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 1^st mortgages

       Harder to refinance your first mortgage