Fixed rate mortgages are exactly like they sound. You borrow a certain amount of money and your payments are consistent over the length of the loan. The advantage and disadvantage of the fixed rate mortgage go hand in hand. If you take out the loan during a period of low interest rates, it works to your benefit. If interest rates dip after you take out the loan, you would have to refinance to take advantage of it.
15, 20 and 30 year fixed rate mortgages are the most common. The shorter the term, the higher the monthly payments. The longer the term, the more interest paid.
Adjustable rate mortgages have payments that fluctuate with interest rate levels. If interest rates are high, your payment increases. Conversely, if rates are low, your payment decreases. Generally, ARMs have a lower initial monthly payment than a fixed rate loan. This can be advantageous if you are not planning to spend a long time in the property.
The convertible adjustable rate mortgage is a hybrid of both the fixed rate and adjustable rate. It generally starts off with lower payments, which may fluctuate, but then moves over to a fixed rate loan after a specific period of time.
If you are a veteran or in a low income bracket, you may qualify for goverment loans. Both the Veterans Administration and Federal Housing Authority offer limited loans if you qualify.
