| Loan Program |
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 |
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