30 Year Fixed Mortgage


What is a 30 year fixed rate mortgage?

In a 30 year fixed mortgage, your monthly interest rate and principal payments will remain the same for the life of the loan. The 30 year mortgage has long been a very popular loan in Midland and Odessa, Texas because of it’s fixed interest rate and lower monthly payments. The biggest issue with the 30 year mortgage is that you’ll pay more in interest due to the length of the mortgage compared to the 15 year fixed mortgage.

30 Year Mortgage Benefits

  • The interest rate will NOT change for the life of the loan. Unlike the adjustable rate mortgage.
  • Conventional mortgages like the 30 year fixed often require less documentation than FHA loans or VA loans.
  • Increased cash flow – The 30 year mortgage will drop your monthly payment substantially (typically 40% less), compared to the 15 year mortgage, which allows you to save hundreds of dollars each month.

30 Year Fixed VS 15 Year Fixed

  • Your monthly payment is typically 40% less on a 30 year compared to a 15 year mortgage.
  • Your interest on a 30 year fixed will be 0.25% and 0.75% higher compared to the 15 year fixed.
  • Total investment of house at the end of amortization for a $200,000 house at 4.5% interest and 5% down:
    • 30 year fixed rate mortgage, a $200,000 house will end up costing you $346,573
    • 15 year fixed rate mortgage, a $200,000 house will end up costing you $261,628.
    • The 30 year fixed loan will cost you $84,945 more in interest.

30 Year Fixed Rate Mortgage Qualifications

Steady Employment – When you apply for a mortgage, you will need to meet certain requirements in order to prequalify. First off, you will need to show steady employment history of around 2 years at the same job. If you have changed jobs, mortgage lenders will want to see that you are changing to improve your income.

Credit Score – The higher your credit score the better interest rates you will be able to lock in on your loan. Most conventional lenders will require borrowers to have a credit score of at least 620 to qualify. If your credit is under 620 there are other ways to qualify for a mortgage, but you will need to contact a mortgage lender to see what their qualifications are.

Debt-to-income ratio – The next biggest pre-qualification for a 30 year mortgage is your debt-to-income ratio. There are two different types of debt-to-income variations that lenders look at:

  • Total Debt –  (total monthly debt / monthly income) less than 36%.
  • House debt – (Principal + interest + taxes + insurance) / total monthly income = approx 28% of your income before taxes.

Keep in mind that these percentages aren’t concrete. They vary, so contact a lender to see how your situation positions you to qualify.

Who Should Get A 30 Year Fixed Rate Mortgage?

If you are unable to afford the higher monthly payment of a 15 year fixed rate mortgage, then the 30 year fixed loan will be a better option for you. The 30 year mortgage will allow you the advantage of building equity in your home from the start. Also, the 30 year fixed rate mortgage is for those who think they may want to live in their home long term.

Frank Perea is a mortgage broker based out of Midland, Texas and serves clients all throughout eastern Texas including: Odessa Texas, Monahans Texas, Big Springs Texas among others.