Mortgage Process



Select The Right Program

Home loans come in many shapes and sizes. Deciding which loan makes the most sense for your financial situation and goals means understanding the benefits of each. Whether you are buying a home or refinancing, there are 3 basic types of home loans. Each has different reasons why you would choose it.

1) Fixed Rate Mortgage

Fixed rate mortgages usually have terms lasting 15 to 30 years. Throughout those years, the interest rate and monthly principal and interest payments remain the same. You would select this type of loan when you:

  • Plan to live in the home for an extended period
  • Enjoy the stability of a fixed principal/interest payment
  • Don't want to run the risk of future monthly payment increases

2) Adjustable Rate Mortgage

Adjustable Rate Mortgages (often called ARM’s) typically last for 15 or 30 years, just like fixed rate mortgages. But during those years, the interest rate on the loan may go up or down. Monthly payments increase or decrease based on a predetermined margin and fluctuating index. You would select this type of loan when you:

  • Plan to stay in your home less than 5 years
  • Don't mind having your monthly payment periodically change (up or down)
  • Comfortable with the risk of possible payment increases in future

3) Combination Rate Mortgage

Combination rate mortgages combine fixed interest rates and adjustable interest rates. Lenders often refer to these loans as hybrid loans. For the first few years (1-10), the interest rate is fixed, along with your monthly principal and interest payment. During the remaining years of the loan after the initial fixed period, your interest rate becomes adjustable and can vary. You would select this type of loan when you:

  • Want the stability of a fixed principal/interest payment in the short term
  • Anticipate a positive change in your income which could absorb possible higher payments in the future
  • Want to borrow more and get a lower initial monthly payment than a standard fixed rate loan

By carefully considering the above factors and seeking professional advice, you should be able to select the loan that matches your present condition as well as your future financial goals.