Financing Explained

Types of loans

Fixed-Rate Mortgages
30-Year Fixed-Rate: The easiest fixed-rate loan to qualify for, the 30-year mortgage, gives you an excellent opportunity to keep mortgage payments reasonable by making monthly payments over a long period of time. This mortgage loan may be ideal if you plan to remain in your home for years and wish to keep your housing expense low and use any extra cash for other purposes. This loan also provides maximum interest deduction for tax purposes.

15-Year Fixed-Rate: This shorter-term mortgage will save you a significant amount of interest over the life of the loan. By paying off the mortgage more quickly, you also build up equity in your home sooner.

Adjustable-Rate Mortgages (ARMs)
with an adjustable-rate mortgage (ARM), the interest rate you pay is adjusted from time to time to keep it in line with changing market rates determined by a specified financial index. ARMs are attractive because they may initially offer a lower interest rate than fixed-rate mortgages. An ARM has two "caps" or limits on how large an interest rate increase is permitted. One cap sets the most that your interest rate can go up during each adjustment period, and the other cap sets the maximum total amount of all interest adjustments over the life of the loan.

Additional Information

• Pre-qualification and Pre-approval on a Mortgage
• What factors need consideration when applying for a loan?
• What are the basic components of a mortgage loan?
• Types of loans?

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