Adjustable-rate mortgages ARMs offer less predictability but may be cheaper in the short term.
You may want to consider this option if, for example, you plan to move again within the initial fixed period of an ARM. In this case, future rate adjustments may not affect you. However, if you end up staying in your house longer than expected, you may end up paying a lot more.
During the second period, your rate goes up and down regularly based on market changes. Learn more about how adjustable rates change. Most ARMs have a year loan term.
Common fixed periods are 3, 5, 7, and 10 years. Other, less common adjustment periods include "3" once every 3 years and "5" once every 5 years.
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- Barrier: Next, you need to select a barrier.
You will be notified in advance of the change. ARMs can have other structures.
Understand the fine print. Not all lenders follow the same rules, so ask questions to make sure you understand how these rules work.
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ARMs marketed to people with lower credit scores tend to be riskier for the borrower. Then, you can compare all your options.
Loan type Conventional, FHA, or special programs Mortgage loans are organized into categories based on the size of the loan and whether they are part of a government program.
This choice affects: How much you will need for a down payment The total cost of your loan, including interest and mortgage insurance How much you can borrow, and the house price range options higher lower can consider Choosing the right loan type Each loan type is designed for different situations.
Sometimes, only one loan type will fit your situation. If multiple options fit your situation, try out scenarios and ask lenders to provide several quotes so you can see which type offers the best deal overall.