This loan could be your perfect fit if you have great credit and can afford a large down payment (although a large down payment is not always required — but can help you eliminate paying private mortgage insurance). Whatever your long- or short-term goals are, a conventional mortgage can help you meet them.
With a conventional loan, you can choose from a fixed-rate mortgage or an adjustable-rate mortgage — also known as an ARM. Here’s how the two differ:
With a fixed-rate mortgage, your mortgage 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.
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 5/6, 7/6, and 10/6. The first number in these scenarios represents the number of years your interest rate will remain fixed. The second number represents the period of time in months where your interest rate could change after the fixed period expires. This is called the adjustment period.
