What Type of Loan Do You Want?

When you are at the start of your home buying process, you may want to get ahead of the game by making sure you get pre-approved for a mortgage. There are several different types that you may have heard about and choosing one can be difficult. Let's take a look at fixed rate and adjustable rate mortgages.

Fixed Rate Mortgage

A fixed rate mortgage can be for some but not for all. With this type of mortgage, you can expect that your monthly payments will stay the same throughout the entire life of the loan. This is to say that your principal payment will always be the same, every month. On the other hand, while your principal payments will remain the same, your interest rate may change over a specific period of time. The positive side to this type of loan is that your payments will stay the same most of the time. Therefore, if your income is fixed and you want to lock in a rate, this is the way to go.

Adjustable Rate Mortgage

Adjustable rate mortgage is a little different. With this type of mortgage, you can expect the interest rate to change right away, or more specifically, every year. It will adjust to the current market. Sometimes principal payments can change with this type, but it does not always happen. If you can handle variable rates, you can consider this type of loan because you can then take advantage of times when the interest rates drop. On the other hand, if you can't handle much fluctuation in your payments, you may want to consider a fixed rate loan instead.

When speaking to a loan advisor, be sure that you are aware of the exact details of the home loan that you choose. Read the fine print and if you have any questions about anything, be sure that you ask the lender about all of them so that you know what you are getting into.