| Years you plan to stay in the home |
Recommended program |
| 1-3 years |
3/1 ARM, 1 year ARM or 6 month ARM |
| 3-5 years |
5/1 ARM |
| 5-7 years |
7/1 ARM |
| 7-10 years |
10/1 ARM, 30 year fixed or 15 year fixed |
| 10+ years |
30 year fixed or 15 year fixed |
|
| Loan Program |
Advantages |
Disadvantages |
| Fixed Rate Mortgages |
Monthly payments are fixed over the life of the loan |
Higher interest rate |
| 30 Year Fixed |
Interest rate does not change |
Higher mortgage payments |
| 20 Year Fixed |
Protected if rates go up |
Rate does not drop if interest rates improve |
| 15 Year Fixed |
Can refinance if rates go down |
|
|
| Loan Program |
Advantages |
Disadvantages |
| Adjustable Rate Mortgages |
Lower initial monthly payment |
More risk |
| 10/1 ARM |
Rates and payments may go down if rates improve |
Payments may change over time |
| 7/1 ARM |
May qualify for higher loan amounts |
Potential for higher payments if rates increase |
| 5/1 ARM |
30 year term, no balloon payment |
|
| 3/1 ARM |
|
| 1 year ARM |
| 6 month ARM |
| 1 month ARM |
|
| Loan Program |
Advantages |
Disadvantages |
| Balloon Mortgages |
Lower initial monthly payment |
Risk of rates being higher at the end of the initial fixed period |
| Lower payment for a predetermined period of time |
Risk of foreclosure if you cannot make balloon payment, refinance, or exercise the conversion option |
| Many balloon mortgages offer the option to convert to a new loan after the initial term |
Balloon payment requires you to sell or refinance after the term, as opposed to a 7/1 or 5/1 program with a 30 year term |
|
| Loan Program |
Advantages |
Disadvantages |
| First Time Buyer Programs |
Lower down payment |
May be subject to income and property value limitations |
| Easier to qualify |
Some government subsidized programs may generate a recapture tax if you sell the house too soon |
| Lower rates may be available |
Education courses may be required to qualify for these loans |
|
| Loan Program |
Advantages |
Disadvantages |
| Low Documentation Programs |
Dont need to verify income or assets |
Higher rates |
| Faster approval |
Higher down payment |
| Good for borrowers who may not qualify with a full income documentation program |
|
|
| Loan Program |
Advantages |
Disadvantages |
| Interest Only Loans |
You have several payment options |
Higher rates |
| Lower monthly payments |
Principal loan balance will not decrease during the interest only payment period |
| Qualify for a higher loan amount |
Payment will be higher for the remaining term |
| Qualify at the interest only payment |
 Loan Options |
| Option to pay the full normal payment |
| Interest only payments for up to ten years |
|
