Finding the perfect home for you and your family is not an easy job. However, perfect loans to pay for it is another complicated task to be solved. Loan programs come in many forms and come from many sources. But before you even start looking for a lender, first of all, you have to know what type of loan you are looking for. There are two basic types: fixed-rate and adjustable-rate mortgages, known as ARMs.
Fixed rate is a mortgage loan program where the interest rate does not change for the life of the loan.
With an ARM, the interest rate can change. The interest rate in this program is adjusted periodically based on an index. It is also called a variable rate mortgage. When and how it changes will depend upon the type and length of the ARM you have. There are one-year ARMs, where the interest rate stays the same for the first year, and then changes based on what the interest rate is on the date it changes. There are three-year ARMs, and so on.
The charm of an ARM is that the initial interest rate is usually lower than a 30-year loan.
In general terms, the main factors you should think about when looking at a mortgage is how long you can reasonably expect to stay in a house. If you know you will be transferred in two years, then a two-or three-year ARM makes sense, since you’ll be buying a new home at whatever the interest rate will be at that point, no matter what interest rate you pay now. If you plan on being there for the long haul, a fixed rate loan is your best deal.
