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| Mortgage Rates |
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Dallas Residents, Learn more about Mortgages! |
| There are several different types of mortgage loans. The two basic types of amortized loans are the Fixed Rate Mortgage (or FRM) and Adjustable Rate Mortgage (or ARM).
In a FRM, the interest rate, and thus the monthly payment, remains fixed for the life (or term) of the loan. This term is usually for 10, 15, 20, or 30 years (15 and 30 being the most common). The only increase you might see in the monthly payments would result from an increase in the property taxes or insurance rates (whic can be paid using an escrow account, if you've opted to use an escrow). But payments for principal and interest will be consistent throughout the life of the loan using an FRM. In an ARM, the interest rate is fixed for a period of time, after which it will periodically (either annually or monthly) adjust up or down to some market index. These rates can be determined by some of these common indices: Prime Rate, the London Interbank Offered Rate (LIBOR), and the Treasury Index ("T-Bill"). Other indexes like 11th District Cost of Funds Index, COSI, and MTA, are also available but are less popular. If you'd like to learn more about these rates (including historical/current rates), you can visit the following link. Adjustable rates transfer part of the interest rate risk from the lender to the borrower, and thus are widely used where unpredictable interest rates make fixed rate loans difficult to obtain. Since the risk is transferred, lenders will usually make the initial interest rate of the ARM's note anywhere from 0.5% to 2% lower than the average 30-year fixed rate. In most scenarios, the savings from an ARM outweigh its risks, making them an attractive option for people who are planning to keep a mortgage for ten years or less. Additionally, lenders rely on credit reports and credit scores derived from them. The higher the score, the more creditworthy the borrower is assumed to be. Favorable interest rates are offered to buyers with high scores. Lower scores indicate higher risk to the lender, and lenders require higher interest rates in such scenarios to compensate for increased risk. Other Types of Loans: * Assumed mortgage |
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