| Loan Program | Advantages | Disadvantages |
|---|
Fixed Rate Mortgages - 30 year
- 20 year
- 15 year
- 10 year
| - 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 rates (then ARM's)
- Higher mortgage payments (then ARM's)
- Rate does not drop if interest rates improve
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| Loan Program | Advantages | Disadvantages |
|---|
Adjustable Rate Mortgages (ARM) - 10/1 ARM
- 7/1 ARM
- 5/1 ARM
- 3/1 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
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| 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
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| 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
| |
|
| Loan Program | Advantages | Disadvantages |
|---|
| No Doc Loans | - You do not have to verify income or assets
- Qualify when income cannot be verified
- Qualify when employment cannot be verified
- Based on only FICO score and appraisal
| - Higher rates
- Higher closing cost's
- less programs to choose from
|
|
| Loan Program | Advantages | Disadvantages |
|---|
| Interest Only | - Qualify for more house
- Much lower payments
- Can pay towards the interest monthly if you choose
| - Higher rates
- Higher closing cost's
- You will not pay any interest for the first 5-10 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
- Get into the House you want now, instead of later.
| - Higher rates
- Terms may not be as favorable
- Higher Closing Cost's
- 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
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| 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
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