Loan Programs

Which loan is right for me? Loan Programs


 Years you plan to stay in home  Best program
1-3
3-5
5-7
7-10
10+
3/1 ARM, 1 year ARM or 6 month ARM
5/1 ARM
7/1 ARM
10/1 ARM, 30 year fixed or 15 year fixed
30 year fixed or 15 year fixed
 Program

 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

  • 10/1 ARM
  • 7/1 ARM
  • 3/1 ARM
  • 1 year ARM
  • 6 month ARM
  • 1 month  ARM
  • 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
  • More risk
  • Payments may change over time
  • Potential for high payments if rates go up
Balloon Mortgages

  • 7 year
  • 5 year
  • 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
  • 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
First Time Buyers
  • Lower Down payment
  • Easier to qualify
  • Sometimes you may get lower rates
  • 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
Stated Income Programs
  • Don’t need to verify income
  • Faster approval
  • Higher rates
  • Higher payments
No point, No fee Programs
  • No closing costs
  • Less money required to close
  • Higher rates
  • Higher payments
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 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
  • Rates can change, max rates are normally high
  • Payments can change
  • Harder to refinance your first mortgage
Home Equity Fixed Loan
  • Fixed payments
  • Interest may be tax deductible
  • Higher interest rates than on 1st mortgages
  • Harder to refinance 1st mortgage