|
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. |
|
Interest Only Programs: |
| |
Qualify for more house
Initial payments are lower |
No equity is built
After initial interest only term, the mortgage either
balloons or turns into an arm and principle is then added to the
monthly payment |
|
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 |
