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Excellent Service
Bill is an exceptional loan officer. He helped us to purchase our home with very personal and professional service. He helped us navigate the whole process from start to closing without any problems. We didn't think we're qualified to purchase a house, but Bill went above and beyond to find a way to help us achieve our goal. He always responded very quickly with our requests, he would come back with different options with comparison chart to clearly indicate how much we need for down payment, monthly payments, interest rates, closing costs etc.
We would highly recommend Bill to anyone in need of lending services. In fact, we have already recommended Bill to one of our friends on purchasing a house.
๏ปฟ--- David Chan - Houston, TX
Bank Statement Lending!
William Rapp of Network Funding, L. P. was very professional and I felt comfortable in dealing with him. I will definitely recommend him to family and friends.
๏ปฟ--- Ian F - Missouri City, TX
Professionalism - Expert In Home Style Loan
Bill is an expert in the topic, his explanations and online material make a difference and he is always there from the beginning to the end. He is committed to make thing happen.
๏ปฟ--- Felipe Caldern & Carolina Angel Gutierrez
Great Service!
Bill Rapp's handling of our loan (even though out of state) was unparalleled to any service I have been through prior, including 3 different real estate transactions and multiple refinances. Extremely quick close, with great options and flexibility for my families needs. All around A+
--- Chris & Beth Sheehan - San Jose, CA
Knowledgeable and Responsive!
Bill was a pleasure to work with and he made the loan process fairly easy. He answered all questions I had very quickly and was straight forward in doing it. I would recommend Bill to others.
--- Wes Brady - Richmond, TX
Very professional and always returned our calls!
Bill takes a lot of pride in his job and is very dependable. They were very patient and understanding. He went out of his way and explained all my questions and concerns. They were very professional and returned my phone calls and emails. He did a great job and I fully recommend him.
--- Therese, Malcom & Shirley Teixeira - Katy, TX
Great Job!
Bill helped us out from beginning to end of loan process. The loan closed in a timely manner as Bill worked hard with bank to get our to the final steps.
๏ปฟ--- Kamal & Theresa Wilson - Hartford, CT
Avid Problem-Solver and Absolute Pleasure to Work With!
Bill Rapp worked very hard to ensure that we closed our loan and were able to move into our new home. He always had alternatives to any problems we encountered while closing. He worked with us from the beginning identifying solutions to any problems that we were having. He was an absolute pleasure to work with!
--- Nikita Rayani & Sanit Tejani - Houston, TX
Awesome to work with!
Being a first-time buyer I came in with lots of questions and concerns. Bill was always available for any questions I had and answered everything to my satisfaction. Bill made the loan process so painless that I could still concentrate on other things. We ended up closing early which made things even better. If you are in need of a lender and want someone who is very approachable and stays on top of your loan then Bill is your guy.
--- Cesar Raya - Richmond, TX
Loan Declined by my bank, and he saved the day!
Bill, did an amazing job helping me close on my house. He took the reigns and reassured me the best route to take to help close. He was accountable, thorough and trustworthy. I will continue to work with Network Funding, L.P. when it comes to home buying in the future because of the quality of service Bill gave.
--- Jacob Smith - Boerne, TX
Bill Rapp Will Definitely Make It Happen!
Bill is the most kind, patient and helpful person I have ever known. He answers his phone calls and emails promptly. You can ask him a million questions, and he will answer each and every one of them. Before I started working with Bill, I had been turned down for a home loan, because of some past credit issues I had, plus I was a single mother. However, once I started working with Bill, he was able to quickly get me a home loan, with a good interest rate. I would recommend that you call him, as he will help you.
--- Corinne Wilson - Roselle, NJ
Knowledgeable, Honest, Trustworthy, and Reliable!
"I will definitely keep you in mind. If anyone I know needs financing, I will send them your way!"
--- Jon & Andrea Saleem, CRPC Financial Advisor - Houston, TX
Best Dam Mortgage Guy a man could know!
"Hands down the best loan experience to date!"
--- Gabe & Chelsea Jackson - Pearland, TX
Phenomenal, Hard Working and Never Quits!
