Understanding Benefits of Adjustable Rate Mortgage Loans

By Karen Lawson
LoanPage.com Columnist

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In certain circumstances, it makes good sense to consider an ARM loan. If you anticipate moving on or moving up before the payments will increase, an ARM can help you gain the benefits of homeownership such as the potential for building home equity. It's a good idea to prepare a list of questions before shopping for a new home loan.

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Look before You Leap: Learning about Mortgage Loans

Getting some solid advice before you start looking for a new home loan can help you avoid shaky financial ground later. Mortgage loan documents serve as a contract between you and your lender. If you don't understand the terms of your new home loan, trouble can quickly develop when interest rates increase or a balloon payment comes due.
  • » What is the initial interest rate on this loan, and will it change? If it changes, how often and by how much can interest rates increase?
  • » What are current mortgage rates? If you're being asked to pay a higher rate, ask why.
  • » If a mortgage lender tells you that there are "issues" with your credit report, ask for specific details. Verify that your credit report is accurate.
  • » Ask mortgage lenders to explain all of the terms of loans you're considering. The duration of the loan, exactly how much you're borrowing, interest rates, and whether or not the loan is fully amortized. If the answer is "no," that means you may have lower payments, but that unpaid interest can be added to the balance of your mortgage.
Ask your lenders if they offer a home loan seminar. Learning about how mortgage loans work can help you save money and avoid financial headaches down the road.

About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds BA and MA degrees in English from the University of Nevada, Reno.

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