| 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 changes
- 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
5/1 ARM
3/1 ARM
|
- Lower initial monthly payment
- Lower payment over the fixed 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 can neither make balloon payment nor refinance
|
HOME EQUITY LINE OF CREDIT
("HELOC")
|
- 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
|
- Rates may adjust daily,usually pegged to the prime rate plus some margin
- Payments can change
|
STATED INCOME AND NO DOCUMENT PROGRAMS
|
- Income is not verified – no supporting documents required
- Faster approval
|
- Higher rates
- Higher down payment
|
NO COST PROGRAMS
|
- No lender, legal, or title costs
- Less money required to close
|
- Higher rates
- Higher payments
|
BAD OR LOW CREDIT PROGRAMS
|
- Potential for reestablishing credit
- 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
|