Loan Programs
 Advantages
Disadvantages
Fixed Rate Mortgages
30 year fixed
15 year fixed
  • Monthly payments remain the same 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
10/1 ARM
7/1 ARM
3/1 ARM
1 year ARM
6 month ARM
1 month ARM
  • 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
7 year
5 year
  • 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 end of initial fixed period.
  • Risk of foreclosure:
    if you cannot make balloon payment, or
    if you cannot refinance, or
    if you cannot exercise conversion option.
First Time Buyer Programs
  • Lower down payment
  • Easier to qualify
  • Sometimes you may get lower rates
  • 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
  • Opportunity to reestablish credit by paying off mortgage on time.
  • If used for debt consolidation, may reduce 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

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