Had a stupid foreclosure that could have been avoided if exโs attny would have sent my buy out offer. So Bill was able to push this through with a 4 year foreclosure. He worked his butt off, was very diligent with his communication; and was very professional talking to me even when I was screaming and/or crying at him. Highly recommend this lender. He really go to the ends of the earth to help you!
--- Liz Keeter - Harlingen, TX
Exceptional customer service!
Bill is the most kind, patient and helpful person I have ever known. He answers his phone calls and emails promptly. You can ask him a million questions, and he will answer each and every one of them. Before I started working with Bill, I had been turned down for a home loan, because of some past credit issues I had, plus I was a single mother. However, once I started working with Bill, he was able to quickly get me a home loan, with a good interest rate. I would recommend that you call him, as he will help you.
--- Isha Lopez & Mauricio Garcia - Houston, TX
Service with a capitol S
Bill went above and beyond at every turn. He worked late on Saturday, he worked late all the time. We wanted to close ASAP and he really helped make it happen for us.
--- Jeff & Wendy Heger - Houston, TX
Best Buying Experience!
I would would highly recommend going with Network Funding LP. As a first time home buyer I didn't know what to expect. Bill Rapp was very helpful in answering all my questions and guided me through all ghe steps. I couldn't have asked for a better buying experience!
--- Tabitha Turner - Humble, TX
Would recommend him and use him again!
Very involved and professional . Kept me informed and up to date on everything that was going on Went with me closing and was very helpful and knowledgeable.
--- Kathy Ward - Houston, TX
Great experience!
Well I meet bill back in December 2016 he got recommended by my real estate agent we had a house in sight and started the process to get approved but we fail due to my work history and credit bill told me not to give up and put me in contact with a credit repair company they help me bring my score up and bill walk me thru the process of getting a new line so this time around we got approved before looking for our house after we found it we still had a couple of hick up but with bills help on Sunday 6-18-17 to be exact Father's Day bill called me to give me the great news that we had got approved and the closing date was as scheduled bill was more than just a lender to my family he became a friend and I'm alway going to have him in mind for any other financial situation.
--- Alejandres Felimon - Richmond, TX
I really liked his attitude!
I wouldn't usually say this but the way he had handled my mortgage was really pleasant. I personally enjoyed the time spent with him while we discussed feasible rates. He's a great man with a great personality and he offered really low interests as well. Definitely recommend him to others.
--- Tom Troiano - Atlantic City, NJ
He's nothing short of a miracle!
I'm a self-employed businessman and had him figure out the mortgage of the house after 30% down payment. The interest rates I received were incredibly low given what I had thought of earlier. One other important thing to note was that I hadn't really taken any loans earlier, so I had no credit history. He helped me out with all that as well so I can't really call him anything else but a miracle.
--- Fran Suarez - Cleveland, OH
He's really helpful!
I made a bid to him and the very same day he gave me an offer which I couldn't resist. It was too intimidating with those incredibly low interest rates and all, thoroughly recommend him.
--- Kenny Mickle - Houston, TX
Expeditious!
Bill was very expeditious and made it real easy going through the loan process. I felt he was on top of things.
I deal with investment properties and will more than likely call on him again.
--- Wayne King - Pensacola, FL
Bill was great!
Bill made us feel like a friend all the way thru the process. He was patient and explained everything he needed clearly. He was available ANYTIME we had questions or needed more information. Hopefully we wonโt go thru this process again anytime soon, but if we do - weโd choose Bill! =)
--- Barbra & Nick Grimmer - Austin, TX
Great broker!
Bill was a great broker to work with. As first time home buyers we had many questions about the process, Bill took the time to help us even calling us back on weekends with answers. I would not hesitate to recommend him to anyone looking for a broker to work with.
--- Murray & Lisa Turner - Pensacola, FL
Outstanding service!
I couldn't have been more pleased with Bill's level of service. He made what is typically a lengthy, arduous process far quicker and easier at every turn. I'm extremely comfortable recommending Bill to friends and family, and will definitely utilize his services again!
--- Jim Lipari - Austin, TX
9 Things Every Dentist & Doctor Should Know About Mortgages
Brew up a great cup of coffee, pull out your notepads, iPads, MacBooks or whatever you prefer to take notes withโthis post is epic and contains everything you ever wanted to know about physician loans. More importantly, youโll find step-by-step information on how to research, compare banks and negotiate to get the best mortgage rates. Letโs go!
