While there are several mortgage products available to homebuyers, most of them can be grouped into two broad categories: fixed-rate mortgages and adjustable-rate mortgages (ARMs). A fixed-rate mortgage has one interest rate that never changes, while an ARM has a variable interest rate that changes periodically over time.
A fixed-rate mortgage has the same interest rate for the life of the loan.
Jump to insightFixed-rate mortgages come in many types, including conventional and government-backed loans.
Jump to insightThis type of mortgage may be right for you if you want predictable monthly payments.
Jump to insightHow fixed-rate mortgages work
Fixed-rate mortgages are the most common type of mortgage, and they have one interest rate for the entire loan term.
Interest rates
Mortgage rates fluctuate daily. They change based on factors like economic conditions, supply and demand and the Federal Reserve’s benchmark interest rate. The benchmark interest rate, known as the federal funds rate, is the interest rate financial institutions use to lend money to each other overnight.
Once you sign your mortgage agreement, you’ll keep the same interest rate until you pay off your loan.
Once you sign an agreement for a fixed-rate mortgage, you’ll keep the same interest rate until you pay off your loan or refinance with a new loan.
Term lengths
Fixed-rate mortgages tend to come with terms of 15, 20 or 30 years. There are also 10-year mortgage options, but they’re not as common. Ultimately, the shorter the term, the higher the monthly payments, but the faster you pay the loan off. That said, the 30-year option is popular for cash flow reasons. Interest rates tend to be higher with this option, but the monthly payment is much more affordable since the loan amount is spread over more time.
» MORE: 20-year vs. 30-year mortgage: Which is best for you?
Monthly payments
You’ll pay off the mortgage through fixed monthly payments of principal, interest, taxes and insurance. The mortgage lender calculates an amortization schedule ahead of time to build the interest into your payments. During amortization, your payment stays the same from month to month, but the amounts going toward principal and interest differ.
Early in the loan term, more of each payment goes toward interest because there’s a larger balance. However, as you continue to make payments, there’s less principal to charge interest on. As a result, these payments are eventually made up of more principal than interest.
Types of fixed-rate mortgages
Fixed-rate mortgages come in many different types.
Conventional loans
Conventional loans are any mortgage loan that’s not guaranteed by the U.S. government. These loans are backed by private financial institutions, banks and credit unions, and they technically come in conforming and nonconforming types.
- Conforming loans: Conforming loans meet criteria (like maximum loan limits and minimum credit scores) set by government-sponsored enterprises like Fannie Mae and Freddie Mac.
- Nonconforming loans: Nonconforming loans don’t meet the guidelines set by government-backed programs. They typically have larger loan amounts and may have stricter credit and debt-to-income (DTI) requirements.
Conventional loans typically require down payments of at least 3%, though it’s usually recommended to put at least 20% down to avoid paying private mortgage insurance (PMI).
» MORE: How to shop for and compare mortgage lenders
Government-backed loans
Government-backed loans refer to mortgage loans that are guaranteed by agencies like the Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA) and the U.S. Department of Agriculture (USDA). All of these agencies have set requirements for mortgage loans, like maximum loan amounts, minimum down payments, maximum DTI ratios and minimum credit scores. However, minimum borrower criteria is typically more lenient than conventional loans.
- FHA loans: FHA loans are typically easier to qualify for than conventional loans. They require 3.5% or 10% down, depending on your credit score.
- VA loans: VA loans are available to military members, veterans and their eligible family members. VA loans typically don’t require a down payment or PMI.
- USDA loans: USDA loans are typically available in certain rural areas, and you’ll need to meet income requirements. These loans are typically best for people with low to moderate income.
Pros and cons of fixed-rate mortgages
Consider the pros and cons of fixed-rate mortgages:
Pros
- Predictable monthly and future payments
- Rate is locked in if rates go up
- Can be conventional or government-backed loan
Cons
- Higher interest rates than ARMs
- Could miss out on a lower rate if interest rates drop
Is a fixed-rate mortgage right for you?
A fixed-rate mortgage may be right for you if you want to:
- Lock in your rate: If current mortgage rates are low overall, you can lock in a great rate. This protects you in case rates rise later.
- Have predictable payments: Fixed-rate mortgage payments are the same every month. It’s much easier to budget for your mortgage this way.
- Get more options: You can get a conventional fixed-rate loan or government-backed fixed-rate loan insured by the FHA, VA or USDA.
- Have payment flexibility: You can make only your minimum monthly payment, or you can pay more and potentially pay the loan off faster.
FAQ
What credit score is needed for a fixed-rate mortgage?
Typically, you’ll need a credit score of at least 620 for a fixed-rate mortgage, though some government-backed loans, like FHA loans, require a minimum credit score of 500 or 580. However, for the best approval odds, rates and terms, it’s usually best to have a good to excellent credit score, or a FICO score of 670 to 850.
Should you get a short-term fixed-rate mortgage?
A short-term fixed-rate mortgage could be right for you if you can afford paying higher monthly payments. Typically, the longer the term, the lower the monthly payments, and the shorter the term, the higher the monthly payments.
Which is better, a fixed- or variable-rate mortgage?
Whether a fixed-rate or variable-rate mortgage is right for you depends on your financial situation and needs. If you want predictable monthly payments, a fixed-rate mortgage will likely be better for you. However, a variable-rate mortgage may be better for you if you plan to sell your home or refinance before the loan’s first rate adjustment period or if you expect interest rates to fall in the future.
What is a conforming fixed-rate loan?
A conforming fixed-rate loan is any loan that adheres to the guidelines set by a government-sponsored enterprise like Fannie Mae and Freddie Mac.
Bottom line
Fixed-rate loans can be excellent options for homebuyers who want predictable monthly payments with an interest rate that stays the same over time. This is especially true when rates are low since locking in a rate in a low-interest environment protects you from future increases. While an adjustable-rate mortgage’s lower starting rates might be more attractive, you won’t be able to predict future monthly payments.
Article sources
ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
- U.S. Department of Agriculture Rural Development, “Single Family Housing Guaranteed Loan Program.” Accessed Nov. 25, 2025.
- U.S. Department of Housing and Urban Development, “FHA Single Family Housing Policy Handbook.” Accessed Nov. 25, 2025.
- U.S. Department of Veterans Affairs, “VA Home Loans.” Accessed Nov. 25, 2025.
