| Loan
Program |
Advantages
|
Disadvantages
|
Appealing to
borrowers who |
| Fixed
Rate Mortgages |
Monthly
payments are the same over the life of the loan
Interest rate is the same over the life of the loan
Interest rate does not change
if rates increase |
Typically
interest rates and payments are higher
Interest rate does not change
if rates decrease |
Prefer
fixed payments
Do not want to risk fluctuating interest rates |
| Adjustable
Rate Mortgages |
Initial
monthly payments are lower
Rates and payments may be lowered if interest rates
decrease
May qualify for higher loan amounts |
Rates
and payments may increase if interest rates increase
|
Prefer
lower payments for initial period
May need to qualify for higher loan amounts |
| Balloon
Mortgages |
Offer
lowest initial monthly payments
Many offer the option to convert to a new loan after
an initial period |
Interest
rates may be higher at the end of the initial fixed
period
Large payment is due at the
end of a fixed term |
Need
lowest payment over a short period of time |
| First
Time Buyer Programs |
Lower
down payment required
Easier to qualify
Many times interest rates are lower |
May be
subject to income and property value limitations
Some government subsidy programs may have a recapture
tax if you sell before a specified time period |
First
time buyers who do not have funds for a large down payment
|
| Stated
Income Programs |
Don’t need to verify income
Faster approval |
Typically higher interest rates
Typically a higher down payment is required |
Are currently unemployed
Need a fast approval |
| No
point, no fee programs |
No closing costs required
Usually requires less money to close |
Interest rates usually higher
Usually have higher payments |
Have limited funds for closing costs |
| Poor
credit programs |
Opportunity to re-establish credit if monthly payments
are made on time
Can use for debt consolidation and potentially reduce
monthly debt payments |
Typically higher interest rates
Loan terms may be stricter
Loans may have prepayment penalties |
Do not have good credit |
| Home
Equity Line of Credit |
Only borrow what you need
Pay interest only on what you borrow
Interest rates are typically lower than bank loans
Flexible access to funds
Interest may be tax deductible |
Adjustable interest rates, with maximum rate typically
high
Monthly payments may fluctuate with interest rates
Harder to refinance your first mortgage |
Need an open line of credit such as for remodeling
projects |
| Home
Equity Fixed Loan |
Monthly payments are fixed
Interest rates are typically lower than bank loans
Interest may be tax deductible |
Interest rates are typically higher than on first mortgages
Harder to refinance your first mortgage |
Need a fixed loan amount such as for debt consolidation
|
