Years you plan to stay in home

 Best program

1-3

3-5

5-7

7-10

10

3/1 ARM, 1 year ARM or 6 month ARM

5/1 ARM

7/1 ARM

10/1 ARM, 30 year fixed or 15 year fixed

30 year fixed or 15 year fixed

 Program

          Pros

         Cons

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

• 3/1 ARM

• 1 year ARM

• 6 month ARM

• 1 month  ARM

• Lower initial monthly payment

• Lower payment over a shorter period 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

• 7 year

• 5 year

• Lower initial monthly payment

• Lower payment over a shorter period of time

• Many balloon mortgages offer the option to convert 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 Buyers

• 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

Stated Income Programs

• Don't need to verify income

• Faster approval

• Higher rates

• Higher payments

No point, No fee 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 EquityLine 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, max rates are 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 1st mortgage