5 loans you didn’t know still exist- statedincome.org

5 Loans You Didn’tKnow Still Exist

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It’s not too often you hear about ARM’s, interest only,stated income, no money down, or teaser rates, but thetruth is all these mortgage loan programs still verymuch exist. There are some more popular andfavorable loans out there now, but the original 5 are stillthere.

These loans may not be as talked about anymore, butthey are still very much available for borrowers to use.



Stated Income LoansStated Income Mortgages are also known as Liar Loans,they have been known for getting borrowers intomortgages they couldn’t exactly afford, and they get theirofficial name, Stated Income because it’s not required forthe borrower to prove their income. The borrower onlyhas to state what their income is and the lender canaccept that for qualification and approval. Today, youaren’t able to be approved for many of the more popularloans such as; FHA, Fannie Mae or Freddie Mac, or a VAloan without showing proper documentation of yourincome. Stated Income loans are favorable among self-employed individuals.



No-Money-Down LoansIt used to be fairly common to be able to buy a new home and not have to put any money down for at least a decade. Some Lenders didn’t require any money down at all and there were ways around not having to pay out of pocket for money down, such as a piggyback loan that would cover any down payments. In today’s market no money down mortgages are nearly impossible for majority of borrowers. They’re not gone, just much more difficult to qualify for. You can use a VA home loan which is known for no money down, also borrowers who have low incomes could get a USDA loan with no money down. Even though No money down loans are hard to come by, other loans offer very low down payments, such as 3% down if you’re using an FHA loan. Mortgage insurers are more comfortable with insuring a loan that has some percent down as opposed to no money down.



Interest-Only LoansBorrowers who were on a strict budget used to only have topay the interest charges on a mortgage loan and nothingtoward the principle for a temporary period of time.Eventually, they had to start making the principle paymentstowards the mortgage or had the option to refinance into anew interest only loan. In today’s market you can’t find alender who will allow you to buy a home with an interest onlymortgage. These loans still exist, but with circumstances, suchas; new constructions homes. Builders often take out a shortterm interest only loans to cover any costs of the constructionof the new home, which is eventually converted into a normalmortgage loan once the new construction home is completeand there is a new owner.



ARMsARMs are a lot less common than they used to be. Some oftheir variations however, have disappeared altogether. Manyborrowers see ARMs as an exotic type of loan, than a moretraditional one. In some countries this is their main type ofhome loan. Also known as an Adjustable Rate Mortgage,ARMs basically start with an interest rate and then between 5and 7 years down the road the rate then adjusts to a new rate.The rates are based on the current market conditions andcould be significantly higher than the original interest rate.With all the options out there for a fixed interest rate loans itmakes it hard for ARMs to compete and therefore thedemand for ARMs has shrunk quite dramatically.



Teaser RatesSome borrowers found out the hard way when using ARMsthat the loans included other features that were combined,one of these features were teaser rates. Borrowers could startwith an extremely low interest rate, but the loan wouldeventually reset with a significantly higher interest rate.Borrowers were often swayed into these loans since theinterest rate was so small, but would result in financial troublelater down the road and even the possibility of defaulting ontheir loans. While other loans could be advertising 6% interestrates the teaser rate loans would advertise between 3% to 6%but then when the loan would reset, it could change that rateto 9% or even higher in just a short period of time.



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C L I C K H E R E



Justin McHood is Americas MortgageCommentator and has been providing

Mortgage commentary for over 10 years.

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5 loans you didn’t know still exist- statedincome.org

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