Which loan is right for me?

 

Years you plan to stay in the house Recommended program
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
30 year fixed
15 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
  • Higher mortgage payments
  • Rate does not drop if interest rates improve
Adjustable Rate Mortgages
10/1 ARM
7/1 ARM
5/1 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
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.
No point, No fee Programs
  • No closing costs
  • Less money required to close
  • Higher rates
  • Higher payments

Imperfect Credit Programs

      FHA

 

 

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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