House Rules: Waving Our ARM's in the Air: New Home Loans

By Emily Kerr
LoanPage Columnist

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In the last 12 months, the Fed has raised interest rates 11 times. What's that mean to you as a new home buyer? It means that if you're looking for a low monthly payment in an interest-only adjustable rate mortgage (ARM), there were 11 chances within 12 months for your monthly home loan payment to go up.


What is an ARM?

An adjustable rate mortgage is a popular mortgage product that offers lower interest rates than a fixed-rate mortgage. Because you're paying interest only, not principle, you'll have lower monthly payments at the beginning and because your payments are lower, you may qualify for a larger new home loan. Larger loan means more house for the money.

An ARM also means that if interest rates go up, your mortgage payments may go up also. If you crave certainty and want to know exactly what you're going to be paying each month, you may want to consider some other type of mortgage product.

What are my Other Options for a New Home Mortgage?

Fixed rate mortgages are another type of mortgage product with repayment terms of 15, 20 or 30 years, during which time the interest rates and monthly payments remain the same. They're a good mortgage product if you're looking for peace of mind and want to know your monthly payment will stay the same.

How do I Shop for a New Home Loan?

Check out your options before deciding on a new home loan mortgage product. You have options beyond fixed rate mortgages and adjustable rate mortgages. Invest some time in research to find the mortgage product that works for you. You may want to consult with a mortgage banker or mortgage broker.

Mortgage bankers manage home loans, finding the money, underwriting the home and selling it on the secondary market at a profit. Mortgage brokers specialize in putting together lenders and borrowers.

Buying a new home is a huge and wonderful investment. You owe it to yourself to find the right mortgage product and get yourself moved in.


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About the Author

Emily Kerr is a freelance writer with over 425 articles in print. She writes about everything from home loans to home construction.

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