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