| This is an age-old question that people have been | | | | bought into ARM's only to see their interest rates and |
| asking for about as long as there has been home | | | | monthly payments go through the roof along with their |
| financing. Although the practice of lending has evolved | | | | blood pressure. ARM's are unpredictable and chancy |
| dramatically over the past years, the basics are still the | | | | and are not recommended for most buyers. Usually |
| same. Indeed some of the old standby loans are still | | | | these loans are negotiated when interest rates are |
| offered and are usually the best option as well. This | | | | low and don't show signs of inflating in the near future |
| article will explore the most commonly used home | | | | but that is a huge gamble as many have found out. |
| loans and explore some of their merits and | | | | Balloon Mortgages - This is another tricky type of |
| drawbacks. | | | | home loan. Essentially the practice of a balloon |
| Fixed Rate Mortgage - This is by far the most | | | | mortgage is to enable the home owner to pay only |
| common and desirable mortgage. It is also one of the | | | | the interest for the first term of the loan, usually 5-10 |
| oldest types of home loan going. This is what most | | | | years. At that point the home owner must either pay |
| people are referring to when they speak of a | | | | the entire amount of the loan off or refinance for the |
| mortgage. Fixed rate loans are usually amortized over | | | | amount remaining. These kind of loans can work if you |
| a set period of time, 30 years for example. The fixed | | | | are only going to be in a home for a short time. |
| interest rate is what makes these loans popular. If you | | | | However, long-term they are not a wise choice. |
| can find a fixed rate mortgage then you will always | | | | FHA & VA Loans - These are both Government |
| know what you loan payments will be for years to | | | | insured loans. VA loans are available to Veterans only |
| come. This is highly valuable in creating a realistic | | | | and FHA loans are Federal Housing Administration |
| budget that you can stick to in the long run. This type | | | | loans and a potential borrower must qualify for either. |
| of loan is so popular because of the wild fluctuations | | | | Keep in mind that only certain homes qualify for this |
| that home loan interest rates go through. Once the | | | | kind of loan program as well. |
| loan is signed then the interest rate is fixed for the | | | | Be sure to investigate your borrowing options carefully. |
| term of the loan. | | | | The kind of loan that you choose will be a major |
| Adjustable Rate Mortgage - This kind of loan is based | | | | defining factor in your financial future and as such it is |
| on the borrower taking a chance that interest rates will | | | | a decision that should be made from an educated |
| decrease. ARM's are notorious as many people | | | | perspective. |