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LOANS TO RE-ESTABLISH CREDIT
LOAN PROGRAM ADVANTAGES DISADVANTAGES

   Adjustable Rate Mortgage (ARM)

      6 month ARM
      12 month ARM

  • Six and twelve month ARMs can significantly lower a mortgage payment for six or twelve months. That can be enough time to catch up on other debt payments and improve your credit rating.

  • Six and twelve month ARMs can become expensive after the initial six or twelve month introductory period. Chances are, you'll want to improve your credit and obtain a better loan.

   Fixed Rate Mortgages

      2 year fixed
      3 year fixed

  • Two and three year fixed rate mortgages provide the security of a fixed loan payment and relatively low, fixed interest rate for the first two or three years. For most people trying to improve their credit, two to three years is plenty of time. After two or three years, these loans convert to ARM loans.

  • Two and three year fixed rate mortgages convert to ARM loans at the end of the fixed rate period. Rates on ARMs can increase. Chances are, you'll want to improve your credit and obtain a different loan before the two or three years are up.

   Fixed Rate Mortgages

      15 years fixed
      30 years fixed

  • Fixed monthly payment and rate protect against interest and monthly payment increases

  • Higher interest rate compared to ARM introductory rates
  • Higher rate compared to two and three year, fixed rate loans
  • Fifteen and thirty year loans should generally be obtained if you plan not to move or refinance in the foreseeable future. If you're trying to improve your credit in anticipation of refinancing for a lower-rate loan, consider avoiding these loans.
CREDIT ADVANTAGE LOANS
LOAN PROGRAM ADVANTAGES DISADVANTAGES

   Adjustable Rate Mortgage

      10/1 ARM
      7/1 ARM
      3/1 ARM
      1 year ARM
      6 month ARM
      2/28: 2 yr. fixed rate; 28 yr. 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

   Balloon Mortgages

      15 year (30 yr. fixed, due in 15)
      7 Year
      5 Year
  • 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
  • Risk of rates being higher at the end of the initial fixed period
  • Risk of foreclosure if you cannot make the balloon payment, refinance or exercise the conversion option

   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

   No or Stated Income/Asset Programs
  • No tax returns or W-2s
  • No proof of assets or down payment
  • No verification of income
  • Fast approval
  • Higher rates
  • Higher down payment

   Home Equity Line of Credit
  • You only borrow what you need
  • Pay interest only on what you borrow
  • Access to funds as needed
  • Interest may be tax deductible
  • Up to 125% loan-to-value

  • 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
  • Receive one lump sum at closing
  • Access to funds as needed Interest may be tax deductible

  • Higher interest rates compared to 1st mortgages

  • Harder to refinance your first mortgage
WHICH LOAN IS RIGHT FOR ME?
  YEARS YOU PLAN TO STAY IN YOUR HOUSE   RECOMMENDED PROGRAM
  1-3  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

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