| There are many different types of mortgage loans | | | | There are also other types of mortgage loans |
| available to the consumer. The most common | | | | available, although the aforementioned are the most |
| amortized loan types are fixed-rate mortgages (FRM) | | | | common. Other types include blanket loans, bridge |
| and adjustable-rate mortgages (ARM). | | | | loans, budget loans, deeds of trust, equity loans, and |
| Fixed rate mortgages are loans in which the interest | | | | wraparound mortgages. When you are considering |
| rate is locked at a specific and agreed upon rate. | | | | your first mortgage, you are likely to end up choosing a |
| Many first time homebuyers opt for this type of loan, | | | | FRM or an ARM. These are by far the most common |
| as it allows them the ability to know exactly what their | | | | mortgage types. Consult your local mortgage broker |
| loan payment will be each month. The payment stays | | | | for more information on these types of loans. |
| fixed for the entire term of the loan. Typical terms are | | | | Interest rates have been relatively stable in recent |
| 5, 10, 15, 20, or 30 years. | | | | years, and many government agencies and financial |
| Adjustable rate mortgages are loans in which the | | | | institutions offer tax and financial incentives for new |
| interest rate is fixed for a short period of time only, | | | | homeowners. The Department of Housing and Urban |
| and the variation in the rate is determined by the | | | | Development oversees a program called the Federal |
| market. Many homebuyers, especially those not | | | | Housing Administration in which the government will |
| concerned with adhering to a strict budget each | | | | insure the lender against a loss (in case you default on |
| month, prefer these types of loans. Although different | | | | your mortgage). Veterans Affairs also administers a |
| lenders use different indices to determine the market | | | | program for military veterans, which provides |
| rate, some of the more common are Prime Rate, | | | | assistance and guarantees to veterans interested in |
| LIBOR, and the Treasury Index. | | | | entering the market for a new home. |
| Fixed rate loans often end up costing more than | | | | Whether you are new to the housing market or you |
| adjustable rate loans, but they do not provide the | | | | have been involved for decades, it pays to stay |
| stability of a known and consistent monthly payment. | | | | informed about recent developments. New housing |
| Adjustable rate loans work by transferring part of the | | | | starts are at an all time high, and interest rates are |
| interest rate risk from the lender to the borrower, and | | | | very reasonable. This creates an excellent climate for |
| are widely used when there is instability in the market | | | | prospective homeowners. The time just might be right |
| and fixed rates are difficult to obtain. | | | | for you to buy your first home! |