| Loan Programs
|
Advantages |
Disadvantages
|
Fixed Rate Mortgages
- 30 year fixed
- 20 Year fixed
- 15 year fixed
- 10 years 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 |
