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Advantages and disadvantages of different loan programs

Loan Program Advantages Disadvantages
Fixed-rate mortgages
  • Predictable monthly payments
  • Less risk if market conditions cause rates to rise
  • Rate does not change
  • You pay more in interest
  • Higher interest rate
  • Unable to take advantage of lower interest costs if market changes to lower rates
Adjustable rate mortgages
  • Flexibility
  • Lower initial monthly payment
  • You pay less for short term ownership
  • May be easier to qualify for higher loan amounts
  • More risk
  • Inability to predict future housing costs
  • Potential higher payments (at max. interest rate)
Stated income mortgages
  • Don't need to verify income
  • Higher rates
  • Need a low LTV to qualify
Combination loans
(such as an 80/10/10)
  • Avoid PMI
  • Potential tax advantages
  • Possibly higher monthly payments
  • Two monthly payments instead of one

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