Non Comforming Loan Comparison Adjustable Rate Mortgage Versus Fixed Rate Mortgage

Non Comforming Loan Comparison: Adjustable Rate Mortgage Versus Fixed Rate Mortgage
Are all mortgage loans the​ same? Or can making a​ choice between one particular type of​ mortgage get you​ in​ trouble if​ you​ aren’t careful .​
in​ the​ case of​ an​ adjustable rate mortgage versus a​ fixed rate mortgage it​ is​ true that all mortgages are not alike .​

Of course in​ many cases the​ type of​ loan you​ can secure has to​ do with how good or​ bad your credit has been over the​ years .​
Your FICO score will often determine the​ loan you​ will be offered .​
Basically,​ FICO is​ an​ acronym for Fair Isaac Corporation and refers to​ your best-known credit score calculated by using a​ specific mathematical formula .​

GMAC takes the​ FICO score into account and also explains the​ difference between a​ fixed rate mortgage and adjustable rate mortgage,​ depending on​ which loan you​ might be eligible for,​ Most mortgage loans have either a​ fixed interest rate or​ an​ adjustable interest rate .​
With a​ fixed-rate mortgage,​ the​ interest rate never changes and your payments remain stable throughout the​ life of​ your loan .​
With an​ adjustable-rate mortgage (ARM),​ the​ interest rate changes at​ regular intervals — usually once every year — based on​ a​ formula that uses a​ market index .​
For most ARM options,​ rate adjustments begin after an​ initial period — usually between three months and ten years — during which the​ rate is​ fixed.
That said you​ might be wondering why in​ the​ world a​ person would opt for a​ loan with rates that fluctuate like the​ wind .​
There are some good reasons such as​ that in​ some cases a​ lender will charge a​ lower interest rate for an​ ARM at​ the​ beginning of​ the​ loan than as​ compared to​ a​ fixed-rate loan .​
This will not only increase your buying power,​ but in​ many cases it​ can prove quite frugal if​ interest rates remain steady or​ decrease.
At bankrate.com it​ states,​ With a​ fixed rate mortgage (FRM),​ your monthly payments will be steady .​
In contrast,​ with an​ adjustable rate mortgage (ARM)…you typically have an​ initial fixed rate lower than the​ rate of​ a​ comparable fixed rate mortgage .​
The initial fixed rate period is​ followed by adjustment intervals .​
For example,​ a​ 3/1 ARM is​ fixed at​ an​ initial low rate for the​ first 3 years,​ and then adjusts every year based on​ an​ index .​
Common ARMs are: 1/1,​ 3/1,​ 5/1,​ 7/1,​ and 10/1 .​
For the​ most part a​ quick rule of​ thumb is​ to​ remember that a​ fixed rate is​ a​ great idea if​ you​ plan on​ being in​ your home for a​ long time and the​ interest rates are low when you​ buy .​
as​ for an​ adjustable rate mortgage this is​ a​ good idea if​ you​ don’t plan to​ stay in​ your house very long and the​ rates are higher than usual when you’re initially buying.
Non Comforming Loan Comparison Adjustable Rate Mortgage Versus Fixed Rate Mortgage Non Comforming Loan Comparison Adjustable Rate Mortgage Versus Fixed
Rate Mortgage Reviewed by Henda Yesti on June 25, 2018 Rating: 5

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