|
Programs
|
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 (ARM)
- 10/1
ARM
- 7/1
ARM
- 5/1
ARM
- 3/1
ARM
- 1
year ARM
- 6
month ARM
- 1
month ARM
|
- Lower
initial monthly payment
- Rates
and payments may go down if rates
improve
- May
qualify for higher loan amounts
- 30
year term, no balloon payment
|
- Payments
may change over time
- Potential
for higher payments if rates increase
- More
risk
|
|
First
Time Buyer Programs
|
- Lower
down payment
- Easier
to qualify
- Lower
rates may be available
|
- May
be subject to income and property
value limitations
- Some
government subsidized programs may
generate a recapture tax if you sell
the house too soon
- Education
courses may be required to qualify for
these loans
|
|
Stated
Income Programs
|
- Don't
need to verify income
- Faster
approval
- Good
for borrowers who may not qualify with
a full income documentation program
|
- Higher
rates
- Higher
down payment
|
|
Interest
Only Programs
|
- You
have several payment options
- Lower
monthly payments
- Qualify
for a higher loan amount
- Qualify
at the interest only payment
- Option
to pay the full normal payment
- Interest
only payments for up to ten years
|
- Higher
rates
- Principal
loan balance will not decrease during
the interest only payment period
- Payment
will be higher for the remaining term
|
|
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
- May
be free of closing costs
- A
good source for an emergency fund, if
set up in advance
- Can
be used for debt consolidation and
lower payments
- Rates
are usually lower than consumer loan
or credit card rates
|
- Rates
can change. The maximum interest rate
can be relatively high
- Payments
can change
- Harder
to refinance your first mortgage
|
|
Home
Equity Fixed Loan
|
- Fixed
payments
- Interest
may be tax deductible
- Get
cash out for any purpose
|
- Higher
interest rates compared to first
mortgage
- Harder
to refinance your first mortgage
- Interest
is paid on the entire loan amount,
compared to an equity line of credit
|