Loan Programs
Which loan is right for me?
Often the answer to this question is based around the number of years you plan to stay in your home. Each type of loan has specific terms that affect the amount of the payment, the interest rate, and the length of the pay back. However, this is not the only factor. It is important to weigh many factors such as income projections, economic trends, and personal debt management preferences. Weigh the pros and cons of each loan type. The important thing is to make an educated decision.
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Program
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Pros
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Cons
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Fixed Rate
- 30 Year fixed
- 15 Year fixed
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- Monthl 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
- 10/1 ARM
- 7/1 ARM
- 3/1 ARM
- 1 year ARM
- 6 month ARM
- 1 month ARM
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- 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
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- More risk
- Payments may change over time
- Potential for high payments if rates go up
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Balloon Payment
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- Lower initial monthly payment
- Lower payment over a shorter period of time
- Many balloon mortgages offer the option to convert a new loan after the initial term
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- 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
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| First Time Buyers |
- Lower Down payment
- Easier to qualify
- Sometimes you may get lower rates
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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 house too early
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| Stated Income Programs |
- Don't need to verify income
- Faster approval
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- Higher rates
- Higher payments
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| No point, No fee Programs |
- No closing costs
- Less money required to close
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- Higher rates
- Higher payments
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| 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
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- Higher rates
- Terms may not be as favorable
- Harder to get long term fixed loans
- Loans may have prepayment penalties
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| Home EquityLine of Credit |
- You only borrow what you need
- Pay interest only on what you borrow
- Flexible access to funds
- Interest may be tax deductible
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- Rates can change, max rates are normally high
- Payments can change
- Herder to refinance your first mortgage
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| Home Equity Fixed Loan |
- Fixed payments
- Interest may be tax deductible
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- Higher interest rates than on 1st mortgages
- Herder to refinance 1st mortgage
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