1. Physician Loans: A History Lesson
Special mortgage products for doctors are not new, but when you compare them with the modern mortgage market (popularized by insurance companiesโnot banksโin the 1930โs), they are relatively new products that have yet to make their way into the mainstream.
Sometime in the mid-2000โs, a forward-thinking employee at Bank of America (letโs call him Steve) honed in on an interesting strategy for attracting wealthyโor soon to be wealthyโclients to the bank.
Every single year, over 16,000 fresh-faced medical school grads were being matched to their residency/fellowship programs all over the United States. The majority of these new graduates had massive student loans. In fact, according to the Association of American Medical Colleges, the average medical student in 2015 will amass over $183,000 in debt. That figure is up 2% over 2014. If you look at this situation through a traditional lens, you understand why a recent graduate would never qualify for a traditional mortgage loan: too much debt and zero income history.
Most of these students also emerged into their adult life with the preconceived notion that renting an apartment or home is not a good idea. They would prefer to purchase a home, but canโt. Finally, Steve discovered that MDs have one of the lowest default rates (.02%) of any demographic, so it was relatively safe to lend them money.
That perfect storm created the doctor loan program.
Being an astute strategist and looking to add value to the bottom line, Steve brought this idea to the upper brass at the bank in Charlotte. It took a few months to consider the strategy, vet it out and get it approved. But once implemented, the program was hugely successful. It filled a much-needed void, so the bank generated millions and millions of dollars of new revenue by originating physician loans.
Competing banks took notice. They soon carved out similar doctor loan programs, complete with unique benefits, rates, and states where a resident could purchase a new home.
Now that we understand the history and how we got here, letโs take a look at what these loans look like in general.
2. A physician loanโฆ
Requires you to invest very little money down for a down payment, usually zero to five percent of the total purchase price.
Accepts your residency/fellowship/employment contract as proof of how much money you will be making in the future. Usually, conventional mortgage underwriters look backward at your earning history in efforts to determine if youโll be able to afford your monthly payment and not default.
Might call on you to open an account with the originating bank. Typically, theyโll need you to set up an auto-draft for your monthly payment, which lowers the risk of default. Forcing you to open an account is also a way for the bank to ensure youโll be doing business other than your physician loan with them, with the hopes of converting you into a lifetime customer.
May be used by a resident or practicing physician. This is the case at 90% of the banks that offer physician loans. Make sure you inquire as soon as you can about this important distinction.Can be used on most property types (single family and townhomes), but in certain cities and regions, you may not be eligible to purchase a condo with a physician mortgage.
Does not distinguish between a conventional mortgage loan and a jumbo loan. Most banks will charge higher rates and fees on anything over $417,000, which is considered a riskier product, thus the name โjumboโ. A point of note: not all banks that offer the doctor loan program offer jumbo loans.
In some cases, lending guidelines may allow you to use money you receive as a gift for a down payment, cash reserves or miscellaneous closing costs.
Requires you to have decent credit. Typically, you need to be in the neighborhood of 700-720+. If you have scores that are over 800, congratulations. Youโre in a different league, and the absolute best rates and terms for physician loans will be available to you.
Mandates that you have a loan payment to income ratio of less than 38%, which means your monthly payment canโt equate to more than 38% of your income. This can vary with lenders, though, and is something you should ask about for when interviewing different banks.
Letโs move on to the other mortgage type so you can easily compare the two.
3. Conventional conforming loansโฆ
Require 3% to 5% down. For reference, 3% of a $200,000 loan would be $6,000. That is just what it takes to get in the door and qualify for the mortgage. This does not include any fees or percentages youโll pay your Realtor.
Require PMI (private mortgage insurance) if you donโt put 20% down or have 20% equity in the home.
Allow you to qualify with a credit score of 580 or above.
Require three months of cash in reserve that could cover PITI (principal, interest, taxes and insurance) payments on the loan.
Require proof of earnings history (W-2 forms, bank statements, and/or pay stubs). If youโre self-employed, youโll need to present two years of previous tax returns.
