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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