|
Loan Program
|
Advantages
|
Disadvantages
|
Fixed Rate
Mortgages
-
30 Year Fixed
-
15 Year Fixed
|
- Monthly payments fixed
for 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
|
Adjustable
Rate Mortgages
- 7/1 ARM
-
5/1 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
|
- 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
|
