Karen Maserjian Shan writes for the Poughkeepsie Journal,
Among the options here are mortgages for 100 percent or more financing, where borrowers can purchase a house without any out-of-pocket costs; a low down payment for people with little money to put down on a house; and interest-only products where borrowers pay only the interest on their mortgage for a period of time to lower their monthly mortgage payments.
Other types of mortgages for qualifying candidates include first-time home buyer programs and government loans through the Federal Housing Administration or the Veterans Administration.
Conforming and nonconforming loans are available in fixed or adjustable rate products, Johnson said. With fixed mortgages, the loans’ interest rate and monthly mortgage payments remain constant for the term of the loan, typically 10 to 30 years. On the other hand, the interest rate of variable or adjustable rate mortgages changes at pre-set intervals, altering monthly mortgage payment amounts.
For example, the interest rate of the loan may stay fixed for the first three or five years of the mortgage and then adjust every year after that. ARM interest rates generally start out lower than fixed rates, but they’re linked to an economic index (for example, the 10-year Treasury bill), and a margin the mortgage lender adds to the index.
If the indicator has risen when a borrower’s mortgage adjustment period occurs, the interest rate will rise on the loan. Similarly, if the index has gone down at the time of his adjustment, his interest rate will drop.
ARMs usually have caps, Johnson said, that limit how much the interest rate can rise during the life of the loan.