| Loan Programs |
Advantages |
Disadvantages |
Fixed Rate Mortgages
Ranging from 10-40 years(15 & 30 year being the most common)
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- 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
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- Higher interest rate
- Higher mortgage payments
- Rate does not drop if interest rates improve
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Adjustable Rate/Hybrid Mortgages
10/1 ARM
5/1 ARM
7/1 ARM
3/1 ARM
1 year ARM
6 month ARM
Option ARMS, 1 & 3 mos., etc.
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- Lower initial monthly payment
- Rates and payments may go down if rates improve
- May qualify for higher loan amounts
- Cash flow advantages (use funds to invest, etc.)
- 40 & 50 year loan terms available
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- More risk
- Payments may change over time
- Potential for higher payments if rates increase
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First Time Home Buyer Programs
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- Lower down payment
- Easier to qualify
- Lower rates may be available
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- May be subject to income and property value limitations
- Some programs which have government subsidies may have a recapture tax if you sell the property too soon
- Counseling may be required to qualify for these loans
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Reduced Doc Programs:
Stated Income
Stated Income/Stated Asset
Full Income/Stated Asset
No Ratio
NINA (No Income & No Asset Verification)
No Documentation Loans
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- Don't need to verify income (or assets in some cases)
- Faster approval
- Good for borrowers who may not qualify for a full income documentation program
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- Slightly higher rates in some cases
- Larger down payment may be required
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Interest Only Programs
30 Year
10/1 ARM
7/1 ARM
5/1 ARM
3/1 ARM
1 Year ARM
6 Month ARM
Option ARMS, 1 & 3 mos., etc.
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- Allows for more than one payment option
- Lower monthly payments
- Qualify for a higher loan amount
- Qualify at the interest only payment
- Option to pay the fully amortized payment
- Cash flow advantages (use funds to invest, etc.)
- 40 year loan terms available
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- Principal loan balance will not decrease in any month the interest only payment is chosen
- Payment can increase when loan converts to fully amortized
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No point, No fee Programs
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- No closing costs
- Less money required to close
- Refinance without increasing your loan amount
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- Higher rates
- Higher payments
- Loans may have prepayment penalties
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Imperfect Credit Programs
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- 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
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- Higher rates
- Terms may not be as favorable
- Harder to obtain long term fixed loans
- Loans may have prepayment penalties
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Home Equity Line of Credit
Home Equity Line of Credit with Fixed Rate Options
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- 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
- Can be a good source for an emergency fund
- Can be used for debt consolidation and lower payments
- Rates are usually lower than consumer loan or credit card rates
- Can be used for investment opportunities
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- Rates can change
- The maximum interest rate can be relatively high
- Payments can change
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Home Equity Fixed Loan
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- Fixed payments
- Interest may be tax deductible
- Debt consolidation
- Can be used for investment opportunities
- May have lower interest rates than equity lines
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- Higher interest rates compared to a first mortgage
- Proceeds received in one lump sum as opposed to drawing funds as needed
- Interest is paid on the entire loan amount, compared to an equity line of credit
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