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ARM vs. Fixed Rate: Which is Right for You?

| Posted in Bank Blogs

When you are in the market for a mortgage, it is important to understand the difference between adjustable rate mortgages (ARM) and fixed rate mortgages. An ARM, or adjustable rate mortgage, has an interest rate that can change over time. A fixed rate mortgage has a set interest rate that will not change during the entire term of the loan. It's time to find out which is right for you.

Comparing Two Types of Loan

ARMs feature a mortgage rate that is fixed for a certain period of time, usually between three and 10 years. The most common ARMs are 3/1, 5/1, 7/1, and 10/1. The first number indicates how many years the mortgage rate will remain fixed. The second number tells you how many times each year the mortgage rate may adjust after that initial fixed period has expired.

On the other hand, with a fixed-rate mortgage, your interest rate remains constant over the life of the loan. This means that no matter how much economic conditions change in your area or throughout the country, your mortgage payment will stay exactly the same each month until you have paid off the loan.

ARMs can be appealing for those who plan on moving or refinancing within a few years. Those who plan on staying in their home for the longer term may prefer the stability of a fixed-rate mortgage, such as a 30-year fixed rate mortgage.

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Finding a Lender

Choosing a mortgage lender is one of the most important decisions you can make when it comes to buying a home. A good mortgage lender will help you understand all your loan options, pick the best loan for your needs, and guide you through the entire mortgage process from start to finish. They’ll be able to answer any questions you have about choosing a mortgage or understanding different types of loans, as well as provide advice on how to get the most value out of your mortgage.

With so much at stake in this major life decision, it pays to find an honest, reliable mortgage lender that you trust with your financial future. Do your research and take time to make sure that you’re getting the best mortgage for your needs.

Start by asking friends, family and colleagues for referrals to mortgage lenders they’ve worked with in the past. You can also check online reviews and ratings of loan providers before making your choice. Look for lenders that have experience dealing with clients like you—whether you’re a first-time homebuyer or someone looking to refinance their existing mortgage. Make sure to compare several different lenders before choosing one to work with.

A great lender will help you understand principal and interest considerations, property taxes, mortgage insurance, rate caps, monthly mortgage payments, initial interest rates, total loan amounts, and many other important details.

Obtaining a Loan

Obtaining a home loan is no small task. With so many different mortgage rates and lenders out there, it can feel overwhelming trying to decide which one is right for you. Before you jump into the process, take the time to do some research.

Talk with friends and family who have been through the home loan process and see what their experience was like. Use online resources to compare mortgage rates among lenders in your area. And most importantly, choose a mortgage lender that you trust to give you good advice throughout the home loan process. Considering their advice will help make sure you get the home loan that's best suited for your needs.

When deciding which mortgage type to choose, consider the interest rate you'll be paying. Fixed-rate mortgages offer stability because your monthly payments will remain the same over the life of the loan. Adjustable-rate mortgages can have lower interest rates, but they also come with a certain degree of risk since your monthly payments could go up or down depending on market conditions.

Special Considerations

When it comes to finding the right home loan for you, there are certain things you should avoid. ARM (adjustable rate mortgage) loans tend to be less expensive than fixed-rate loans in the beginning but can become more expensive later on so make sure you're aware of any potential costs before making a decision. It's also important to avoid taking out a loan with too many fees attached or one that has an excessively high-interest rate as this could cause serious financial strain further down the line.

Finally, be wary of choosing a variable rate loan without understanding how it works and what kind of risks are involved - these types of loans can often result in unexpected costs if rates increase. By being mindful of these tips when selecting your home loan, you can be sure to make the most informed decision that's right for you.

Consider factors such as your credit score, down payment amount and long-term financial goals when choosing a loan. Your lender should provide detailed information about the terms of your loan so you understand exactly what you’re signing up for. Be sure to ask questions if anything isn’t clear—it’s better to be informed upfront than face surprise costs later on.

No matter what mortgage you choose, make sure you understand all the terms and conditions before signing any paperwork. It is also wise to shop around and compare mortgage rates from different lenders to get the best deal possible. With the right knowledge and careful planning, you'll be able to find a mortgage that works for your budget.

In Conclusion

At the end of the day, it's important to remember that mortgage shopping should always be done with a clear head and an eye for detail.

"Make sure you carefully research all your options and look into fixed-rate mortgage loans, ARM mortgages, and any other mortgage types that may be suited to your unique needs," says Premier Community Bank Mortgage Lender Connie Rust, NMLS #637207. "With careful consideration and due diligence, you can make sure that the mortgage you choose is one that provides peace of mind and financial stability in the long run!"

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