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FIXED RATE MORTGAGES
30 year fixed
15 year fixed
Advantages 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
Disadvantages Higher interest rate; Higher mortgage payments; Rate does not drop if interest rates improve
ADJUSTABLE RATE MORTAGAGES
10/1 ARM
7/1 ARM
3/1 ARM
1 year ARM
6 month ARM
1 month ARM
Advantages Lower initial monthly payment; Lower payment over a shorter period of time; Rates and payments may go down if rates; May qualify for higher loan amounts
Disadvantages More risk; Payments may change over time; Potential for high payments if rates go up
BALLOON MORTGAGES
7 year
5 year
Advantages 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
Disadvantages 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
Advantages Lower down payment; Easier to qualify
Disadvantages 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
Advantages Don’t need to verify income; Faster approval
Disadvantages Higher rates; Higher down payment
NO POINT, FEE OR CLOSING COSTS PROGRAMS
Advantage Less money required to close
Disadvantages Higher rates; Higher payments
IMPERFECT CREDIT PROGRAMS
Advantages Potential for re-establishing credit if you pay your mortgage on time; When used for debt consolidation, you may be able to reduce your monthly debt payment
Disadvantages 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
Advantages You only borrow what you need; Pay interest only on what you borrow
FLEXIBLE ACCESS TO FUNDS
Advantage Interest may be tax deductible
Disadvantages Rates can change; The maximum interest rate is normally high; Payments can change; Harder to refinance your first mortgage
HOME EQUITY FIXED LOAN PAYMENTS
Advantage Interest may be tax deductible
Disadvantages Higher interest rates than on 1st mortgages; Harder to refinance your first mortgage
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| Fixed rate. Adjustable rate. Interest Only. Flex. All of the different types of home loans that are available these days can puzzle many homebuyers. But, say mortgage experts, virtually every home loan is one of two types: a fixed rate loan or an adjustable rate loan. |
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