Financing in Millburn>Question Details

Maria, Home Buyer in New Jersey

For whom would an interest-only mortgage be best?

Asked by Maria, New Jersey Fri Sep 28, 2007

My husband and I have a decent savings, however, we don't want to blow most of it on a down-payment of our first home. In 4 years, we have another reliable source in which to invest our savings that will increase my husband's salary significantly. If we put most our money into a down-payment now, we won't have the full payment for our investment in 4 years.

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9
Hi Maria. If you have limited funds towards down payment, I would suggest against a interest-only loan. Out of all loans available to home-buyers today, FHA is the one that requires the least downpayment, which is 3.5%. FHA does not offer an interest-only option, just a fixed rate (which I recommend) and a variety of adjustable rates.

Meet face-to-face with a Loan Officer and allow him/her to review your credit and all necessary documentation, so they can determine how much you'll qualify for and go over what the downpayment will be and all other variables as well. Good luck!

Javier Meneses
Senior Loan Officer
NMLS #23130
STERLING NATIONAL BANK
310 Crossways Park Drive
Woodbury, NY 11797
jmeneses@snb.com
(516) 740-4478
4 votes Thank Flag Link Sun Feb 24, 2013
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.
3 votes Thank Flag Link Fri Sep 28, 2007
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
Web Reference: http://www.iansellsnola.com
2 votes Thank Flag Link Fri Sep 28, 2007
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.
2 votes Thank Flag Link Fri Sep 28, 2007
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.
1 vote Thank Flag Link Wed Feb 20, 2008
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
1 vote Thank Flag Link Fri Oct 5, 2007
NEVER accept an adjustable rate mortgage ! Lock your loan at these very low rates and sleep easy!

Many, many foreclosures are due to adjustable rate mortgages
0 votes Thank Flag Link Mon Feb 13, 2012
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…
Web Reference: http://getprequalified.com
0 votes Thank Flag Link Mon May 19, 2008
I think this should answer your question. http://getprequalified.com/article/104749/mortgage_loan_prog…
0 votes Thank Flag Link Sat Nov 10, 2007
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