| Loan Program |
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
|
|
| Loan Program |
Advantages |
Disadvantages |
Adjustable Rate Mortgages (ARM)
- 10/1 ARM
- 7/1 ARM
- 5/1 ARM
- 3/1 ARM
- 1 year ARM
- 6 month ARM
- 1 month ARM
|
- Lower initial monthly payment
- Rates and payments may go down if rates improve
- May qualify for higher loan amounts
- 30 year term, no balloon payment
|
- More risk
- Payments may change over time
- Potential for higher payments if rates increase
|
|
| Loan Program |
Advantages |
Disadvantages |
| Balloon Mortgages
|
- Lower initial monthly payment
- Lower payment for a predetermined 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, refinance, or exercise
the conversion option
- Balloon payment requires you to sell or refinance after the term, as opposed
to a 7/1 or 5/1 program with a 30 year term
|
|
| Loan Program |
Advantages |
Disadvantages |
| First Time Buyer Programs |
- Lower down payment
- Easier to qualify
- Lower rates may be available
|
- May be subject to income and property value limitations
- Some government subsidized programs may generate a recapture tax if you sell
the house too soon
- Education courses may be required to qualify for these loans
|
|
| Loan Program |
Advantages |
Disadvantages |
| Stated Income Programs |
- Don't need to verify income
- Faster approval
- Good for borrowers who may not qualify with a full income documentation program
|
- Higher rates
- Higher down payment
|
|
| Loan Program |
Advantages |
Disadvantages |
| Interest Only Programs |
- You have several payment options
- Lower monthly payments
- Qualify for a higher loan amount
- Qualify at the interest only payment
- Option to pay the full normal payment
- Interest only payments for up to ten years
|
- Higher rates
- Principal loan balance will not decrease during the interest only payment
period
- Payment will be higher for the remaining term
|
|
| Loan Program |
Advantages |
Disadvantages |
| No point, No fee Programs |
- No out-of-pocket loan costs at closing
- Closing costs are paid from the lender rebate
- Less money required to close
- Refinance without increasing your loan amount
|
- Higher rates
- Higher payments
- Some lenders may have a short payoff penalty which is usually charged to the
loan broker, but may be passed on to you
- Some require a prepayment penalty for the first one to five years
|
|
| Loan Program |
Advantages |
Disadvantages |
| 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
|
|
| Loan Program |
Advantages |
Disadvantages |
| 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
- May be free of closing costs
- A good source for an emergency fund, if set up in advance
- Can be used for debt consolidation and lower payments
- Rates are usually lower than consumer loan or credit card rates
|
- Rates can change. The maximum interest rate can be relatively high
- Payments can change
- Harder to refinance your first mortgage
|
|
| Loan Program |
Advantages |
Disadvantages |
| Home Equity Fixed Loan |
- Fixed payments
- Interest may be tax deductible
- Get cash out for any purpose
|
- Higher interest rates compared to first mortgage
- Harder to refinance your first mortgage
- Interest is paid on the entire loan amount, compared to an equity line of
credit
|
