| For years, when someone wanted to purchase or | | | | one percent or so. The difference is that the |
| refinance a home, the choices were simple. | | | | rate can adjust over time as the market |
| The buyer chose either a 15-year fixed-rate | | | | changes. The loan agreement will spell out |
| mortgage or a 30 year fixed-rate mortgage. | | | | how often the rate may change and how much |
| That was it. Of course, those were also the | | | | the rate may change at one time. The |
| days of twenty percent down payments, which | | | | agreement may also indicate a maximum |
| seriously hindered the ability of many | | | | interest rate that may be charged over the |
| Americans to obtain the loan necessary to buy | | | | life of the loan. These types of loans are |
| their own home. In recent years, more | | | | ideal for buyers who do not intend to stay in |
| flexible loan types have become available and | | | | their home for more than a few years, or |
| down payment requirements have been relaxed. | | | | buyers who are purchasing in times of high |
| There are now far more choices of loan types | | | | interest rates, when there is an expectation |
| available for the borrower than ever before. | | | | that rates will drop over time. |
| That can be a mixed blessing, however, as | | | | |
| prospective borrowers now have to do a | | | | Convertible mortgages are ARMs that offer the |
| tremendous amount of homework in order to | | | | buyer an opportunity to "convert" the |
| determine which type of loan might be the | | | | adjustable rate loan to a fixed rate loan |
| best choice. The selection of loan types that | | | | after a certain period of time that is |
| are currently available can be quite | | | | spelled out in the loan agreement. There is a |
| bewildering, and the wrong choice could cost | | | | fee charged for converting the mortgage, but |
| the prospective borrower thousands of dollars | | | | the fee is typically less than the fees |
| over the term of the loan. | | | | associated with refinancing the mortgage |
| | | | altogether. |
| The standard 15-year and 30-year mortgages | | | | |
| are still quite popular. Each provides the | | | | Two Step mortgages offer an initial rate that |
| stability of a fixed interest rate and a | | | | is lower than the rate for fixed-rate |
| payment that will remain the same throughout | | | | mortgages for the first few years of the |
| the duration of the life of the mortgage. | | | | loan. After a set period of time, the rate |
| When interest rates are near historic lows, | | | | increases to a fixed rate. This allows buyers |
| as they are today, these traditional choices | | | | to pay less during the early years of their |
| work well for most buyers. Buyers who find a | | | | loan, when they may earn less or need extra |
| 15-year or 30-year mortgage to be within | | | | cash for home furnishings. The disadvantage |
| their means would probably benefit from | | | | of this type of loan is that the increase in |
| obtaining such a mortgage now. | | | | the interest rate can be substantial, and may |
| | | | make the payments unaffordable for some |
| In recent years, as home prices have | | | | buyers.. |
| increased faster than wages, the lending | | | | |
| industry has created more flexible types of | | | | These are just a few of the types of loans |
| mortgages designed to help buyers who may | | | | that are currently available in the market. |
| have trouble with traditional loans obtain | | | | There are probably dozens of variations on |
| financing. These types of loans tend to have | | | | ARM loans, and prospective buyers should |
| adjustable interest rates: | | | | study their options carefully before agreeing |
| | | | to a loan. Making the right choice could save |
| The Adjustable Rate Mortgage, or ARM, has a | | | | buyers thousands of dollars over the life of |
| rate that adjusts over time as spelled out in | | | | the loan. Making the wrong choice could leave |
| the mortgage agreement. Typically, the rate | | | | buyers with a loan that they cannot afford to |
| at the time of singing the loan is lower than | | | | pay. A little time spent on research is time |
| that of a traditional mortgage, perhaps by | | | | well spent. |