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Loan Programs |
Advantages |
Disadvantages |
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Fixed Rate Mortgages
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30 year fixed |
Monthly payments are fixed over the life of the loan |
Potentially higher interest rate |
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20 year fixed |
Interest rate does not change |
Potentially higher mortgage payments |
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15 year fixed |
Protected if rates go up
Can refinance if rates go down |
Rate does not drop if interest rates improve |
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Adjustable Rate Mortgages
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10/1 ARM |
Lower initial monthly payment |
More risk |
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7/1 ARM |
Lower payment over a shorter period of time |
Payments may change over time
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5/1 ARM |
Rates and payments may go down if rates improve
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Potential for high payments if rates go up
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3/1 ARM |
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1 year ARM |
May qualify for higher loan amounts |
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6 month ARM |
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1 month ARM |
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Interest Only Mortgages
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30 year I.O. Period |
Lowers monthly payments
Makes housing more affordable |
After first 10 years, potentially increases mortgage payments |
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10 year I.O. Period |
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10/1 ARM |
Provides flexibility – 4 payment options |
Potential for higher payments upon loan recasting
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7/1 ARM |
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5/1 ARM |
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3/1 ARM |
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1 year ARM |
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6 month ARM |
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1 month ARM |
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First-Time Buyer Programs
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Lower down payment
Easier to qualify
Sometimes you may get a low rate |
May be subject to income and property value limitations
Some programs which have government subsidies may have a recapture tax if you sell early.
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Stated Income Programs
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Don’t need to verify income
Faster approval |
Higher rates
Higher down payment
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| No Point, No Fee Programs |
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No closing costs
Less money required to close |
Higher rates
Higher payment |
| Imperfect Credit Programs |
| |
Potential for reestablishing credit if you pay your mortgage on time |
Higher rates
Terms may not be as favorable
Harder to get long term fixed loans |
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When used for debt consolidation, you may be able to reduce your monthly debt payment.
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Loans may have prepayment penalties |
| FHA and VA Loans |
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FHA Loan |
Loan is insured by the Federal Housing Administration to all qualified home buyers.
Loans are generous enough to handle
moderate-priced homes.
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There are limits to the size of FHA loans. |
|
VA Loan |
Loan is insured by the Veteran’s Administration. |
Only available to eligible veterans. |
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