LOAN PROCESS

Years you plan to stay in the house Recommended program 1-3 3/1 ARM, 1 year ARM or 6 month ARM 3-5 5/1 ARM 5-7 7/1 ARM 7-10 10/1 ARM, 30 year fixed or 15 year fixed 10+ 30 year fixed or 15 year fixed Loan Programs 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 Adjustable Rate Mortgages 10/1 ARM 7/1 ARM 3/1 ARM 1 year ARM 6 month ARM 1 month ARM   Lower initial monthly payment Lower payment over a shorter period of time Rates and payments may go down if rates improve May qualify for higher loan amounts   More risk Payments may change over time Potential for high payments if rates go up First Time Buyer Programs Lower down payment Easier to qualify Sometimes you may get lower rates May be subject to income and property value limitations Some programs which have government subsidies may have a recapture tax if you sell the house too early. Streamline Refinance Lower interest rates Use the home's equity to pay closing costs Cost of refinance may be tax deductible May be subject to property value and credit limitations No point, No fee Programs No closing costs Less money required to close Higher rates Higher payments 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 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 Rates can change. The maximum interest rate is normally high. Payments can change Harder to refinance your first mortgage Home Equity Fixed Loan Fixed payments Interest may be tax deductible Higher interest rates than on 1st mortgages Harder to refinance your first mortgage