The Types of Loan Programs

The two most basic kinds of mortgages offered by both conventional and government backed lenders are Fixed and Adjustable Rate Mortgages (ARM). Here is a table showing the very basic advantages and disadvantages of each:

The Advantages and Disadvantage of Fixed and ARM Mortgages
FIXED Mortgages ARM Mortgages
Advantages Advantages
  • The payment never changes; makes it easier to budget
  • The Interest rate never changes; no worries about current conditions
  • If interest rate declines, your payment will decline.
  • May be easier to qualify because the interest rate and payment are initially lower
Disadvantages Disadvantages
  • Need more income to qualify because of higher interest rate
  • If interest rates decline, your payment won’t
  • If the interest rate increases so does your payment
  • A large increase could make your home unaffordable

Many lenders have different kinds of Loans such as interest only, fixed rate balloons, and negatively amortized loans.
ARMS come in many varieties: Convertible, Balloon, Option and Interest only ARMs. Ask your broker how these loans could benefit you.
Remember, your Broker can and should give you complete information about all available loan programs and how they work.

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