30 Year Rates - 30 year rates

When buying a home, taking a mortgage is necessary since none of us have enough capital to pay upfront. As a first time buyer, people get confused with the multiple mortgage options available to them.
Federal Housing Administration (FHA), Veteran Affairs (VA) and Rural Housing Service (RHS) are loans that the US government offers. FHA loans have lower down payment requirements but cannot exceed a statutory limit. This statutory limit is defined by the county you wish to purchase your home in.

Private players such as Fannie Mae offer various loan programs. Fixed rate mortgages are popular with people who want to purchase large homes. With a fixed rate mortgage, the interest and mortgage monthly payments remain fixed for the loan period. Home owners generally opt for 30 year loans because of lower monthly payment, even though the interest rates are somewhat higher for this term.

According to Freddie Mac, a 30 year fixed rate mortgage offers the following benefits:

1. Your mortgage and monthly payment will not get affected if the interest rates are increased.
2. Because you know the exact amount you will be giving for your mortgage payment, you can plan other expenses around this.
3. Being a fixed rate mortgage, you know what your mortgage payment will be regardless of the interest rates.

A 30 year interest rate has some disadvantages as well. For example, if the interest rate drops, there will be no change to your fixed mortgage although you have the option of refinancing, if you have available equity.

Fannie Mae also offers interest only, fixed rate mortgages in which the term of the loan is divided in two periods. In the first period, the monthly payment is lower because you are paying interest only and are not making any payments. In the second period, you pay both. The principal or the amount you borrow is paid off during the second period so expect second period payments to be higher.

In comparison to adjustable rate mortgages (ARM), a 30 year fixed mortgage rate offers less flexibility since an ARM offers low initial rates allowing you to purchase expensive homes. However, as the name suggests, the interest rate is not fixed – a benefit that a fixed mortgage provides.

In May, 2010, LA Times reported that 30 year interest rates fell to a record low of 4.78%. During this time, a large number of home owners applied to refinance their loans. Upfront costs for refinancing are high but experts suggest that the low interest rate will offer long term savings.

Select a mortgage depending on your current financial situations. Expecting a promotion or an increase in your income is good but do not consider it while taking a loan. Take small, calculated steps to avoid the risk of foreclosure.