|
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
|
| 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 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
|
|