Use any debt (consumer, student, etc.) as factors in your debt-to-income ratios.
Require a debt-to-income ratio of 45% to 55%. This just means your debts canโt equate to more than 45% to 55% of your income.
Allow you to purchase condominiums in most markets.
Here comes the butโฆkeep in mind not all banks can loan in every one of these areas, and each bankโs doctor loan program will be unique in each state. Some banks even vary rates and terms based on the particular city.
Caliber Home Loans makes Doctor loans in all 50 states.
4. These are your options :
There are many alternatives to physician loans. Letโs take a look at the main ones:
Conventional Mortgages โ These are your typical mortgages, and encompass anything that isnโt part of a specific government loan or special program. They come in many flavors: 30, 20, 15 and 10 year fixed rate or 5/1, 7/1 and 10/1 adjustable rate mortgages (ARM). If you put at least 20% down, youโll get a better interest rate and will not have to pay mortgage insurance. This is a good idea if you have the cash.
Many banks offer options for you to pay less than 20% down. The disadvantage of putting less money down are higher rates. If youโre not able to put 20% down, the bank will require you to pay PMI.
As of September 2016, youโll have to put down at least 3% for this type of loan. Before the 2008 financial meltdown, there were many programs available that offered borrowers 100% financing. Those options have disappeared, many say with good reason.
FHA Loans โ These loans are administered and regulated by the Federal Housing Authority. They allow for lower credit scores than conventional loans and require as little as 3.5% down. They also require private mortgage insurance (PMI) on all loans.
VA Loans โ This program was created for US Military veterans and are guaranteed by the VA. They do not require a down payment or PMI, but there is an upfront fee (1.5% โ 2% depending on your down payment) with most loans.
USDA Loans โ Offered to rural, low-income borrowers, these mortgages require zero money down, are often cheaper than going the FHA route. They are sponsored and administered by the US Department of Agriculture and do require PMI.
State and Local Programs โ These programs aim to help low to moderate income buyers purchase a home. Some are aimed at certain professions like teachers, firefighters and police officers. You can find out more and see if there is something available for doctors here. The last time I checked, there was not.
5. How to compare banks and their mortgages
It may seem like a daunting task, but putting the time into up-front research is well worth the end result. For example, on a $300,000 30-year fixed rate mortgage, reducing your interest rate by just .25% will save you almost $16,000 in interest payments over the life of your mortgage.
Call Caliber Home Loans who can shop your loan to ensure you get the best mortgage!
6. How mortgage rates are determined by banks
Before we get into negotiating rates, itโs helpful to understand how banks come up with the rates they charge borrowers for their home loans. This is a fascinating, complicated process. Itโs not possible to say that interest rates are tied to one particular index, economic factor or governing body. It is possible to say that banks want to be as competitive as possible and at the same time as profitable as possible. This leads to the very strategic game that is determining their rates.
Things that influence rates include: the secondary mortgage market (how much investors are willing to pay for vast tranchesโwhich are packaged bundlesโof loans that are packaged up and sold as mortgage-backed securities), inflation rates, the price of US Treasuries, the LIBOR Bank rate and the Federal Reserve funds rate.
7. Finding the perfect home
There are many guides online that can help you define what will make the perfect home for you. HTGV, Forbes, and Houzz have put together some nice ones. Do this first, because itโs important to narrow your possibilities and focus on homes that fit your criteria.
Once you know what youโre looking for, be prepared to do a lot of virtual house-hunting. Things have changed a lot since your parents drove around with their Realtor to look at every single house they were interested in. Be very glad about that.
8. Buying a house isnโt a good idea for everyone
Letโs be honest. Sometimes, it just makes more sense to rent. If youโre not sure about where youโll be in three years, rent. If you think youโre in a declining market, and thereโs a possibility that home prices will decrease, rent. Weโve come up with a guide to help you weigh these factors: Getting a Physician Loan vs. Renting. The New York Times also put together a great interactive article called Is it Better to Rent or Buy?
In many cases, it makes more sense to buy. From a financial and psychological perspective, the benefits of homeownership are pretty compelling.
If you are saddled with consumer debt and/or excessive student loans, you also might want to pay off some of those debts before purchasing real estate, even with a physician mortgage loan. It all depends on the interest rates and terms. Check out this post on debt from Future Proof M.D. for more info and a few options.
