How do fixed-rate mortgages, ARMs and rate locks work?

A fixed-rate mortgage keeps the interest rate unchanged for the loan term, although taxes and insurance can change your total payment. An adjustable-rate mortgage (ARM) may start with a fixed introductory period and then adjust according to the contract’s index, margin and caps. Do not assume the initial ARM rate or payment will remain unchanged.

A rate lock is separate from the loan type. It sets a rate for a stated period under specified conditions; expiration, extensions and changes to the application can affect it. Fundsitive LLC helps explain available terms and coordinate lock requests with the lender. Confirm the lender’s written lock terms—an estimate or quoted rate is not automatically a locked rate.