|
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 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
|
