Advantages and Disadvantages of Some Mortgages

There are many Mortgage products available and you want to educate yourself as to what is right for you.  If you are considering of taking a mortgage to live in a home for 5-7 years which is the national average, then a 30 year fixed loan would not be a good product for you because you are not building equity quickly enough and are paying  much higher  interest amount monthly.

There are many programs for the first time home buyer as  I have written further below.  There are  free resource government websites where you can download pamphlets and find real estate professionals  affiliated with the site, such as brokers, loan and  Fha/Hud counselors.   For example: Hud.gov and Va.gov, are two great resources and have many links,  most people think you have to be a veteran to purchase properties, there is a bank which handles VA properties and even offers financing on some of the properties ocwen.com.

If you decide to buy a fixer upper from these government sites most of these properties are in very bad shape or have been vacant for a long time, there are some properties that you may find property that needs only cosmetic work on it.

have listed some of the advantages and disadvantages of some major mortgage products:

1. Fixed rate 30 yr - 15 Yr  - the advantages are that these types of mortgages are fixed throughout the life of the loan, interest rate doesn't change, and if interest rates are lowered can refinance to get  lower rate.

Disadvantages are that you are paying a much higher interest rate, equity is not being built as quickly, higher mortgage payment and rates do not drop automatically, you have to refinance to get lower improved rate

2. Adjustable Rate Mortgages advantages are that they are lower initial monthly payments, lower payment over shorter period of time, interest rates adjust if they improve and become lower.  You may qualify for a higher loan amount.

Disadvantages are that there is more risk because payments can change over time, potential for higher payments if interest rates go up.

3. Balloon Payments- advantages are lower initial monthly payments, lower payments over a shorter period of time, many balloon mortgages offer the option to convert to a new loan after the initial term.

disadvantages are the risk of the interest rates being higher at the end of the fixed period, risk of foreclosure if you cannot refinance, or cannot exercise the conversion option.

4. First time Homebuyer program- advantages are thaht you have lower down payments, its easier to qualify for,, lower rates apply,

The disadvantages are that you may be subject to income and property value limitations, some programs which are government subsidies may have a recapture tax if you sell the house early or before the terms of the mortgage

5. Stated Income programs- Do not need to verify income and is faster approval.

The disadvantages are that they have higher rates, higher down payment.   

6. Imperfect Credit Programs- Potential for re-establishing credit if you pay your mortgage on time, when used for debt consolidation you may be able to reduce your debt payment.

Disadvantages are the higher interest rates, terms may not be as favorable, harder to get fixed rate loans, loans may have pre-payment penalties.

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