Are you ready to buy a home? If you think that you're ready to buy a home the first thing that you need to do is decide what type of mortgage is for you. When you're looking into the different kinds of mortgages that are available you need to know how much of a down payment you will be able to make on a home because the amount of the down payment that you can make will affect the type of mortgage that you are eligible for. The ideal down payment amount is 20% of the cost of the home but most people can't come up with 20% and usually people put down about 3% of the cost of the home as a down payment.

The two most common types of mortgages are an adjustable rate mortgage and a fixed rate mortgage. An adjustable rate mortgage, also known as an ARM, usually has a low down payment and initially has a low monthly payment however the monthly payment will increase as interest rates go up. An ARM may have a low monthly cost that is fixed for six months or even a year but after that the monthly payment you need to make could double or even triple depending on the interest rate. Many people will initially choose an adjustable rate mortgage and then try to refinance and get a fixed rate mortgage just before the ARM monthly payment is set to increase.

A fixed rate mortgage, on the other hand, has the same monthly cost throughout the entire cost of the mortgage. You will always know what your monthly mortgage will be if you have a fixed rate mortgage. However, the monthly mortgage payment if you have a fixed rate mortgage will be higher than the initial cost of an ARM mortgage and will be higher in total than an ARM. So over the course of the mortgage you will pay more to have a fixed rate mortgage but for many people that extra cost is worth the security of knowing that the monthly mortgage fee is fixed and won't change.

Even though you will pay more over the course of the mortgage if you choose a fixed rate mortgage if you choose an adjustable rate mortgage there's a chance that you will end up paying a lot more over the course of the ARM depending on how high the interest rate climbs. Since you will most likely have the mortgage for more than ten years going with a fixed rate mortgage is still usually a better option than an adjustable rate mortgage. If you can't get a fixed rate mortgage when you first buy a home then you should refinance and switch your adjustable rate mortgage to a fixed rate mortgage as soon as you can after buying the home. If you can refinance before your adjustable rate mortgage introductory period is up then you can smoothly switch from one mortgage to the other without paying the ultra high interest rate of an ARM.