Conventional Home Loan
benefits and requirements
Conventional Fixed Rate Mortgages
With a fixed rate mortgage, your interest rate and payments will be consistent throughout the duration of your loan. You can rest assured knowing your interest rate won’t increase alongside market rates. You may also benefit from refinancing later if market rates decrease. Fixed rate mortgages are available in a variety of term lengths ranging from 10 years to 30 years.
Pros:
- Your interest rate is set and won’t change.
- Your monthly payment won’t change if market rates do.
- You’ll be protected from rate increases.
- You may be able to refinance if market rates decrease.
Cons:
- Your initial interest rate may be higher than an ARM rate.
- Your mortgage payments may be higher than initial ARM payments.
- Your interest rate won’t automatically lower if market rates decrease.
Conventional Adjustable Rate Mortgages (ARM)
An ARM can save you money on your loan, especially if you’ll be living in the home for only a few years. ARMs are available in a variety of configurations and term lengths, with the most common being 3/1, 5/1, 7/1 and 10/1. In these figures, the first number represents the number of years your interest rate will remain fixed. The second number represents how often your interest rate will change after the fixed rate period expires (in this case, every year). This is called the adjustment period. Rates may increase or decrease during adjustment periods and make your monthly payments higher or lower respectively. However, you can set caps on your ARM to protect against rate increases.
Pros:
- Your initial interest rate may be lower than a fixed rate mortgage.
- Your rate may decrease with market rates.
- Your monthly payment may decrease.
- You can set caps on rate increases and payment limits.
Cons:
- Your rate may increase with market rates.
- Your monthly payment may increase.
- Payment caps may lead to negative amortization, which is when payments aren’t covering loan interest.
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Connect with Beau Hollingsworth
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Let's schedule a meeting! During this initial consultation, we'll learn more about your situation and what you're seeking in a home. We'll provide advice and address any concerns you may have in order to determine the best approach to achieving your goals. By the end of our conversation, we'll have a solid plan of action and next steps for moving forward.
Beau Hollingsworth
License# NMLS 314451
881 Dover Dr # 110, Newport Beach, CA 92663
BRANCH NMLS2433794
CORP. NMLS3029
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