Fixed Rate Mortgage
The interest rate and your mortgage payment remain the same over the term of your loan. These loans are generally available for 30 or 15 years — the shorter the term the lower the interest rate, and the longer the term the lower the monthly payment. Paying the loan off more quickly at the same interest rate, however, means you will pay less interest, sometimes as much as 50% less.

The advantages are that you are protected if rates go up — your monthly payments will not change. The disadvantages are that fixed interest rates may be higher than for some other loan programs, and you cannot benefit from dropping rates without refinancing.

Balloons
These are short-term fixed-rate loans that have fixed monthly payments based usually upon a 3-year schedule, with a lump sum payment at the end of its terms. Terms are generally 3, 5, and 7 years.

Advantages are that you will generally have a lower interest rate, perhaps considerably lower than with a fixed rate loan. Disadvantages are that the rates may be higher at the end of a term, and that you will not be able to make the balloon payment, risking foreclosure.

Second Mortgages and Home Equity Lines of Credit (HELOCs)
With the demands on today’s household budgets and the increase in property values, many are opting to borrower against the equity in their home for everything from home improvements to consolidating other loans and credit card balances as a second mortgage equity loan. This can be wise, considering that the interest you pay on the loan may be tax deductible. If you select a HELOC, then the initial interest rate is probably lower than a traditional second mortgage loan and many other types of loans or credit accounts for such purposes. Check with your tax consultant to be sure about any potential deductions you may be eligible for before you decide. Today, second mortgages and HELOCs are often closed simultaneously with a first mortgage for borrowers with limited down payment funds.

A HELOC is an adjustable-rate line-of-credit. HELOCs offer interest-only and minimum-payment options just like ARMs and the flexibility of borrowing up to the loan limit, paying it down and then borrowing up again, just like a credit card or traditional line-of-credit loan, as many times as you are able during the initial draw period which is usually ten years. If you still have a balance at the end of the initial draw period, then the loan goes into a repayment-only period, also usually ten years, and the required payment is the fully-amortizing or, principal and interest, payment. Many financial advisors now recommend getting approved for a HELOC even if you don’t have an immediate need for one. That way, if there’s ever an emergency need for a larger amount of cash, you can access it quickly and conveniently without having to qualify at a time when you may have difficulty qualifying, especially if the need stems from a medical emergency or other hardship that could adversely affect your credit rating.

Adjustable Rate Mortgages
With adjustable rate mortgage loans, interest rates and thus your monthly payments fluctuate. Adjustments are based on changes in a defined index, which is set at the time of application. If know that interest rates are not likely to rise quickly, you know that your income will increase, or if you expect to move in the near future, this kind of loan may be right for you.

Advantages are that you get a low interest rate, thus your initial monthly payments may be lower than with a fixed rate. You also get the immediate benefit of dropping rates without refinancing. Disadvantages are that your payments will change over time and will go up if rates go up, with the potential for much higher payments.

Information that determines terms, fees, and rates
1. Credit Scores
Current statutes require us to inform you of your credit risk scores on file with each of the three major repositories following any inquiry to your credit for the purpose of obtaining a mortgage loan. The current range of scores is from 350-850 but the practical range is from 500 to about 800. Higher score = lower risk. Lower risk = better pricing.

2. Occupancy Type
Primary Residence and Second Home, Owner Occupied = Lowest price.
Investment Property/Rental or, Non-Owner Occupied = Premium Price.

3. Documentation Type
Full Documentation
Income, employment and assets are verified.
Lowest Risk = Lowest Price
No Income Documentation
Employment and assets are verified but monthly income is not verified.
Medium Risk = Second-best Price
No Documentation
No verification of income, employment or assets is required and approval is determined by favorable credit standing and a significant down payment.
Highest Risk = PremiumLoan Categories

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