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Types Of Morgages
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PROS
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CONS
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Fixed Rate Mortgages
30 year fixed
15 year fixed
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- 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
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- Higher interest rate
- Higher mortgage payments
- Rate does not drop if interest
rates improve
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Adjustable Rate Mortgages
10/1 ARM
7/1 ARM
3/1 ARM
1 year ARM
6 month ARM
1 month ARM
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- 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
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- More risk
- Payments may change over time
- Potential for high payments
if rates go up
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Balloon Mortgages
7 year
5 year
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- Lower initial monthly payment
- Lower payment over a shorter
period of time
- Many balloon mortgages offer
the option to convert to a new loan after the initial
term.
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- Risk of rates being higher
at the end of the initial fixed period
- Risk of foreclosure if you
cannot make balloon payment or if you cannot refinance
or if you cannot exercise the conversion option
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First Time Buyer Programs
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- No down payment
- Lower monthly payment
- Up to 6% seller paid closing
costs.
- Great way to get into a home
and start building equity.
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- May have slightly higher interest
rate with no down payment.
- Many zero down programs have
a fixed rate for only the first 2-3 years.
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Stated Income Programs
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- Don’t need to verify income
- Faster approval
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- Higher rates
- Higher down payment
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No point, No fee Programs
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- No closing costs
- Less money required to close
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- Higher rates
- Higher payments
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Imperfect Credit Programs
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- 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
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- Higher rates
- Terms may not be as favorable
- Harder to get long term fixed
loans
- Loans may have prepayment penalties
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Home Equity Line of Credit
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- You only borrow what you need
- Pay interest only on what you
borrow
- Flexible access to funds
- Interest may be tax deductible
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- Rates can change. The maximum
interest rate is normally high.
- Payments can change
- Harder to refinance your first
mortgage
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Home Equity Fixed Loan
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- Fixed payments
- Interest may be tax deductible
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- Higher interest rates than
on 1st mortgages
- Harder to refinance your first
mortgage
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