Non Comforming Loan Comparison Adjustable Rate Mortgage Versus Fixed
Rate Mortgage

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.




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