The number of years you plan to stay in your new home can help you determine the best loan program for you.
FIXED RATE MORTGAGES
30 YEAR FIXED & 15 YEAR FIXED
Pros:
- 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
Cons:
- 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
Pros:
- 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
Cons:
- More risk
- Payments may change over time
- Potential for high payments if rates go up
BALLOON MORTGAGES
7 YEAR & 5 YEAR
Pros:
- 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
Cons:
- 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
Pros:
- Lower Down payment
- Easier to qualify
- Sometimes you may get lower rates
Cons:
- 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
Pros:
- Don’t need to verify income
- Faster approval
Cons:
- Higher rates
- Higher payments
NO POINT, NO FEE PROGRAMS
Pros:
- No closing costs
- Less money required to close
Cons:
- Higher rates
- Higher payments
IMPERFECT CREDIT PROGRAMS
Pros:
- 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
Cons:
- 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
Pros:
- You only borrow what you need
- Pay interest only on what you borrow
- Flexible access to funds
- Interest may be tax deductible
Cons:
- Rates can change, max rates are normally high
- Payments can change
- Harder to refinance your first mortgage
HOME EQUITY QUICK LOAN
Pros:
- Fixed payments
- Interest may be tax deductible
Cons:
- Higher interest rates than on 1st mortgages
- Harder to refinance 1st mortgage
