That is a tough question to answer it is just a matter of what you want to do with your money.

http://getprequalified.com/article/104749/mortgage_loan_prog…

Interest only loans sound a little scary but when you think of the first five years of your conventional mortgage payment (especially a 30 year payout) in actuality 99-95 percent of the loan is interest only anyway. The difference in the payment is neglible. Some mortgages allow you to select the payment each month from interest only right down to a 15 year payout depending on your circumstances from month to month. As for the dowpayment, leveraging the lowest dowpayment is a key factor because no matter how much you put down the home price is the amount that is fluctuating - so if your home is a $500,000 home - that's the amount that will either yield a profit or a loss when you go to sell. Since the prices are not really going up right now, putting your money into other investments that are going up more than 5% may be a smart idea. Who wouldn't want to put zero down on a home that is appreciating 10%+ a year--it's a smart idea. It's the bank that wants the 10-20 percent down incase you can't make your mortgage payments, walk away and leave them holding the paper. Which brings me to to finally say, banks are very critical about who they are lending money today. Borrowers with good credit and fully documented income are about the only ones getting good interest loans with little down today.
I work with many different lenders to custom-fit your financing needs.
For more information on buying your first home, financing your first home (with an assortment of no downpayment loans), please don't hesitate to contact me.
sandra@thecrosskeysteam.com
Re/Max Village Square
Upper Montclair, NJ
973-744-7722

BEST ANSWER
Dear Maria, an interest only loan is best usually best for 4 types of people:
1. Those who are trying to streeeeeetch the amount of money they qualify to borrow.
2. Those who make a significant amount of their income in the form of a bonus or commission.
3. Those people who have a significant amount of equity in their home and they want to have their money work for them in another investment, because money tied up in the equity of a property is not working for you. An asset accumulation analysis can show you this.
4. People who want to buy a new house but haven't sold their present one and can qualify to carry both payments.
With that said Maria, it sounds as if the interest only loan is not really your question. You're concerned with being able to keep your cash available for a future investment. Normally a person can borrow 3 to 4 times their annual income, depending on other debt payments. There are still many loan programs that require little of no money down. There is FHA (3% down), Fannie Mae's My Community 100% (0% down), Fannie Mae Flex 100 & 97% (0 or 3% down) and the USDA rural loan program for up to 102% (0% down)of the purchase price + closing costs. This loan is for moderate borrowers with a moderate income. If you wish to still reside in Union County unfortunately their are no eligible properties, but Somerset county and other points West & South do have areas that qualify for the loan. An overview of the program can be found here http:// http://www.rurdev.usda.gov Below is a link to see if you qualify and show you areas of eligibility. If you have any further questions please post here of E-mail directly at cgrushin@gateway-funding.com. I can do all of these programs in house.

I think this should answer your question. http://getprequalified.com/article/104749/mortgage_loan_prog…

There still is a place for interest only loans. For example, lets say a couple employed as a teacher and police officer fall in love with a home a little out of their comfort range.

Many times these professions have specific raises based on longevity. So in essence, they can grow into a property instead of settling for a home they would not be happy with.

I recommend 30 Year fixed rate interest only loans. This is how they work. The first 10 years only interest payments are required. However, you can always pay extra payments directly to the principle.

Then, after the initial 10 years the loan is converted to a fully amortizing 20-fixed rate at the same rate. Yes, the payment will increase. However, if you are still in the house you would have had 10 years of potential raises or other income increases

I think interest only mortgages are best for buyers who may consider the following:

1. a lower payment rate a month (keep in mind your not denting the principal at all)
2. either are banking that the home will appreciate and plan on moving in a few years and want to buy more house than could afford at a higher interest rate
3. employed to receive bonuses or commission and can pay down some principal when the lump checks come in.

I think what you should be considering is an FHA loan which will require you to put down very little money and still get an attractive rate.

Hope this helps.

Look at 40 yr mortgage options...this can lessen the monthly payments. Ask the seller to pay some closing costs, if you offer closer to their asking price, as long as the property will appraise for that amount

Maria:

Great Question! Two big investments in the same 4 years.

I would advise the following:
1. Consult with a tax Consultant
2. Try to buy a home under $416,000 to be conforming
3. Have your lender check for a FHA loan for you.
4. Have full documental income

Remember, interest only normally requires a minimum of 5%down payment. Please consult with your professional lender.