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Selecting a Loan Program

Just like selecting a wine, there isn't a right answer when selecting a loan program but you may feel more comfortable with one choice over another. 
There isn't a right answer but you may feel more comfortable with one choice over another.

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

Years you plan to keep the house


1-3

3-5

5-7

7 - 10

10+

Recommended Program

3/1 ARM

5/1 ARM

7/1 ARM

10/1 ARM, 30 Yr Fixed or 15 Yr Fixed

10+ 30 Yr Fixed or 15 Yr Fixed

Benefits and Disadvantages of Fixed Rate Programs

Loan Programs

30 Year Fixed
20 Year Fixed

15 Year Fixed

10 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

Benefits and Disadvantages of Adjustable Rate Programs

Loan Programs

10/1 ARM

7/1 ARM

5/1 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 improve

  • May qualify for higher loan amounts

Disadvantages
  • More risk

  • Payments may change over time

  • Potential for high payments if rates go up

Benefits and Disadvantages of Balloon Mortgages

Loan Programs

30/7

30/5

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

Below Market Rate Homes
1st Time Buyer Loan Programs
  • Zero or low down payment

  • Easier to qualify

  • Sometimes you may get lower rates

Advantages
 
  • Zero or low down payment

  • Easier to qualify

  • Sometimes you may get lower rates

  • Purchase price can be substantially lower than market price

Disadvantages
 
  • May be subject to income and family size limitations

  • Some programs which have government subsidies may have a penalty if you sell the house too early.

  • Restrictions on resale price

  • Restrictions on whom the property can be sold to

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