Types of Loans

Thirty-Year Fixed Rate Mortgage

The traditional 30-year fixed-rate mortgage has a constant interest rate and monthly payments that never change. This may be a good choice if you plan to stay in your home for seven years or longer. If you plan to move within seven years, then adjustable-rate loans are usually cheaper. As a rule of thumb, it may be harder to qualify for fixed-rate loans than for adjustable rate loans. When interest rates are low, fixed-rate loans are generally not that much more expensive than adjustable-rate mortgages and may be a better deal in the long run, because you can lock in the rate for the life of your loan.

Fifteen-Year Fixed Rate Mortgage

This loan is fully amortized over a 15-year period and features constant monthly payments. It offers all the advantages of the 30-year loan, plus a lower interest rate—and you’ll own your home twice as fast. The disadvantage is that, with a 15-year loan, you commit to a higher monthly payment. Many borrowers opt for a 30-year fixed-rate loan and voluntarily make larger payments that will pay off their loan in 15 years. This approach is often safer than committing to a higher monthly payment, since the difference in interest rates isn’t that great.

Hybrid ARM (3/1 ARM, 5/1 ARM, 7/1 ARM)

These increasingly popular ARMS—also called 3/1, 5/1 or 7/1—can offer the best of both worlds: lower interest rates (like ARMs) and a fixed payment for a longer period of time than most adjustable rate loans. For example, a “5/1 loan” has a fixed monthly payment and interest for the first five years and then turns into a traditional adjustable-rate loan, based on then-current rates for the remaining 25 years. It’s a good choice for people who expect to move (or refinance) before or shortly after the adjustment occurs.

Adjustable Rate Mortgages (ARM)

When it comes to ARMs there’s a basic rule to remember…the longer you ask the lender to charge you a specific rate, the more expensive the loan.

  • Loan Checklist:

    - Executed sales contract on property being purchased
    - W-2 forms for the previous two years
    - Year-to-date signed profit and loss, if self employed
    - Names and phone numbers both listing and selling agents
    - Copy of listing and/or contract on any properties currently for sale


  • Mortgage Tips:

    - Review your credit report. In many states, reports can be requested for little or no cost. Request changes to any report that is in error
    - If a creditor does not respond to the credit reporting agency within 30 days, the report must be taken off your credit report
    - If you've been turned down for credit, get your report for no charge


  • Expert Tips:

    - Don’t get new credit cards, even when stores offer a discount in return for applying for a card
    - Pay all credit card bills on time, even if it means paying utility bills late
    - Close out unused credit card accounts
    - Maintain at least one of your oldest cards to show a lengthy credit history