| In common parlance, a mortgage is a loan that you | | | | After the introductory period, rates may move up or |
| take out to purchase a home. The house that you | | | | down monthly, semi-annually or annually. It's also |
| purchase is the collateral for the mortgage and an | | | | possible that it will stay the same for a long time |
| assurance that the debt will be paid. | | | | before it adjusts. Rates rise and fall according to |
| There are actually some different types of mortgages | | | | current market average rates. There is no way to |
| around so first time home buyers should do their | | | | predict what the rates will be in this type of home loan. |
| research and find out what type of mortgage is most | | | | However, ARMs normally have a cap or a limit to how |
| suitable for their particular situation. | | | | much the interest rate can go up. The ARM is popular |
| Fixed-Rate Mortgage | | | | for home buyers who do not plan to be in their home |
| In this type of home loan, the interest rate stays fixed | | | | for a long period of time. It is also something of a |
| for the entire duration of the loan. When considering | | | | gamble since interest rates might go down, which is |
| this type of loan, it is most important to figure out and | | | | good for the home owner but they might also go up, |
| calculate how long it would take you to pay off the | | | | which is bad for the home owner. |
| loan. That can be anything from 15 years to 30 years | | | | Construction Mortgage |
| for most people. In this type of loan, your mortgage | | | | People who plan to build their own homes can take |
| payments will not change. | | | | out a construction mortgage. This involves borrowing |
| This type of loan is popular because the borrower | | | | money to pay for the construction of the house. The |
| always knows exactly how much mortgage | | | | borrower only pays the interest of the loan amount |
| payments are because it is fixed for the lifetime of the | | | | while building the house. Then when the house is built, |
| loan. | | | | the mortgage is usually carried over as a fixed-rate, |
| Adjustable Rate Mortgage (ARM) | | | | traditional long-term mortgage. |
| Adjustable rate mortgages or ARM is a type of loan | | | | Special Mortgages for First Time Buyers |
| where the interest rate is not fixed. Typically it starts | | | | Some lenders might offer a special type of home loan |
| off with a lower rate than fixed-rate mortgages but | | | | targeted towards first time buyers. Such mortgages |
| the rates change according to market conditions. At | | | | for first time home buyers may have a lower required |
| first, during the introduction period of about such as | | | | down-payment and may offer flexible credit and |
| three, five or seven years, the rates are fixed. | | | | income requirements. |