Home Mortgage Loans For People With Bad Credit Pros And Cons Of
Interest Only Loans

Home Mortgage Loans For People With Bad Credit Pros And Cons Of Interest Only Loans

Home Mortgage Loans For People With Bad Credit - Pro's And Con's Of Interest-Only Loans
Buying a​ home with poor credit is​ just as​ easy as​ buying a​ home with perfect credit .​
Years ago,​ many people with a​ low credit rating believed homeownership was unattainable .​
Fortunately,​ there are various loan programs designed to​ help people with low income,​ bad credit,​ and no down payment purchase a​ house .​
Included among these programs are interest-only loans.
What are Interest-Only Mortgage Loans?
Interest-only mortgage loans became popular in​ the​ early 2000's .​
The concept of​ interest-only loans is​ very unique .​
Ordinarily,​ monthly mortgage payments consist of​ a​ portion of​ the​ payment being applied to​ the​ principal balance,​ and a​ portion applied to​ the​ interest .​
In order to​ payoff a​ mortgage in​ 15 or​ 30 years,​ a​ specific amount of​ money must be paid each month.
On the​ other hand,​ if​ you​ obtain an​ interest-only mortgage loan,​ you​ pay only the​ interest for the​ first few years .​
Interest-only periods vary .​
Homeowners may opt for a​ three,​ five,​ seven,​ or​ ten year interest-only loan .​
After the​ interest-only period ends,​ the​ homeowner must begin making payments toward the​ principal and interest.
Why is​ an​ Interest-Only Loan Beneficial?
If you​ live in​ a​ booming housing market,​ an​ interest-only loan may be your only option for buying a​ home .​
Many are attracted to​ these loans because the​ initial mortgage payments are low .​
For example,​ a​ $200,​000 conventional loan has a​ monthly payment of​ about $1200 .​
With an​ interest-only loan,​ the​ mortgage would be about $800 a​ month .​
Hence,​ if​ you​ are buying in​ an​ overpriced market,​ affordable living is​ within reach.
Pitfall of​ an​ Interest-Only Loan
Once the​ interest-only period ends,​ you​ still owe the​ original loan amount .​
When homeowners begin making payments towards the​ interest and principal balance,​ mortgage payments may increase 40% .​
Most homeowners are unable to​ afford a​ mortgage increase .​
If you​ plan on​ living in​ your home for several years,​ an​ interest-only loan may not be a​ good option .​
On the​ other hand,​ if​ you​ earn a​ sizeable income and can afford a​ higher mortgage,​ you​ may benefit from this type of​ loan.
Another option involves selling your home before the​ interest-only period ends .​
If home values in​ your area have increased significantly,​ you​ may capitalize from the​ equity .​
However,​ if​ the​ housing market takes a​ nosedive and home values decline,​ you​ may be unable to​ sell your home.

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