Loan Programs

Advantages

Disadvantages

Fixed Rate Mortgages

• 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

• 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

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 1^st mortgages
• Harder to refinance your first mortgage