Compare 30-Year Fixed-Rate Mortgages
If you’re planning to buy a house, you probably need a loan. And for the majority of borrowers across the U.S., that loan takes a specific form. The most common kind of home loan in America is the 30-year fixed-rate mortgage.
It makes sense. This kind of financing offers some serious upside, like predictable payments and lower monthly costs than shorter-term mortgages. If you’re thinking about buying a home, the 30-year fixed-rate mortgage is an excellent option to consider.
What is a 30-year fixed-rate mortgage?
The name of this loan product tells you a lot about it: it’s a loan that lasts 30 years (i.e., you have 30 years to pay off the balance) and comes with a fixed (i.e., unchanging) interest rate. You can compare this against shorter-term loans, like 15-year fixed-rate mortgages, or ones with an adjustable interest rate, which allow the lender to change the interest rate periodically.
Because this kind of loan gets paid off over 30 years, it comes with lower payments than shorter mortgages. More time to get your balance to $0 means less of your monthly budget needs to go toward your housing.
And the fixed interest rate means your monthly principal and interest (P&I) payment won’t change. You might have some small fluctuation in what’s due each month because of changes to property tax or homeowners insurance. Still, those should be minor, so this kind of home loan makes budgeting relatively easy.
The pros and cons of a 30-year fixed-rate mortgage
While a 30-year fixed-rate mortgage is the most common type of home loan, it’s absolutely not your only option. To decide if it’s right for you, explore your other choices and weigh the upside and drawback of each type of mortgage.
Pros of a 30-year fixed-rate mortgage
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These kinds of mortgages come with predictable monthly payments, making budgeting easier.
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Because you’re breaking the repayment up into 360 pieces (30 years with 12 monthly payments in each year), the monthly payment is smaller than with shorter-term loans.
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That smaller payment helps to lower your debt-to-income (DTI) ratio, which makes it easier to qualify for the loan — and to get a lower interest rate.
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You’ll have this loan long-term, assuming you don’t sell or refinance. Most people tend to earn more money as they get older, which can help your monthly payments feel more affordable over time.
Cons of a 30-year fixed-rate mortgage
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30-year fixed-rate mortgages usually have higher interest rates than shorter-term loans and the starting rates on adjustable-rate mortgages. (For the latter, though, the rate usually ends up increasing once the introductory period ends.)
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It takes a long time to start seeing consistent equity gains with this kind of loan. The 30-year payoff plan means you’re making a relatively small monthly payment. And in the beginning of your loan, the bulk of that goes toward interest.
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With a longer repayment timeline, interest has more opportunity to build up. You’ll pay more in interest over the life of the loan than you would with a shorter-term loan.
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If you plan to sell your house soon, you can probably save money going with an adjustable-rate mortgage (specifically, look for one with an introductory period that lasts beyond when you plan to sell).
How to compare 30-Year Fixed-Rate mortgage rates
If you only take one piece of advice when you’re getting a mortgage, let it be this: compare rates from at least three different lenders. Doing so can save you thousands of dollars over the life of your loan.
To make it easier for you to put the work in here, follow these steps:
Step 1: Understand your borrower profile
First, you want to get a handle on how mortgage lenders are going to see you. If you look like you’re going to be able to repay your home loan fairly easily, they’ll offer you more favorable conditions. If you look high-risk, you’re going to pay more for your mortgage. Specifically, you’ll be charged a higher interest rate.
So, what makes a borrower low- or high-risk? To decide what kind of loan to offer to you (if any), lenders look at a lot of factors. The biggest ones here include:
- Your monthly income — you don’t want an overly large chunk to have to go toward paying your monthly mortgage bill, which lenders measure with your debt-to-income (DTI) ratio
- Your credit score, which essentially tells them how good you’ve been with managing money in the past
- Your loan-to-value (LTV) ratio (higher is riskier) — the price of the house and your down payment size both come into play here
If you’re not in good shape in any of these areas, putting in some work before you buy (e.g., working on your credit score, lowering your DTI ratio) can help you get a lower interest rate.
Step 2: Use rate tables to see what’s on offer today
There are lots of resources online that show you rate offers from leading lenders. Use a mortgage rate table to get a feel for what kind of interest rates are available from financial institutions that provide home loans in your area.
Ideally, that rate table lets you input personal information, like your credit score and the price of the house you want to buy. This way, the rates you get shown should align with what you’re actually eligible to get. A lot of lenders advertise low starting rates, but only the “best” borrowers will be approved for them once they apply.
Step 3: Get preapproved with three lenders
Once you’ve picked out a few lenders that look good to you, go through their preapproval process. That will mean filling out some paperwork, but it’s the best way to figure out what you can really qualify for in terms of loan size and interest rate.
Have financial documents — like your bank statement and pay stubs — handy to make it easier to complete your preapproval applications.
Step 4: Compare preapprovals
When you get preapproved, the lender should give you documentation about your potential mortgage. Ideally, this gives you a feel for the total amount you’re borrowing, the repayment term, the interest rate, fees, and closing costs.
Line up your quotes from each lender and go through them, paying special attention to the annual percentage rate (APR). This tells you how much you’ll pay each year for the loan including not just interest, but also fees. By looking at APRs, you get a clear idea of what you’ll truly pay if you choose that specific mortgage. This helps you identify the best option for yourself and your financial goals.
If you’re ready to start comparing 30-Year Fixed-Rate rates, use our rate table to get started. We have fields up top where you can input key details like your credit score range and zip code so we can best tailor the mortgage rate offers to you.