|
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 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
|
