Matching Oregon Mortgage Terms to Your Needs

By Karen Lawson
Local Lender Columnist
Oct 1, 2007
Rates. Loan Type. Loan Term. These factors determine the amount of your mortgage payments, the length of the loan, and the interest rates you'll pay. When looking for a home loan, it's important to understand how these features work. Finding the right combination of features is critical to finding a mortgage loan that helps you buy (and keep) your home.

Loan Type and Rates: a Marriage Made in Heaven, or...

In addition to a traditional mortgage loan offering a fixed interest rate for thirty years, you can now find loans with adjustable interest rates, low initial interest rates, or shorter terms with balloon payments.

The loan type determines if/ how mortgage payments can change. A fixed rate mortgage (FRM) has one interest rate for its duration. The principle and interest (P&I) payment will not change throughout the course of the loan. An adjustable rate mortgage (ARM) is typically tied to a financial index, and the interest rate will change according to the index. This can be complicated, and it is essential that you find out how often and how much payments can increase if you' re considering an ARM loan. Lenders may also offer loans that offer predetermined increases in rates. These may be called step-rate mortgages. (SRM) They are technically FRM's, but offer initial low rates for a period of one to several years. An example would be a mortgage that starts out at 5% for the first year, "steps up" to 6% the second year, and fixes at 7% the third year and for the rest of the loan term. Knowing Oregon real estate market trends can also help you select your next mortgage loan.

About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds a Master's degree in English from the University of Nevada, Reno.