Sometimes lenders even offer discounted ARMs, with lower rates than their standard ARMs. This might be the result of a seller buydown, which means a home seller has paid the lender to offer you a lower rate and lower payment terms. The seller probably raised the price of the home so that the payment to the lender was included in the price.

One problem with this discounted ARM is that you (or the seller) pay much higher points up front. Then, after the initial period, if interest rates rise your mortgage payment could increase dramatically. For example, if you finance $100,000 at 8%, you will pay $734 per month for the first year. If the interest rate increases to 10%, your payment will jump to $875, and if it increases again to 12%, your mortgage payment suddenly becomes $1022.

Is an ARM right for you? Only you can answer that question, but whether you choose an ARM, a balloon mortgage, or other type of loan package, there's no doubt that there are more loan options available to consumers than ever before. At LoanManager.com, we want to help you find just the right loan that meets all your needs. Please feel free to browse our other articles for further information on home mortgage loans.  Go to our Prosper.com loan group.

At LoanManager.com, we strive to help you learn all you can about home mortgage loans. After all, knowledge is power; by knowing the advantages of every type of home loan, you are better able to choose the home mortgage loan that suits you.

One popular type of home mortgage loan is the Adjustable Rate Mortgage, or ARM. There are several different ways to set up an ARM; you can start out with fixed payments for the first year, for example. Since the interest rate changes, the payment will change over the life of the mortgage. What makes an ARM so attractive is that the rates are usually lower. If you can afford to be flexible and risk changing interest rates, you may want to look at an Adjustable Rate Mortgage.