Loan Programs -- Which is Best for You?
|
The loan programs, as discussed below, represent general guidelines, and are not all of the options available.
We strongly suggest you consult with one of our mortgage professionals in order for you to better understand all of the choices available to you. If you already know what loan program interest rates you want to compare, check out Today's Interest Rates.
But, many borrowers think that taking an ARM (adjustable rate mortgage) loan will significantly reduce their anticipated monthly mortgage payment. However, at this time, many of the adjustable rate programs are priced the same as or even higher than a fixed rate mortgage. Some ARM's are priced only 1/8% - 1/4% lower than fixed rate programs, and the risk associated with "hoping" that the adjustable rate will not soar higher at the first adjustment period just may not be worth the perceived savings.
Pay Option ARMS have become a favorite choice by borrowers seeking a lower payment, but can be very detrimental to a borrower's financial future. Additionally, although a borrower has a guaranteed low, "fixed" payment for a year, the interest rate can vary, and the fully-indexed rate is actualy HIGHER on an Pay Option ARM than for a fixed 30 year rate !! Read more about Pay Option ARMS in order to more fully understand their dangers.
We are most happy to help you understand the differences in programs, so please don't hesitate to give us a call, email us at ginger@anasazimortgage.com, or fill out the Quick Quote request to your right to get no-pressure, no-obligation answers to your mortgage questions.
Also, please be comfortable in browsing the rest of our website for more answers to your mortgage questions.
|
|
|
|
| |
|
|
|
| Years You Plan to Be in The Home | Loan Program Guidelines |
|
| 1-3 years |
3-yr or 1-yr ARM or 6 month ARM |
| 3-5 years |
5/1 ARM |
| 5-7 years |
7/1 ARM |
| 7-10 years |
10/1 ARM, 30 or 15-year fixed |
| 10+ years |
30-year fixed or 15-year fixed |
|
| Loan Program | Advantages | Disadvantages |
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
|
|
| Loan Program | Advantages | Disadvantages |
Adjustable Rate Mortgages (ARM)
- 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
- Rates and payments may go down if rates improve
- May qualify for higher loan amounts
- 30 year term, no balloon payment
|
- More risk
- Payments may change over time
- Potential for higher payments if rates increase
|
|
| Loan Program | Advantages | Disadvantages |
| Balloon Mortgages
|
- Lower initial monthly payment
- Lower payment for a predetermined 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, refinance, or exercise the conversion option
- 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
- Easier to qualify
- Lower rates may be available
|
- May be subject to income and property value limitations
- Some government subsidized programs may generate a recapture tax if you sell the house too soon
- Education courses may be required to qualify for these loans
|
|
| Loan Program | Advantages | Disadvantages |
| Stated Income Programs |
|
Essentially unavailable at this time
|
|
| Loan Program | Advantages | Disadvantages |
| Interest Only Programs |
- You have several payment options
- Lower monthly payments
- Option to pay the full normal payment
- Interest only payments for up to ten years
|
- Higher rates
- Must qualify at the fully-amortized payment, using the higher rate
- Principal loan balance will not decrease during the interest only payment period unless additional payments of principal are made
- Payment will be higher for the remaining term
|
|
| Loan Program | Advantages | Disadvantages |
| No point, No fee Programs |
- No out-of-pocket loan costs at closing
- Closing costs are paid from the lender rebate
- Less money required to close
- Refinance without increasing your loan amount
|
- Higher rates
- Higher payments
- Some lenders may have a short payoff penalty which is usually charged to the loan broker, but may be passed on to you
- Some require a prepayment penalty for the first one to five years
|
|
| Loan Program | Advantages | Disadvantages |
| 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
|
|
| Loan Program | Advantages | Disadvantages |
| 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
- May be free of closing costs
- A good source for an emergency fund, if set up in advance
- Can be used for debt consolidation and lower payments
- Rates are usually lower than consumer loan or credit card rates
|
- Rates can change. The maximum interest rate can be relatively high
- Payments can change
- Harder to refinance your first mortgage
|
|
| Loan Program | Advantages | Disadvantages |
| Home Equity Fixed Loan |
- Fixed payments
- Interest may be tax deductible
- Get cash out for any purpose
|
- Higher interest rates compared to first mortgage
- Harder to refinance your first mortgage
- Interest is paid on the entire loan amount, compared to an equity line of credit
|
In addition to our standard loan programs, you may benefit by obtaining one of our many special programs:
- Purchase your home with a 5% down payment using Private Mortgage Insurance (PMI) or Lender-paid Mortgage Insurance (MI).
- Debt consolidation programs.
- Home Improvement loans.
- You may qualify even if you've been turned down before!
|
