|
LOAN
PROGRAMS
Below
is a quick reference guide to help you
differentiate between the different
loan programs.
| Years
you plan to stay in house |
Recommended
programs |
| 1-3 |
3/1
ARM - 1 year ARM - 6 Month ARM |
| 3-5 |
5/1
ARM, Balloon |
| 5-7 |
7/1
ARM, Balloon |
| 7-10 |
10/1
ARM - 30 year fixed - 15 year
fixed |
| 10+ |
30
year fixed - 15 year fixed |
|
|
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
|
|
|
|
|
|
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 1st
mortgages
Harder
to refinance your first mortgage
|
