I knew the amount that I had for a down payment and what I could afford monthly in a home loan payment, but I had no real idea of what kind of loan programs I might qualify for. So I researched different types of loans online and found some great tools to help me estimate closing costs and understand different loan features. They can get pretty complicated! For example, a good friend of mine who is a freelance writer has an Option ARM home loan. She chose it because her income fluctuates and she likes the flexibility of making a lower monthly payment when she needs to. I was having a tough time understanding the pros and cons of an Option ARM loan, so I found a lender who explained the key points.

First, the lender explained that an Option ARM is a type of adjustable-rate mortgage (ARM), which means that the payment amount I would have to make every month would usually change (or adjust) if interest rates went up or down. However, sometimes my payment might not go down even if interest rates went down because of what's called 'carryover'. The lender is better able to explain this and other important details about ARM type loans.