Home Loans ... Which One is the Best for You?
Our Little Rock Home Loans page will help guide
you to the best
mortgage companies for your type of home loan. We'll give you a quick
overview of the different types of Little Rock mortgages and which one
is the best choice for you. The tool below shows current home loan
rates and has a button for your up to the minute local mortgage rates.
is fixed for an amount of time, commonly 30 years but this can vary. At
the end of the allotted time, the amortized principal is paid in full
and you own your home.
Pros - The security of knowing
your payments will be. You have the option of refinancing if interest
rates drop enough. Safe way to go if you plan on keeping your home for
at least 15 years.
Cons - If rates do go down
stuck paying higher interest unless you do refinance. You can end up
paying more short term than with an Adjustable Rate Mortgage
With interest rates for Little Rock home loans at their lowest point in
years, this type of mortgage may be to your advantage now.
interest rate fluctuates with an indexed rate plus a set margin with
predetermined adjustment periods. Minimum and maximum caps limit the
amount of the adjustments.
Pros - Lower initial rates than
fixed. Easier to qualify for a higher loan amount. One year
have outperformed 30 year fixed rate loans for the past 40 years. Good
if you don't plan on staying in your house very long, you plan on
refinancing, or you're in a market where houses are appreciating
As Little Rock home loans go, some form of ARM may
be the best choice for your home mortgage.
Cons - You're betting that
you'll save enough up front to offset any future rate increases.
- Frequency of adjustments. More often means lower rates up front but
more uncertainty. Less often means more security but higher starting
rates. Make sure you can afford a payment at the upper cap because
counting on refinancing to save you can be risky. What if you can't
qualify when the time comes?
The interest rate is fixed for 1 year, then
becomes adjustable every
year. The new rate will be figured by adding the treasury average index
to the loan margin which is usually around 2.5%. There is usually a 30
year term on these loans. Of all the Little Rock home loans, this is
the one my banker brother-in- law uses himself.
Lower rates than a fixed mortgage at first. If rates go down - you win.
Good if rates are trending down and you don't plan on keeping the house
Cons - If rates are trending
upward, you can
end up paying more than a fixed rate. May not be a good choice if you
are in it for the long haul.
types of Little Rock home loans have a fixed rate for a period of time,
then adjustments on a specified schedule. This is shown by the fixed
rate length followed by the adjustment period. Ex. - 3/1 means 3 year
fixed rate, then adjustments every 1 year afterwards. New rates are
figured by some sort of designated economic index plus the loan margin.
Usually a 30 year term.
Pros - Same as other ARM type
Cons - Same as other ARM's
Payment Option ARM
choose from an assortment of payment options each month. There is a
"change cap" limiting the amount of change in any given year.
Pros - Can be good if you have
a variable income like commissions. Good for freeing cash up if you
- Some payment options won't cover your interest payment which can lead
to deferred interest that will increase your balance. Your payments
will increase drastically when you are required to pay down the
principal. If you can't make them - you lose your house!
- These tend to be very shaky loans and most experts advise steering
clear unless you have a thorough understanding of what you are getting
into. These types of Little Rock home loans are sometimes promoted to
the unwary so we advise you to avoid them.
You can pay only the interest for a certain period
of time without paying on the principal.
- Good if you don't plan on staying in the home very long. If you are
in a hot market with good appreciation rates, you can enjoy lower
payments while your home gains value. You don't have to pay on the
principal, but if you do, your monthly payments are reduced. You can
invest the difference between a fixed rate and interest only home loan
to build up your cash reserves.
This has been one of the most
popular Little Rock home loans over the past few years if you don't
plan on staying in your house very long.
Cons - You
will eventually have to pay down the principal. If your homes value has
fallen, you may have trouble making the payments. A good rule is that
if you can't pay the interest and principal at the same time, you
probably can't afford that house.
An ARM that can be converted to a fixed rate after
a specified time.
Pros - Saves on refinancing
costs if you decide to change.
- You'll be locked in to refinancing at a higher fixed rate and won't
be able to shop around for a better deal. Most mortgage pros say don't
do this. It's easier to just refinance when the time comes.
An adjustable rate loan with a balance that can be
assumed by another home buyer.
Pros - A seller can offer a low
- Savings may not be that great since these are almost never fixed rate
loans. Also if the buyer who assumes the loan defaults, the lender will
go after the original owner.
interest rate is fixed for a period of time but the principal is not
completely amortized. For the remainder of the 30 year term, it adjusts
to a new fixed rate based on the Fannie Mae net yield index
plus the margin.
- Lower payment initially. If you think you'll be making more money in
the future you could save some money at the beginning. Or if you're in
a market with rising prices and plan to sell before the balloon comes
Cons - You can refinance when
the balloon comes due, but you're betting that you can afford the new
is fixed for a certain amount of time, but the principal is not all
amortized during this period. The entire balance of the principal is
due at the end of the period in one balloon payment.
Pros - Lower monthly payments
with the option of refinancing or selling before the balloon payment is
Cons - Refinancing costs may
wipe out any savings you have made.
down loan offered to veterans only. The VA guarantees the loan for the
mortgage companies. Quite a few of these Little Rock home loans have
been made. There are usually several assumable ones available if you
Pros - No money down and no
mortgage insurance required. Loans are assumable.
- Rates may be higher than other conventional loans. Little Rock
mortgage companies would receive a 2% service fee from the government
so be sure your points reflect a discount compared to similar rate home
Government subsidized loan with low down payment
and closing fees included.
Pros - Great for first time
home buyers or those who can't afford a large down payment. These loans
- You may be able to find better rates with a conventional loan if you
can afford at least a 5% down payment. Once again, mortgage lenders get
a 2% service fee so make sure points are discounted accordingly.
We hope this information on Little Rock home loans has
helped steer you in the right direction for getting the best home
mortgage. A good idea is to check with at least 3 different mortgage
companies to be sure you're getting the best deal possible.
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