Loan Types

Expected Time in Home

Our Recommendation
  • Not Very Long (1-3 Years)
  • A few years (3-5 Years)
  • At least 5 years (5-7 years)
  • Around 10 years ( 7-10 years)
  • A long time (10 plus years)
  • 3/1 ARM, 1 year ARM or 6 month ARM
  • 5/1 ARM
  • 7/1 ARM
  • 10/1 ARM, 30 yr fixed or 15 yr fixed
  • 30 year fixed or 15 year fixed

Loan Programs

Advantages

Disadvantages

Fixed Term

30, 20, 15 and 10 Year Terms
  • Monthly payments won’t change
  • Interest rate Fixed
  • 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 (ARMS)
  • Lower initial monthly payment
  • Lower payment over a shorter period of 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
  • Lower initial monthly payment
  • Lower payment over a shorter period of time
  • Many balloon mortgages offer the option to convert to 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 Buyer Programs
  • Lower down payment
  • Easier to qualify
  • Sometimes you may get lower rate
  • 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 down payment

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 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
  • Rates can change.
  • The maximum interest rate is 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 your first mortgage