Loan types
Fixed rate - If you borrow money for
15 or 30 years and are guaranteed that the monthly payment for
interest plus principal will never change, you are getting a fixed
rate. This kind of loan makes planning easier because you know
what the payments will be. This is the type of loan you need if
you have fixed income - or plan on staying in your home for a long
time.
ARM - If your monthly payment of
interest plus principal can be adjusted by the lender - every 1 or
3 years for example - then you have an adjustable rate mortgage
(ARM). If overall interest rates go down, when you rate is
adjusted, your payment will go down. But if rates go up, so do
your payments. There is usually a maximum rate, but you need to
understand the exact terms. If you do not plan on keeping your
home for very long, this is a good plan since it starts you out
with a lower payment than a fixed rate mortgage.
Conventional or Jumbo? Lenders use
these terms to indicate if the loan amount is above or below
$300,700.00. If it is above, it is called a jumbo and the rate is
slightly higher.
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