How to Compare Fixed Rate Loans

After you get your free quotes, you will need to compare fixed rate home loans to decide which is best for you. Here are some tips to guide your decision.

Comparing Fixed Rate Home Loans

Comparing mortgages is one of the most important steps in the home financing process. The choices you make will determine how much you pay up front, the amount of your monthly payments, and how much you'll pay in interest expense over the life of the loan. If you're comparing fixed rate home loans or any other type of loan, you should ask each prospective lender the following questions:

1. What is the loan's interest rate?
2. Do you charge points?
3. What is the annual percentage rate or APR?
4. What are the closing costs and all other fees and charges?
5. How is the loan amortized? In other words, how quickly will the principal be paid off?
6. Do you charge a pre-payment penalty?

Questions to Ask Yourself

When comparing fixed rate home loans, the right loan is going to be the one that best suits your unique needs. Here is a list of questions you need to ask yourself while comparing fixed rate home loans:

1. How long do I plan to stay in my home? If you plan to be in your home for at least five years, fixed rate home loans might be your best bet. On the other hand, if you plan to move again soon, you might want to take advantage of the low initial interest rates of an ARM.
2. Will I be able to afford higher payments in the future? To take out an ARM, you have to be sure that you will have the financial wherewithal to make higher payments down the road if your interest rate increases. If you are uncertain of this, you might want to look into fixed rate home loans to be on the safe side.
3. Are my job and income secure over the long-run? You don't want to take out fixed rate home loans or any other type of loan unless you're confident that your job and income are secure over the long term.
4. How comfortable am I with risk? Adjustable-rate mortgages are a risk. Interest rates could go down, which would mean your payments would decrease. However, interest rates could also skyrocket, which means your payments would as well. Fixed rate home loans are ideal for people with an aversion to this kind of financial risk. With fixed rate home loans, you know you will have the same monthly payment and interest rate for the life of the loan.

If you have questions that have not been answered yet, see if they are one of our frequently asked questions.