Step 2: Selecting the Right Program
Home loans come in many shapes and sizes, and choosing the right one depends on your financial situation and goals. Whether you are buying a home or refinancing, there are two main types of home loans, each with distinct advantages.
1) Fixed Rate Mortgage
A fixed-rate mortgage offers stability, with interest rates and monthly payments that remain constant over the life of the loan. Typical terms are 15 or 30 years. This type of loan may be right for you if:
You plan to live in the home for more than 7 years.
You prefer the stability of consistent monthly payments.
You want to avoid the risk of future payment increases.
You expect your income and spending to remain steady.
2) Adjustable Rate Mortgage (ARM)
An adjustable-rate mortgage, or ARM, typically has a 15- or 30-year term, but the interest rate can change over time, leading to fluctuating monthly payments. This type of loan may be a good fit if:
You plan to stay in the home for less than 5 years.
You are comfortable with periodic changes to your monthly payment.
You are okay with the possibility of future payment increases.
You anticipate your income will grow in the future.
By carefully considering these factors and seeking professional advice, you can choose the loan that best matches your current needs and future financial goals.