Fixed Rate

• Your interest rate is set for the life of the loan. This will prevent escalating interest and payments.
• Lenders may be willing to keep the loan in their own lending portfolio, thus allowing more underwriting flexibility.
• Lenders may negotiate or eliminate certain loan fees.
• Lenders may allow comortgagors.
• A lender may allow collateral other than or in addition to the real property being mortgaged.
• A lender may be willing to finance personal property with the real estate loan, such as appliances and/or furniture.
• Appraisal needs to meet only the lender's guidelines (if the loan is held in portfolio) or the secondary market's (if applicable), instead of the strict appraisal standards of the FHA and the VA.
• If PMI is required, its premiums are usually less expensive than with ARM programs or FHA mortgage insurance.
• For a borrower who may have difficulty obtaining PMI, the lender may self-insure the loan, increasing the interest rate to compensate for any potential loss.
• The lender can fund a portion of the closing costs in exchange for a higher interest rate.

Adjustable Rate

• Lower interest rates than for fixed-rate mortgages allow the buyer to qualify more easily for the loan or leverage into a more expensive property than he or she could otherwise afford.
• Rates adjust based on increases and decreases in the particular index used, which is a gauge of inflation in the economy. This creates and equitable situation for lender and borrower alike because the lender's costs are covered, while the borrower's wage increases cover the rise in payment amounts.
• A variety of indexes are available on which to base the ARM.
• The borrower can choose from various adjustment periods, such as six months, one year, three years, five years, or ten years.
• Some ARMs can be converted to fixed-rate mortgages during a specific time frame in the loan.
• Initial lower-than-market "teaser" rates may drastically reduce the borrower's monthly payment in the first year of the loan.
• Some lenders keep ARMs in portfolio, allowing the buyer to request special concessions of the lender, such as no PMI or no reserves account for taxes and insurance.
• Adjustable-rate mortgages are good to use in times of low inflation as well as for short-term ownership.