| 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 |
