Fixed vs. Adjustable
The first step in getting a loan is deciding what kind of program is best for you.   When initially choosing a loan program you need to consider two basic questions:

1) how long are you planning to stay in your home/loan

2) the degree to which you would be willing to trade security for a lower payment

On average people own several homes in their lifetime.  Many doing so for less than 5 years (especially for first time home buyers).  If you are planning to own your home for only a few years it would be to your advantage to examine the possibility of a mortgage that has an adjustable rate.  Often these loans have a period where the interest rate is fixed for a set amount if time (i.e. 3,5,7 and 10 years) with an adjustable period after that.  The advantage of the adjustable loan is that the initial interest rate during the fixed period is lower than a comparable fixed rate loan.  The difference is generally between .25%-2.00%.  This can make a big difference on a monthly payment.  The downside to the adjustable rate loan is once the fixed rate period has expired the interest rate can begin to adjust.  The rate can go up or down depending on current market conditions.  However, if you are planning on being in your home for only a few years, the adjustable rate is an attractive option. 

On the other hand is the fixed rate loan.  Once you have started the loan process you have the option of “Locking” your rate.  In other words, once you have received a rate that you like you can lock the rate and thus be guaranteed you will receive that rate.  Once the loan closes that will be the interest rate through the entire life of the loan.  Thus the term “fixed”.  If you plan to stay in your home for several years (10+) or you cannot bear the possibility of your payment going up in the future, then the fixed rate loan would be a good choice.

When you begin the loan process one of our experienced loan officers will be happy to assist you in determining which loan is best for you.