Loan Programs

Which loan is right for me?
Years you plan to stay in home

1-3
3-5
5-7
7-10
10+ 
Best program

3/1 ARM, 1 year ARM or 6 month ARM
5/1 ARM
7/1 ARM
10/1 ARM, 30 year fixed or 15 year fixed
30 year fixed or 15 year fixed

Program
Pros
Cons
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 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 a new loan after  he 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 Buyers    

  • 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 payments
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, max rates are 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 1st mortgage
 
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