30 Year Fixed Mortgage Rate

In today’s market, it is amazingly easy to get a good 30 year fixed rate mortgage. As long as one is buying a conforming property and follows some basic common sense rules, one can obtain debt at the lowest level in the past forty years.

Unfortunately, today’s strong lending market is most applicable only for those mortgages which are conforming. A conforming loan is one which conforming to guidelines set by Fannie Mae and Freddie Mac, who will buy the loan and sell it on the market. The key consideration is that the mortgage amount must be at or below a certain dollar limit which is $417,000 for most areas, and up to $729,750 in high cost areas in the continental US and Puerto Rico. Higher limits are available in Alaska, Guam, Hawaii and the US Virgin Islands. Any loan above this limit will not be eligible for purchase by either of these agencies and will end up carrying higher rates and inferior terms.

Once one has limited one’s purchase to a conforming amount, getting the best 30 year fixed mortgage rate requires attention to one’s credit. Simply increasing one’s FICO score from 630 to 700 can result in a rate that is 140 basis points lower—equal to going from 6.4% to 5.0%. Although many credit issues can take a long time to solve, taking some basic steps like reducing balances owed and cleaning up any bad debts can make a significant difference in one’s ability to get a good rate. A good mortgage broker should be willing and able to assist a buyer with some basic credit repair activities without charging a fee.

If possible, borrowers should put 20% down on the house. This will reduce the risk for the lender and make the lowest rates possible. If this is not an option, borrowers should consider an FHA loan. FHA loans have relaxed qualification criteria and allow for down payments as low as 3.5%. In exchange for this, though, they carry a requirement for PMI, which is a mortgage insurance product that is added on to the mortgage payment.

Ultimately finding the best rate is a matter of shopping around and accurately comparing rates and terms. The base interest rate, sometimes called a coupon rate, is not a good indication of the total cost of the loan. For example, it is hard to identify whether a 5.15% rate with no costs or a 4.95% rate with $5000 in costs is a better deal. To be able to compare two 30 year fixed mortgages on an equal basis, look for the APR which is an interest rate that includes both the actual interest on the loan as well as all of the other costs. The loan with the lowest APR will be the best loan. A reputable loan broker is a good place to start the search for the best rate since it typically will not come from one’s local bank.