Think about it and choose the path that is right for you.
9. You need to educate yourself
Our physician mortgage loan FAQ will answer more of your burning questions about physician loans specifically, but itโs critical you learn as much as you can about the finance and home buying process. This is the biggest purchase youโll ever make, and it pays dividends to know what youโre doing. At least know the basics. Youโll probably buy another house in your lifetime, and you can continue to build on your home buying knowledge with every purchase.
Heck. You may even be able to pass this knowledge down to your friends, family or children one day. Itโs important stuff.
Please comment below and let me know if there are other things youโd like to know. If you spot any mistakes, point them out, and Iโll correct them.
My best advice to you is to give Bill Rapp, the Mortgage Viking, a call today to discuss the next steps: 281-222-0433.
๐ก Fixed-Rate vs. Adjustable-Rate Mortgage: Which Home Loan Saves You More Money? ๐ฐ
๐ก Fixed-Rate vs. Adjustable-Rate Mortgage: Which Home Loan Saves You More Money? ๐ฐ
๐ต Fixed vs. Adjustable Mortgage Rates: 7 Things Every Homebuyer Should Know Before Choosing ๐
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Fixed-Rate vs. Adjustable-Rate Mortgage: Which Home Loan Saves You More Money?
When you're shopping for a mortgage, one of the most important decisions you'll make is whether to choose a fixed-rate mortgage or an adjustable-rate mortgage (ARM).
Both options can help you purchase a home, but they work differently. One offers predictable monthly principal and interest payments, while the other may offer a lower introductory interest rate in exchange for uncertainty later.
So which mortgage is better for you?
The answer depends on your financial goals, how long you expect to own the home, your budget, and your tolerance for changing interest rates.
At Medallion Funds, we help homebuyers understand their financing options so they can make informed decisions rather than simply choosing the loan with the lowest advertised rate.
Let's break down the differences.
What Is a Fixed-Rate Mortgage?
A fixed-rate mortgage is a home loan with an interest rate that remains unchanged throughout the entire loan term.
Whether you choose a 15-year, 20-year, or 30-year fixed-rate mortgage, your interest rate stays the same unless you refinance or otherwise modify the loan.
Advantages of a Fixed-Rate Mortgage
ยทPredictable payments: Your monthly principal and interest payment stays the same.
ยทProtection against rising interest rates: Market rate increases won't change your existing mortgage rate.
ยทEasier long-term budgeting: You know the scheduled principal and interest payment for the life of the loan.
ยทLong-term stability: Particularly attractive for homeowners planning to remain in their homes for many years.
Disadvantages of a Fixed-Rate Mortgage
ยทThe initial interest rate may be higher than the introductory rate on an ARM.
ยทYou may pay more interest during the early years compared with a lower-rate ARM.
ยทTaking advantage of falling market rates generally requires refinancing, which may involve closing costs and qualification requirements.
Important: Even with a fixed-rate mortgage, your total housing payment may change because of property taxes, homeowners insurance, mortgage insurance, or escrow adjustments.
What Is an Adjustable-Rate Mortgage?
An adjustable-rate mortgage, commonly called an ARM, generally begins with a fixed introductory interest rate for a specified period.
After that initial period, the interest rate can adjust periodically based on a financial index plus a lender-defined margin, subject to the loan's adjustment caps.
Common ARM structures include:
ยท5/1 ARM: Fixed interest rate for five years, then adjustments generally once per year.
ยท7/1 ARM: Fixed interest rate for seven years, then adjustments generally once per year.
ยท10/1 ARM: Fixed interest rate for ten years, then adjustments generally once per year.
ยท5/6 ARM: Fixed interest rate for five years, then adjustments generally every six months.
The first number represents the initial fixed-rate period in years. The second number indicates the adjustment frequency afterward.
For example, a 7/6 ARM generally maintains its introductory rate for seven years before becoming eligible for adjustments every six months.
Advantages of an Adjustable-Rate Mortgage
ยทPotentially lower introductory rates: Some ARMs offer lower initial interest rates than comparable fixed-rate loans.
