LOAN PROGRAM

ADVANTAGES

DISADVANTAGES

Fixed Rate

• 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

30 Year Fixed

15 Year Fixed

LOAN PROGRAM

ADVANTAGES

DISADVANTAGES

Adjustable Rate (ARM)

• Lower initial monthly payment

• Rates and payments may go down if rates improve

• May qualify for higher loan amounts

• 30 year term, no balloon payment

• More risk

• Payments may change over time

• Potential for higher payments if rates increase

10/1 ARM

7/1 ARM

5/1 ARM

3/1 ARM

1 Year ARM

6 month ARM

LOAN PROGRAM

ADVANTAGES

DISADVANTAGES

Balloon Mortgage

• Lower initial monthly payment

• Lower payment for a predetermined 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, refinance, or exercise the conversion option

• Balloon payment requires you to sell or refinance after the term, as opposed to a 7/1 or 5/1 program with a 30 year term 

7 Year

5 Year

LOAN PROGRAM

ADVANTAGES

DISADVANTAGES

1st Time Buyers

• Lower down payment

• Easier to qualify

• Lower rates may be available

• May be subject to income and property value limitations

• Some government subsidized programs may generate a recapture tax if you sell the house too soon

• Education courses may be required to qualify for these loans

LOAN PROGRAM

ADVANTAGES

DISADVANTAGES

Stated Income

• Don't need to verify income

• Faster approval

• Good for borrowers who may not qualify with a full income documentation program

• Higher rates

• Higher down payment

• Balloon payment requires you to sell or refinance after the term, as opposed to a 7/1 or 5/1 program with a 30 year term 

LOAN PROGRAM

ADVANTAGES

DISADVANTAGES

Interest Only

• You have several payment options

• Lower monthly payments

• Qualify for a higher loan amount

• Qualify at the interest only payment

• Option to pay the full normal payment

• Interest only payments for up to ten years

• Higher rates

• Principal loan balance will not decrease during the interest only payment period

• Payment will be higher for the remaining term

LOAN PROGRAM

ADVANTAGES

DISADVANTAGES

No Points / No Fee

• No out-of-pocket loan costs at closing

• Closing costs are paid from the lender rebate

• Less money required to close

• Refinance without increasing your loan amount

• Higher rates

• Higher payments

• Some lenders may have a short payoff penalty which is usually charged to the loan broker, but may be passed on to you

• Some require a prepayment penalty for the first one to five years

LOAN PROGRAM

ADVANTAGES

DISADVANTAGES

Imperfect Credit

• 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

LOAN PROGRAM

ADVANTAGES

DISADVANTAGES

Home Equity

Fixed Loan

• You only borrow what you need

• Pay interest only on what you borrow

•  Flexible access to funds

• Interest may be tax deductible

• May be free of closing costs

• A good source for an emergency fund, if set up in advance

• Can be used for debt consolidation and lower payments

• Rates are usually lower than consumer loan or credit card rates

• Rates can change. The maximum interest rate can be relatively high

• Payments can change

• Harder to refinance your first mortgage

LOAN PROGRAM

Federal Housing Administration Loans

FHA Loans

• FHA loans are insured by the Federal Housing Administration offering both fixed rate and adjustable rate mortgages with a relaxed qualifying criteria and smaller down payment. FHA loans cannot exceed their statutory limit, and availability is limited to those who qualify for the FHA guidelines.

LOAN PROGRAM

Veterans Administration Loans

VHA Loans

• VA Loans are guaranteed by the United States Department of Veterans Affairs. Because these loans are guaranteed, qualifying Veterans and service personnel can receive through lenders loans up to an approximate maximum amount of $203,000. Typically, these loans require little to no down payment, relaxed standards for qualifying, and sometimes lower than market interest rates. The Veterans Affairs Department will determine your eligibility, and issue you a certificate for the loan if you qualify.

LOAN PROGRAM

USDA Guaranteed Rural Housing Loan

USDA Loans

• USDA Guaranteed Rural Housing Loans are Guaranteed by the Government. This program is restricted to only homes located in eligible areas and household income limits.  Typically, these programs require little to no money down, and can finance up to 102% of appraised value to incorporate some or all of the closing cost.  The rates are sometimes lower than current conventional rates.