Years you plan to stay in the house |
Recommended program |
1-3 |
3/1 ARM, 1 year ARM or 6 month ARM |
3-5 |
5/1 ARM |
5-7 |
7/1 ARM |
7-10 |
10/1 ARM, 30 year fixed or 15 year fixed |
10+ |
30 year fixed or 15 year fixed |
Loan Programs |
Advantages |
Disadvantages |
Fixed Rate Mortgages |
40 year fixed
30 year fixed
20 year fixed
15 year fixed
10 year fixed |
- 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 than ARM program*
- Higher mortgage payments
- Rate does not drop if interest rates improve
|
Adjustable Rate Mortgages |
10/1 ARM – 10y. fixed period
7/1 ARM – 7y. fixed period
5/1 ARM – 5y. fixed period
3/1 ARM – 3y. fixed period
1 year ARM
6 month ARM
1 month ARM |
- Lower initial monthly payment than fixed rate programs*
- 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
|
Interest Only (I/O) Option Programs |
30, 40 year fixed programs
3/1, 5/1, 7/1, 10/1 ARMs |
- Lower initial monthly payment during the I/O period
- More flexibility
- Two payment options are available up to 15 years: fully amortized (principal and interest) or interest-only.
|
- Payments will be higher at the end of the initial I/O period
- Higher interest rate than the same program without I/O option
|
|
High Loan-to-Value (LTV) Programs |
|
- Lower down payment
- LTV can be up to 97%
|
- May be subject to income and property value limitations
- May be subject to PMI (private mortgage insurance)
- Higher rates
- Higher payments
|
Stated Income Programs |
Not available on today’s market |
- Don’t need to verify income
|
- Higher rates
- Higher payments
- Higher down payment
- Subject to Loan-to-Value limitations
|
No point, No fee Programs |
|
- Hidden 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 |
1st position up to 75% LTV2nd position up to 80% CLTV |
- 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 |
2nd position up to 80% CLTV |
- Fixed payments
- Interest may be tax deductible
|
- Higher interest rates than on 1st mortgages
- Harder to refinance your first mortgage
|
December 11, 2010
Posted by MiPhone Doctor of Boston |
Mortgage Programs Pros & Cons | Adjustable Rate Mortgages, first time buyer, Fixed Rate Mortgages, HELOC, high LTV loan, high LTV programs, Home Equity Fixed Loan, home equity line, Home Equity Line of Credit, home equity loans, home loans, home mortgage, home refinance, Imperfect Credit Programs, Interest Only Programs, low documentation programs, mortgage, mortgage program, mortgage programs, mortgage refinance, mortgages, no closing cost programs, No fee Programs, no income verification loan, no PMI programs, No point, PMI, Private Mortgage Insurance, second mortgage, second mortgages, stated income mortgage, Stated Income Programs |
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