Loan Programs

1st ask yourself how long you plan to live in or keep the house:

Years you plan to keep 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

Benefits and Disadvantages of Various Programs

Loan Programs	Advantages	Disadvantages
Fixed Rate Mortgages 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 Higher mortgage payments Rate does not drop if interest rates improve

Adjustable Rate Mortgages (ARMS) 10/1 ARM 7/1 ARM 5/1 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 30/7 Year 30/5 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 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	Zero or low 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/ No Ratio/ No Doc Programs	Don’t need to verify income Faster approval	Higher rates Higher down payment

No point, No Closing Cost Programs	No 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	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 1^st mortgages Harder to refinance your first mortgage