| 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
|
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| Loan Program | Advantages | Disadvantages |
Adjustable Rate Mortgages (ARM)
- 7/1 ARM
- 5/1 ARM
- 3/1 ARM
- 1 year ARM
- 6 month ARM
|
- Lower initial monthly payment
- Rates and payments may go down if rates improve
- 30 year term, no balloon payment
|
- More risk
- Payments may change over time
- Potential for higher payments if rates increase
|
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| 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
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| 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
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