What is an adjustable rate mortgage and should I take one?
Answer:Often first time homebuyers are not well educated about the variety of mortgage loans and few will know what is an adjustable rate mortgage and how they work.
An adjustable rate mortgage is a mortgage loan that starts with a very nice low rate for limited time. During this fixed period, borrowers also have the option to make regular payments of principal and interest, interest-only payment, or a minimum payment that leads to negative amortization.
It is not recommended for first time homebuyers to jump into the muddy waters of ARMs. Sometimes, borrowers will not understand that they have agreed at closing to a Neg Am adjustable rate mortgage and have $400 added monthly to the principal, which would terrify them later.
To avoid this happening to you, please, talk to a loan officer about adjustable rate mortgages, your budget and housing needs to determine if you could possibly benefit from an adjustable rate mortgage.
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