| 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
|
- 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
|
| Loan Program | Advantages | Disadvantages |
| Interest Only Programs |
- Qualify for a higher loan amount
- Interest only payments for up to ten years
|
- Potential for Higher rates
- Principal loan balance will not decrease during the interest only payment period
- Payment will be higher for the remaining term
|
