| 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 1stmortgages
- Harder to refinance your first mortgage
|
