Knowing the difference between a fixed rate home loan, or a ARM (Adjusted rate mortgage) loan when you are refinancing, getting a loan modification, or purchasing a home can mean the difference in thousands of dollars in savings Here are the differences between a traditional fixed rate home loan and an ARM loan:

Fixed Interest Rate Home Loans:
The most stable of the two loan choices is a fixed rate home loan. A fixed rate loan means that the interest rate and principal payments will remain the same throughout the course of the loan, regardless of what else happens. However, the stability of a fixed rate home loan often comes with a slightly increased interest rate that an ARM loan would. Generally, if your looking into obtaining a loan or refinancing for $417,000 or less, then a “Conforming Loan” will most likely be best for you. IF the loan amount is going to exceed $419,000, typically a “Jumbo Loan” will be your best choice.

Here are some typical conditions which may need to be followed to obtain a “Fixed Rate” home loan:

-Your income must be consistent and dependable.
-You feel comfortable with paying slightly higher interest rates over an ARM loan due to the stability of a fixed rate home mortgage loan.
-You do not have any plans to move out of your home within the next 7 years.

ARM (Adjustable Rate Mortgage) Loans:
A typical ARM loan has a fixed rate of interest at the beginning of the loan, which is fixed for a set number of months before it is open to periodic adjustments. For a smaller interest rate and lower monthly mortgage payments at the start of the home loan, you are allowing the interest rates to be adjusted at a period later on in the loan. The same rules for jumbo and conforming loans apply to ARM loans as they do to Fixed Rate loans.

Here are some typical conditions which may need to be followed to obtain a ARM” home loan:

-You feel comfortable having a smaller payment and lower interest rates for the start of the loan in exchange for periodic interest adjustments in the future.
-You desire the absolute lowest interest rate and total cost possible.
-You see yourself moving and selling your home within the next 7 years,

-M Petrone

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