Residential Loan Programs

Which loan is right for me?

Often the answer to this question is based around the number of years you plan to stay in your home. Each type of loan has specific terms that affect the amount of the payment, the interest rate, and the length of the pay back. However, this is not the only factor. It is important to weigh many factors such as income projections, economic trends, and personal debt management preferences. Weigh the pros and cons of each loan type. The important thing is to make an educated decision.

Fixed Rates

PROGRAMS

  • 30 Year Fixed
  • 15 Year Fixed

PROS

  • 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

CONS

  • Higher interest rate
  • Higher mortgage payments
  • Rate does not drop if interest rates improve

Adjustable Rate

PROGRAMS

  • 10/1 ARM
  • 7/1 ARM
  • 3/1 ARM
  • 1 year ARM
  • 6 month ARM
  • 1 month ARM

PROS

  • 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

CONS

  • More risk
  • Payments may change over time
  • Potential for high payments if rates go up

Balloon Payment

PROGRAMS

  • 7 Year
  • 5 Year

PROS

  • 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

CONS

  • 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

Stated Income Programs

PROS

  • Don't need to verify income
  • Faster approval

CONS

  • Higher rates
  • Higher payments

No Point, No Fee Programs

PROS

  • No closing costs
  • Less money required to close

CONS

  • Higher rates
  • Higher payments

Imperfect Credit Programs

PROS

  • 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

CONS

  • Higher rates
  • Terms may not be as favorable
  • Harder to get long term fixed loans
  • Loans may have prepayment penalties

Home Equity / Line of Credit

PROS

  • You only borrow what you need
  • Pay interest only on what you borrow
  • Flexible access to funds
  • Interest may be tax deductible

CONS

  • Rates can change, max rates are normally high
  • Payments can change
  • Harder to refinance your first mortgage

Home Equity Fixed Loan

PROS

  • Fixed payments
  • Interest may be tax deductible

CONS

  • Higher interest rates than on 1st mortgages
  • Harder to refinance 1st mortgage
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