Fixed Rate Mortgage Loans

Fixed rate mortgage loans are one of the most popular home financing options available. The basic benefit is the security of knowing you'll have the same monthly principal and interest payments from your first payment until your last.

Fixed rate loans are available for a variety of terms, from 10 to 30 years. Many borrowers choose the traditional 30 year term because it offers the lowest monthly payment, but you may also benefit from a short term loan. Although your monthly payments will be higher with a shorter term loan, your total interest over the life of the loan will be reduced substantially. And your home equity will increase faster since the loan is paid off sooner.

Typically, shorter term fixed rate mortgage loans also have lower rates than comparable 30 year fixed rate loans.

A few of the reasons fixed rate loans are attractive;

• Security of having a fixed monthly payment.
• Income is expected to remain about the same while you own your home.
• Increased interest rates will not effect your mortgage.
• You plan to be in your home for more than 3 years.

Adjustable Rate Mortgages (ARMs)

With an adjustable rate mortgage loan, your interest rate is subject to change on a regular basis, based on market conditions and the kind of ARM loan you have. Some ARMs have rates that adjust annually, others adjust every few years. There are a variety of terms available for ARMs to suit your needs.

ARMs offer many benefits, including an initial interest rate that is usually lower than fixed rate loan and limits on how much the interest rate can be adjusted at one time. Some ARMs even offer the option to convert to a fixed rate loan in the future.

Some home buyers choose ARM loans because with a lower initial rate, they can qualify for a larger loan amount than would be possible with a fixed rate option. Or, they may be planning to be in their home for only a few years. In this case, a lower initial rate can save money.

Finally, some home buyers choose an ARM because they anticipate that their income will grow over time. An ARM will give people in this situation the security of lower monthly payments during the early years of the mortgage, making their home purchase more affordable.

A few of the reasons ARMs are attractive;

• Interest rates are expected to go down during the term of your loan.
• Plans to move in about 3 years.
• Expected increase in income over the years.
• The home you want requires a larger loan than expected.
• Lower payments in the early years of the loan.

Balloon Loans

If you plan to live in your home less than 7 years, you might want to consider a balloon loan. These short term loans offer payments amortized over 30 years, giving you a short term fixed rate loan with a manageable monthly payment. Interest rates are generally lower than fixed rate loans with longer terms.

With balloon loans, repayment of the full mortgage loan amount is required at the end of the term. This usually happens as a result of the sale of the home. If however, you decide to remain in your home, you may be able to refinance your home under another program.

Contract for Deed Loans

A contract for deed is a loan between the buyer and seller and is therefore, usually unique in some or many ways. Contract for deed loans almost always have one or more balloon payments involved. In fact, the deed to the property remains in the sellers name until all payments are satisfied or the buyer establishes a standard mortgage through a financial institution of their choice.

A contract for deed usually requires a downpayment of 20% of the purchase price. Contract for deeds can be risky because if the terms not met, the buyer can lose the home and all money they have invested.