What Are The Riskiest Types Of Mortgages Loans Available

What Are The Riskiest Types Of Mortgages Loans Available



What Are the​ Riskiest Types Of Mortgages Loans Available?
With the​ plethora of​ loan programs expanding every year,​ borrowers are finding themselves faced with decisions about what loan type is​ best for their individual situation .​
The potential for difficulties and confusion is​ significant,​ and it​ is​ for this reason that borrowers seek to​ educate themselves about the​ various types of​ mortgages and their features before committing to​ any contract.
If a​ borrower is​ seeking stability and consistency,​ the​ safest type of​ loan contract is​ the​ traditional 30-year fixed mortgage .​
With this loan,​ the​ borrower’s payment and interest rate does not change for the​ entire duration of​ the​ loan .​
The payment will be predictable and the​ borrower does not need to​ concern himself with potential changes in​ the​ real estate marketplace or​ the​ economy.
However,​ the​ 30-year fixed mortgage may not be attractive to​ the​ more sophisticated buyer,​ or​ to​ the​ buyer with less disposable income .​
These individuals often choose ARM’s,​ Interest Only loans,​ or​ Balloon loans .​
All three of​ these loans have their own unique set of​ characteristics that make them attractive,​ but each of​ these loan types carry the​ potential for confusion and significantly higher monthly payments in​ the​ future.
Any time a​ borrower gets a​ mortgage with a​ fluctuating payment schedule,​ there is​ the​ potential for problems in​ the​ future,​ which could ultimately result in​ damage to​ credit profiles or​ even foreclosure .​
The safest type of​ loan is​ one that the​ borrower can afford every month,​ and one with a​ guaranteed fixed payment .​
The alternative loan types mentioned above all have payments that will undoubtedly increase at​ some point in​ the​ future,​ thereby presenting risk to​ the​ home owner’s financial situation if​ he fails to​ adequately prepare for those changes.
When borrowers get ARM’s or​ Balloons or​ Interest Only loans knowing that they can barely afford the​ initial fixed payments,​ they are putting themselves in​ serious danger .​
Lenders and mortgage brokers often fail to​ adequately prepare the​ borrower for the​ increases in​ payments looming on​ the​ horizon .​
Realistically,​ borrowers should only apply for and obtain such contracts when they can legitimately afford the​ highest permissible payment in​ the​ contract,​ rather than just the​ initial reduced payment.




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