| 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 |
