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