Mortgage loans with low payments? For real??

[Anonymous]

In my search for an overall low payment mortgage loan to slow but sure increase my FICO score over time I have seen some interesting loan offers. Are these for real? They say they'll give ya a loan for $300,000 for $700 a month. What's the catch?

Lee

Message Edited by Lee_6063 on 04-17-2007 12:15 PM

[Anonymous]

Lee,

What they are offering is Negative Amortization loan. A generalization of how they work is as follows:

You have the choice of making a couple of different payments each month.

1.      Minimum Payment say at 1%             

[Anonymous]

Bascally a negative amoritization loan does not bode well for the equity

[Anonymous]

Sorry about the last post. You have 4 payment options each month:

                                                                                                 Example payment                                  

1. Minimum Payment (Let's say 1%)                                        $1000
2. Interest Only Payment                                                          $2000
3. 30 Year Amortized Payment                                                 $ 2200

If you make the Interest Only payment of $2000, you are paying back the interest portion of the loan. Hence there is no principal reduction. If you pay the 30 year payment of $2200, the first $2000 pays the interest you owe and the extra $200 pays down your principal balance.

If you choose to make the minimum payment $1000, you are not paying the interest that is due the bank that month. You are short in the above example $1000. That $1000 dollars would be added to the balance of your mortgage. (Negative Amortization)

This can be a good loan in some cases, but if you can afford to make an interest only payment each month you would be better off with a straight Interest Only loan.

If the people who are quoting you this rate are not explaining the Neg Am portion of this product, I would stay away from them.

[Anonymous]

Boheme:

Oh, so that's how they do it. I was wondering how a payment could be so low on a say $275,000 loan, paying $600 a month. Besides I don't think we have good enough credit scores for that. I have a feeling they'd quote us the payment yet have a different story when we get down to the real paperwork. I just don't want to waste my time. I like this guy we are working with now though. He is working out several different scenarios for us to see what we'd like to do and whats best for us. We may stick with the 2 year ARM.

Question?

Will an ARM and/or no interest loan still help us recover from low FICO scores? Or does that not look at good and therefore slow down the process of us getting those FICO scores up? Does it matter?

Thanks

Lee

[Anonymous]

Lee,

Your loan value compared to your house value is very low, that is a good thing. As far as I know, credit scoring will look at it as a mortgage, and not differentiate as to what type of mortgage. ( Exception is a HELOC which I have seen reported both as a revolving debt and other times as an Installment loan) The key is not the type of mortgage, but make your payments on time every month.

[Anonymous]

Boheme

Thank you so very much for all your help! Your insite has been very valuable to me and has cleared up some questions. I really appreciate it very much. Thank you for taking the time to explain all of this. Your generousity and easy way of explaining things has really helped a lot!!!

Lee

[Anonymous]

Brammy:

I can't thank you enough for the help. Thanks!! I really appreciate it! Wish me luck!

Thanks

Lee

Message Edited by Lee_6063 on 04-17-2007 07:10 PM

[Anonymous]

Steer clear.....and stick to the 'conventional' mortgage. Only buy what you can actually afford. The national foreclosure rate is currently on the rise because of mortgages like this and ARM's......If it sounds too good to be true, it is.

[Anonymous]

Hi BMax:

We have a ARM that will turn into a variable in 6 months, so that's why we are refinancing. We are refinancing the home we live in right now. We want to pay off the second (HELOC) which is at 14% (way too high). Our FICO scores are low and we need to improve them. We feel the only way around this is to refi now and get as low a payment as possible, then refi again in a couple years after working really hard to make sure we get our FICO scores up. Then we can get even a better interest rate when refinancing a few years from now.

Lee