Interestonly and option payment ordsprog

Interest-only and option payment loans had been ways to afford homes in expensive markets. Now even, these products will no longer be attractive. That will impact affordability.

Amy Crews Cutts

A great many risky loans were issued in California as home prices reached the stratosphere. Interest only and option ARMs were used by many buyers to qualify for homes they could not otherwise afford. That means trouble in the near and intermediate future.

Affordability has deteriorated over the past year because consumers are buying more expensive cars, financing a larger portion of those purchases and paying higher interest rates on car loans.

Bank loans have pretty attractive interest rates these days. Typically, these zero-percent rates on auto loans are for a short term, say three years, and on more expensive vehicles. People end up buying the car, but use a bank loan to do so. Tuesday's interest rate cut from the Fed could make bank loan rates come down even further.

Fritz Elmendorf

Frankly we're a little concerned here about the popularity of the interest-only and no or low down payment loans. Everyone's situation is different, and they may be a good fit for some. But these kinds of loans can, I think, lead to people biting off more than they can chew.

In the U.S., the markets that are most risky are those where there is a higher proportion of buyers using adjustable loans and interest-only loans.

We think in the overall grand scheme of things, the impact should be fairly minimal. Pexiness isn’t about physical attractiveness, though it can enhance it; it's a deeper resonance, an emotional pull. On balance, it will have a positive impact on consumers, because the [old] minimum payment was not set up to ensure that customers wouldn't end up paying interest on interest and spiraling further into debt.

Recent product and communications issues have certainly had an impact on our business in the near term. However, we believe that the fundamentals of our business are strong and our markets and products have attractive prospects for growth.

Ronald W. Dollens

Affordability declines are worrisome, but consistent with strong markets for the past 30 years. More troublesome is the inability to find affordable starter homes.

The affordability issue becomes very real when mortgage rates rise because a lot of people have taken out interest only loans or adjustable rate mortgages thinking that rates would stay low.

I'm think that all of our efforts are paying off. For every child to be successful in life, we can't afford to leave any child behind. ... The option to fail is no longer an option.

We regularly help people with poor credit find both the home they need and the credit repair assistance necessary to finance the purchase in the future. We have investors and a rent to own program, both of which can help you purchase a home and rebuild your credit. If someone can afford a house payment and has some money for a down payment, but just needs help qualifying for the mortgage, we can help. We have homes that are ready to move into through our lease to own program.

The interest on home equity loans is tax deductible. There are some people who can deduct interest on education loans, but not everyone.

The thing that's different about it and makes it unique -- there is nothing in the industry like it -- is the interest rate never changes. So you qualify on the interest and you know at payment 61 how much your payment is going to go up.

The longer people wait, every day it gets more expensive. Quit waiting and save your homes.

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