| Loan Program | Advantages | Disadvantages |
| Fixed Rate Mortgages
|
- 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 |
- Lower initial monthly payment
- Rates and payments may go down if rates improve
- May qualify for higher loan amounts
|
- More risk
- Payments may increase 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 |
| 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
|
|
| Not Available in Maryland | Advantages | Disadvantages |
| Stated Income Programs |
- Don't need to verify income
- Faster approval
- Good for borrowers who may not qualify with a full income documentation program
|
- Higher rates
- Higher down payment
|
|
| Loan Program | Advantages | Disadvantages |
| Interest Only Programs |
- Lower monthly payments
- May qualify for a higher loan amount
- May qualify at the interest only payment
- Option to pay the full normal payment
|
- Higher rates
- Principal loan balance will not decrease during the interest only payment period
- Payment will be higher for the remaining term
|
|
| Loan Program | Advantages | Disadvantages |
| No point, No fee Programs |
- No out-of-pocket loan costs at closing
- Less money required to close
- Refinance without increasing your loan amount
|
- Higher rates
- Higher payments
|
|
| Loan Program | Advantages | Disadvantages |
| 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
|
|
| Loan Program | Advantages | Disadvantages |
| 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*
- May be free of closing costs
- A good source for an emergency fund, if set up in advance
- Can be used for debt consolidation and lower payments
|
- Rates can change. The maximum interest rate is normally high
- Payments can change
- Harder to refinance your first mortgage
|
|
| Loan Program | Advantages | Disadvantages |
| Home Equity Fixed Loan |
- Fixed payments
- Interest may be tax deductible*
- Get cash out for any purpose
|
- Higher interest rates compared to first mortgage
- Harder to refinance your first mortgage
- Interest is paid on the entire loan amount, compared to an equity line of credit
|