ยทPotential early payment savings: A lower introductory rate can reduce monthly principal and interest payments.
ยทFlexibility for shorter ownership plans: May suit borrowers who expect to sell or relocate before the first adjustment.
ยทPotential benefit if rates decline: Future adjustments could reduce the interest rate, depending on the index, margin, and contractual limits.
Disadvantages of an Adjustable-Rate Mortgage
ยทYour interest rate and payment may increase after the introductory period.
ยทFuture payment amounts are uncertain.
ยทRefinancing may not be available or financially attractive when you need it.
ยทRising payments can create financial stress if your budget is already stretched.
Key takeaway: An ARM isn't automatically riskier for every borrower, but understanding its adjustment structure is essential.
Fixed-Rate vs. Adjustable-Rate Mortgage: Side-by-Side Comparison
Feature | Fixed-Rate Mortgage | Adjustable-Rate Mortgage |
Interest rate | Remains fixed | Fixed initially, then can adjust |
Initial rate | May be higher | May be lower |
Principal and interest payment | Predictable | Can change after initial period |
Rising-rate protection | Throughout loan term | Limited by fixed period and caps |
Long-term budgeting | Easier | More uncertainty |
Common borrower fit | Long-term homeowner | Borrower comfortable with adjustment risk |
Refinancing | Optional strategy | Optional, but not guaranteed |
Neither mortgage type is universally superior.
The best choice is the one that aligns with your expected ownership period, financial flexibility, and long-term goals.
Real-World Example: Fixed-Rate Mortgage vs. 7/6 ARM
Let's compare two hypothetical financing scenarios.
Home purchase price: $450,000
Down payment: $90,000 (20%)
Loan amount: $360,000
Amortization: 30 years
Assume the following illustrative interest rates:
Option A: 30-Year Fixed-Rate Mortgage
ยทInterest rate: 6.50%
ยทMonthly principal and interest: Approximately $2,275
ยทInterest rate stays at 6.50% for the loan term.
Option B: 7/6 Adjustable-Rate Mortgage
ยทInitial interest rate: 5.75%
ยทInitial monthly principal and interest: Approximately $2,101
ยทRate remains fixed for the first seven years, then can adjust every six months.
Potential Initial Savings
The ARM would save approximately $174 per month in principal and interest during its introductory period.
Over seven years, that represents approximately $14,600 in cumulative payment differences, assuming scheduled payments and unchanged introductory terms.
However, those differences are not the same as total financial savings. The loans amortize differently, and the ARM's interest rate may increase or decrease after year seven.
These figures exclude property taxes, insurance, mortgage insurance, lender fees, points, and other closing costs. Rates are hypothetical, not current loan offers.
What Happens When an ARM Adjusts?
Once the introductory period ends, the ARM's interest rate may move up or down.
Most modern adjustable-rate mortgages use an index, such as the Secured Overnight Financing Rate (SOFR), plus a contractual margin.
For example:
ยทIndex at adjustment: 4.00%
ยทContractual margin: 2.75%
ยทFully indexed rate: 6.75%
The actual adjusted rate is subject to the mortgage's contractual provisions and applicable caps or floors.
Understanding ARM Rate Caps
ARM rate caps limit how much the interest rate can increase.
A hypothetical 2/1/5 cap structure generally means:
ยท2% initial adjustment cap: Maximum increase at the first adjustment.
ยท1% subsequent adjustment cap: Maximum increase at later adjustments.
ยท5% lifetime adjustment cap: Maximum increase over the initial rate during the life of the loan.
Actual caps vary by product. Some loans also specify downward adjustment limits or interest-rate floors.
Before choosing an ARM, ask your mortgage broker to calculate your possible payment under the maximum permitted interest rate.
When Does a Fixed-Rate Mortgage Make Sense?
A fixed-rate mortgage may be particularly attractive if:
1.You expect to remain in your home for ten years or longer.
2.You prefer stable monthly principal and interest payments.
3.Your household budget has limited room for payment increases.
4.You want protection against future interest-rate increases.
5.You value certainty more than potential introductory savings.
For many first-time homebuyers, the predictability of a fixed-rate mortgage provides valuable peace of mind.
However, long-term stability should still be weighed against the loan's interest rate, fees, and total borrowing costs.
