|
Loan Programs |
Advantages |
Disadvantages |
|
Fixed Rate Mortgages |
30 year fixed
15 year fixed |
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Monthly payments are fixed over the life of the loan
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Interest rate does not change
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Protected if rates go up
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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 |
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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 |
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Lower initial monthly payment
-
Lower payment over a shorter period of time
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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
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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
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Sometimes you may get lower rate
|
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May be subject to income and property value limitations
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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.
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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
|
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Higher interest rates than on 1st
mortgages
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Harder to refinance your first mortgage
|
