| Loan
Programs |
Advantages |
Disadvantages |
| Fixed
Rate Mortgages
30 year fixed
15 year fixed |
• Monthly payments are fixed over
the life of the loan
• Interest rate does not
change
• Protected if rates go up
• Can refinance if rates
go down |
• Higher interest rate
• Higher mortgage payments
• Rate does not drop if interest
rates improve |
Adjustable
Rate Mortgages
10/1 ARM
7/1 ARM
3/1 ARM
1 year ARM
6 month ARM
1 month ARM |
• Lower
initial monthly payment
• Lower payment over a shorter
period of time
• Rates and payments may
go down if rates improve
• May qualify for higher
loan amounts |
• More risk
• Payments may change over
time
• Potential for high payments
if rates go up |
Balloon
Mortgages
7 year
5 year |
• Lower initial monthly payment
• Lower payment over a shorter
period of time
• Many balloon mortgages
offer the option to convert to a new loan after the initial term.
|
• Risk
of rates being higher at the end of the initial fixed period
• Risk of foreclosure if
you cannot make balloon payment or if you cannot refinance or if
you cannot exercise the conversion option |
| First
Time Buyer Programs |
• Lower
down payment
• Easier to qualify
• Sometimes you may get lower
rates |
• May
be subject to income and property value limitations
• Some programs which have
government subsidies may have a recapture tax if you sell the house
too early. |
| Stated
Income Programs |
• Don’t
need to verify income
• Faster approval |
• Higher
rates
• Higher down payment |
| No
point, No fee Programs |
• No
closing costs
• Less money required to
close |
• Higher
rates
• Higher payments |
| Imperfect
Credit Programs |
• Potential
for reestablishing credit if you pay your mortgage on time.
• When used for debt consolidation,
you may be able to reduce your monthly debt payment |
• Higher
rates
• Terms may not be as favorable
• Harder to get long term
fixed loans
• Loans may have prepayment
penalties |
| Home
Equity Line of Credit |
• You
only borrow what you need
• Pay interest only on what
you borrow
• Flexible access to funds
• Interest may be tax deductible |
• Rates
can change. The maximum interest rate is normally high.
• Payments can change
• Harder to refinance your
first mortgage |
| Home
Equity Fixed Loan |
• Fixed
payments
• Interest may be tax deductible |
• Higher
interest rates than on 1st mortgages
• Harder to refinance your
first mortgage |