When Does an Adjustable-Rate Mortgage Make Sense?
An ARM may be worth considering when:
1.You expect to relocate within the introductory fixed-rate period.
2.You anticipate selling the property within several years.
3.The ARM provides meaningful initial savings after accounting for fees.
4.You have sufficient income, reserves, and financial flexibility to absorb potential payment increases.
5.You understand the adjustment index, margin, caps, and maximum payment exposure.
An ARM can also be attractive for some medical professionals, executives, or relocating homebuyers who anticipate changes in housing needs.
However, projected career advancement, future income increases, and anticipated refinancing should never be treated as guaranteed.
Should You Choose an ARM If You Expect Mortgage Rates to Fall?
This is one of the most common questions borrowers ask.
If mortgage rates decline, an ARM might eventually adjust downward.
But there are important limitations.
First, your ARM may not adjust until the introductory period expires.
Second, the adjustment depends on the loan's index and contractual provisions, not simply the prevailing advertised mortgage rate.
Third, interest rates could rise instead of fall.
A fixed-rate borrower can also explore refinancing when market rates decline, although refinancing involves new qualification requirements, costs, and potential changes to the loan term.
The better approach is to choose a mortgage you can afford even if your interest-rate forecast turns out to be wrong.
Seven Questions to Ask Before Choosing a Fixed or Adjustable Mortgage
Before making your decision, ask your mortgage broker:
1.What is the initial interest rate and APR for each option?
2.How much are the lender fees, discount points, and closing costs?
3.When can the ARM first adjust, and how frequently afterward?
4.What index, margin, rate caps, and floors apply?
5.What would my payment be at the maximum permitted interest rate?
6.How do the five-year costs and principal balances compare?
7.How does each loan fit my expected ownership period and financial reserves?
A properly prepared Loan Estimate can help you compare interest rates, closing costs, APR, and the projected five-year borrowing costs.
For an ARM, also review the required adjustable-rate disclosures.
Frequently Asked Questions
Is a fixed-rate mortgage better than an ARM?
Not necessarily. Fixed-rate loans offer long-term payment predictability, while ARMs may provide initial savings. The best option depends on your financial circumstances and ownership plans.
Can an adjustable-rate mortgage increase every month?
Not necessarily. Adjustment frequency is specified in the loan documents. For example, a 7/6 ARM generally adjusts no more frequently than every six months after the seven-year introductory period.
Can I refinance an ARM into a fixed-rate mortgage?
Yes, if you qualify for a new loan and refinancing is available. Approval depends on factors such as credit, income, property value, equity, and lender guidelines.
Do adjustable-rate mortgages always start with lower interest rates?
No. ARM pricing depends on market conditions, lender offerings, loan structure, and borrower qualifications. Compare actual offers rather than assuming an ARM is cheaper.
Can an ARM payment decrease?
Yes. If the relevant index declines, an ARM's interest rate and principal and interest payment may decrease, subject to the loan's terms and any applicable floors.
Is a 7/6 ARM better than a 30-year fixed mortgage?
A 7/6 ARM may provide introductory savings, but a fixed-rate loan provides greater long-term certainty. Compare both under realistic scenarios before deciding.
Final Thoughts: Choose the Mortgage That Fits Your Future
Choosing between a fixed-rate mortgage and an adjustable-rate mortgage isn't simply about finding the lowest interest rate today.
It's about understanding your future payment obligations, your financial flexibility, and your long-term homeownership plans.
At Medallion Funds, we help borrowers evaluate financing options, compare loan structures, and understand the potential trade-offs.
Whether you're buying your first home, relocating, purchasing a larger property, or exploring refinancing, the right mortgage strategy begins with the right information.
Let's review your mortgage options together.
Bill Rapp
Partner & Director of Capital Advisory | Medallion Funds
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ยฉ Bill Rapp, Medallion Funds LLC, Director of Capital Advisory
Main Office:
Medallion Funds
[email protected]
11920 Southern Highlands PKWY Suite 302Las Vegas, NV 89141
Texas Complaint and Recovery Fund Notice
All Rights Reserved Copyright ยฉ 2021 - Bill Rapp The Mortgage Viking | NMLS #228246