|
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
|
