Advantages Maximum interest
deduction for taxes, sometimes easier to qualify, stable predictable payments, high lo an to value, lower down payment,
possible secondary financing if needed.
Disadvantage Pay more interest
over the life of the loan, higher starting interest rate, Lower debt ratio (Larger In come to qualify) Higher monthly payment.
Adjustable Rate Mortgage (ARM)
Advantages Lowest starting
interest rates help qualify for higher loan amounts. If you plan to sell within 2-3 years. If you expect your income to
Disadvantage Periodic payment
and rate increases, builds equity Slower payment increases may affect budget.
5 - 7 YEAR BALLOON MORTGAGE
Advantages Lower starting
rate than 30 year fixedgreat for refinancing from a higher rate use when you plan a move in 5-7 years Some are convertible
to 30-yr fixed or a treasury ARM, low fees, good rates.
Disadvantage Loan Balance
Due can Change Long Term Financial Planning If You Plan to Live There Over 7 Years.
There are many loan products
designed to meet the borrowers individual criteria. Most of these products fall under a few basic loan types.
15-Year and 30-Year Fixed Rate Payment and rate stay the same from start to finish
5 and 7 Year Balloons Lower
start rate. Some of the balloon programs may be converted to an adjustable rate or a fixed rate af ter the 5 or 7 years,
with very low fee and attractive rate
Adjustable Rate Mortgage (ARM) Lowest start rate Adjusts either every 6 months or every 12 months depending on program and grade and is based
on the economy 6% ceiling for prime and 7% ceiling for sub-prime.
5/1 and 7/1 Fixed Rate Rate
is fixed for the first 5 or 7 years, then shifts to an adjustable rate mortgage (ARM).
2/28 and 3/27 ARM An
ARM program that is fixed for the first 2 or 3 years, then shifts into a 6 month adjustable rate mor tgage. It is a sub-prime
program giving you a rate lower than the sub-prime 30-year fixed, and if you have had credit problems, it allows a window
of time for credit rebuilding and seasoning. You will then want to refinance this loan.
What Should I Look For?
Are You Moving in the First Few Years? You may want to consider a balloon mortgage. Some balloon loans allow you to convert to a longer
term if you find the 5 or 7 years was not enough time. Conversions are easy and reasonable. When you consider this loan, ask
if the program is convertible.
Do You Need the Lowest Possible Rate to Qualify? To qualify for the house you want, an adjustable rate or a 7-year balloon may
be the answer.
Do You Want a Fixed Predictable Loan? If you want a fixed predictable loan for a long time, the 15-year or 30-year fixed
is probably the best, especially when you have good credit.
Which Program Is Best For Me?
are a few things to keep in mind when selecting a loan program. (see column to right)
Unless otherwise indicated, these APR calculations are based on the following:
Conforming loans (whose maximum loan amount is below $333,700 for the contiguous states, District of Columbia, and Puerto
Rico or below $500,550 for Alaska, Guam, Hawaii and the Virgin Islands) are calculated based on a loan amount of $322,700
with closing costs of $6,454. Jumbo Loans (whose maximum loan amount exceed $333,700 for the contiguous states, District of
Columbia, and Puerto Rico or exceed $500,550 for Alaska, Guam, Hawaii and the Virgin Islands) are calculated based on a loan
amount of $500,000 with closing costs of $10,000. Your actual APR may be different depending upon these factors.