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
The standards imposed by lenders in determining whether a borrower can be approved for a loan. These standards are more comprehensive than qualification requirements in that they include ...
A bundle of mortgage characteristics that lenders view as comprising a distinct category. The characteristics used include whether it is an FRM, ARM, or Balloon, the term, the initial ...
A borrower who submits applications through two loan providers, usually mortgage brokers, without their knowledge. Home purchasers sometimes submit more than one loan application as a way ...
Every ARM is tied to an interest rate index. An index has three relevant features:availibility, level, volatility. All the common ARM indexes are readily available from a published source, ...
Assuming responsibility for someone else's payment obligation in the event that that party defaults. ...
The definition of an assumable mortgage is what happens when a buyer assumes or takes over a mortgage that the seller contracted. This is a type of financial arrangement that passes an ...
Loan applications that are withdrawn by borrowers, because they have found a better deal or for other reasons. ...
An independent contractor who offers the loan products of multiple lenders, called wholesalers. Mortgage brokers do not lend. They counsel borrowers on any problems involved in qualifying ...
The highest rate possible under an ARM contract; same as 'lifetime cap.' It is often expressed as a specified number of percentage points above the initial interest rate. ...
Have a question or comment?
We're here to help.