|
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
5/1 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
- Interest only option
|
-
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
|
|
Jumbo Mortgages |
| |
|
|
|
First Time Buyer Programs |
| |
-
Lower down payment
-
Easier to qualify
-
Sometimes you may get lower rate
|
-
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
|
