Below is a brief explanation of some of the most commonly used loan programs. Feel free to contact me for further details.
FIXED RATE LOAN
A loan, which has an interest rate that remains constant throughout the life of the loan, usually available for 30 or 15 years, even for 20 or 40 years, depending on the lender. Your payment is the same every month.
BUY DOWN THE RATE
This is where the borrower decides to pay more upfront (points) to get a lower interest rate and payment. The borrower should have the loan officer do the math to arrive at the pay back period to decide if this course of action would make sense financially.
ADJUSTABLE RATE MORTGAGE (ARM)
A loan that has an interest rate that increases or decreases at specified times during the life of the loan, either monthly, twice a year, or once a year. Many adjustable rates are fixed for 3, 5, 7 or 10 years, and then become adjustable with the rate changing once or twice a year. On all adjustable, the rate changes according to an underlying financial index. The most common indices are LIBOR (London international-Bank Offered Rate) and the one year T-Bill. The margin, which is added to the index to determine the new rate, remains stable throughout the life of the loan. Adjustable loans have lifetime caps, so you know ahead of time how high the interest rate could potentially rise.