Information for Buyers

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Mortgage 101

Fixed Rate Mortgage
A fixed-rate mortgage offers an interest rate that will never change over the life of the loan. The primary benefit is that if interest rates increase during the term of your loan, your rates stay the same.

On the other hand, if interest rates drop during the term of your loan, your rates still stay the same (unless you refinance your home at the lower rate).

Adjustable rate (ARM)
The adjustable rate mortgage (or "ARM") offers a fixed initial interest rate with a fixed initial monthly payment. "Initial" is the key word here, because after some predetermined initial period, the loan is subject to changes in market conditions.

The initial interest rate you pay will probably be lower than a fixed-rate mortgage; but the uncertainty, of course, comes after the initial period. This type of loan is usually a good option for buyers who only plan to stay in a home for a short while.

Balloon Loan
The balloon loan is a short-term, fixed-rate loan that lets you make small payments for an introductory period of time. After the introductory period - usually five, seven or ten years - you must refinance or pay off the remaining balance with one lump-sum ("balloon") payment.

Government Loans

FHA Loan — A loan insured by the Federal Housing Administration, open to all qualified homebuyers. There are limits to the size of FHA loans, but they are usually enough to cover most moderately priced homes. FHA loans also offer low down payments (usually 3-5 percent).

VA Loan — A long-term, low or no-down-payment loan guaranteed by the Department of Veterans Affairs. Because this loan is insured by the VA, it has the added benefit of zero down payment. This type of loan is only available to qualified military veterans who have obtained a certificate of eligibility from the Department of Veterans Affairs.

RHS Loan — The Rural Housing Service (RHS) loan offers low interest rates with no down payment. It is available to households with low to moderate income located in rural areas or small towns.

Learn More!
Was this information helpful? If so, you'll enjoy my free guide: What You Need to Know About Buying a Home.

This 27-page booklet answers all the questions I've been asked over the years from homebuyers like you.

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