all california mortgage: eastbay Team
What Loan Programs Are Most Commonly Used Today? There are many loan programs designed to meet borrower's individual criteria. The following is a comparison of some of those programs.
LOAN PROGRAM
ADVANTAGES
DISADVANTAGES
FIXED RATE
Ranging from 10-40 years(15 & 30 year being the most common)
- 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 / HYBRID
10/1 ARM
5/1 ARM
7/1 ARM
3/1 ARM
1 year
6 month ARM
- 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 year loan terms available
- More risk
- Payments may change over time
- Potential for higher payments if rates increase
FIRST TIME HOME BUYER PROGRAMS
- Lower down payment
- Easier to qualify
- Lower rates may be available
- May be subject to income and property value limitations
- Some government subsidies programs may have a recapture tax if you sell too soon
- Counseling may be required to qualify for these loans
INTEREST ONLY PROGRAMS
30 Year
10/1 ARM
7/1 ARM
5/1 ARM
3/1 ARM
1 Year ARM
6 Month ARM
NO POINT, NO FEE PROGRAMS
IMPERFECT CREDIT PROGRAMS
HOME EQUITY LINE OF CREDIT WITH FIXED RATE OPTIONS
HOME EQUITY FIXED LOAN
- Allows for more than one payment option
- Lower monthly payments
- Qualify for a higher loan amount
- Qualify at interest only payment
- Option to pay the fully amortized payment
- Cash flow advantages (use funds to invest, etc.)
- 40 year loan terms available
- Principle pay downs will result in an immediate reduction in the monthly payment during interest only term
- No closing costs
- Less money required to close
- Refinance without increasing your loan amount
- 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
- Can be used as temporary financing until you qualify to refinance into a mortgage with better terms
- 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
- Good source for an emergency fund
- Can be used for debt consolidation and lower payments
- Rates usually lower than consumer loan or credit card
- Can be used for investment opportunities
- Fixed payments
- Interest may be tax deductible
- Debt consolidation
- Can be used for investment opportunities
- Principal loan balance will not decrease in any month the interest only payment is chosen
- Payment can increase when loan converts to fully amortized
- Higher rates
- Higher payments
- Higher rates
- Terms may not be as favorable
- Harder to obtain long term fixed loans
- Loans may have prepayment penalties
- Rates can change
- The maximum interest rate can be relatively high
- Payments can change
- 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 where interest is charged on the amount drawn only
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