| You've found a home, your credit is in good shape and | | | | have to worry about getting stuck with a bad rate for |
| you have money for a down payment. So, how do | | | | 15 or 30 years. With a fixed rate mortgage, the lender |
| you go about picking the right home loan for you? | | | | runs the risk of lending you money at a relatively low |
| Picking A Home Loan - Short Term | | | | rate for a long period of time, only to see rates rise |
| There are more than a few issues that go into picking | | | | later during the life of the mortgage. This leaves the |
| a home loan. One of the key factors is the amount of | | | | lender "upside down" on the loan. Lenders make every |
| time you intend to live in the residence. If you expect to | | | | effort to avoid such scenarios. |
| sell within a few years, then picking a home loan for a | | | | ARMS - Risk, Risk and Risk |
| short term scenario is going to be relatively easy. | | | | The disadvantage associated with ARM loans is the |
| ARMS - Adjustable Rate Mortgages | | | | inherent risk. With an ARM, the interest rate can be |
| Adjustable rate mortgages are very good solutions for | | | | adjusted on a quarterly or yearly basis depending upon |
| short term home ownership situations. The advantage | | | | the terms of the loan. If interest rates shoot up and the |
| lies primarily in the fact you will get a much lower | | | | real estate market cools off, you may be left with a |
| interest rate on an adjustable mortgage. This, of | | | | loan you can't make payments on and a home with |
| course, translates into lower monthly payments, which | | | | nominal equity. This is a nightmare scenario. If you're |
| gives you financial flexibility for the first few years of | | | | considering an ARM, make sure you understand how |
| the loan. | | | | much the rate can rise, when it can rise and what the |
| Interest rates on ARMS are lower than fixed rate | | | | resulting payments will be. |
| loans for one primary reason. With an ARM, lenders | | | | For short term home ownership situations, adjustable |
| assume you intend to hold on to the home for a | | | | rate mortgages almost always make sense. While an |
| relatively short period of time. As a result, they are | | | | ARM may seem an obvious answer, just be careful |
| willing to offer lower interest rates because they don't | | | | you are not stuck holding the bag if rates shoot up. |