgage Terms
Compiling and maintaining the file of information about the transaction, including the credit report, appraisal, verification of employment and assets, and so on. Mortgage brokers usually ...
The process of determining whether a prospective borrower has the ability to repay a loan. Qualification Versus Approval: To be approved for a loan, a prospective borrower must ...
The present value of a house, given the elderly owner's right to live there until she dies or voluntarily moves out, under FHA's reverse mortgage program. ...
A measure of interest cost on a reverse mortgage. ...
The portion of the monthly payment that is used to reduce the loan balance. ...
A payment made by a lender to a mortgage broker for delivering an above-par loan. A par loan is one on which the lender charges zero points. Lenders charge points on loans carrying ...
The interest rate used in calculating the initial mortgage payment in qualifying a borrower. The rate used in qualifying borrowers may or may not be the initial rate on the mortgage. On ...
A request for a loan that includes the information about the potential borrower, the property and the requested loan that the solicited lender needs to make a decision. In a narrower sense, ...
A borrower, usually refinancing rather than purchasing a home, who allows a lock to expire when interest rates go down in order to lock again at the lower rate. ...
Have a question or comment?
We're here to help.