In the past, a person had limited options when borrowing money
for a home purchase. These days, there are exotic mortgage loan
options that satisfy just about every borrowing need.
Creative Mortgages
Getting a loan for a home purchase can be very stressful. What
if you don't qualify? How humiliated will you be? These days,
there's no reason to worry. The mortgage lending market has a
solution for just about everyone.
1. Do the Two Step. The Two-Step Mortgage is a mixed interest
rate loan. Essentially, the loan provides a lower fixed interest
rate for a period of 5 years or so and then adjusts to a new
rate at the end of the period. The new rate is dependent upon
the interest rates being charged at the time of the change. This
loan can be helpful for borrowers who are squeezing into a loan
since the initial period tends to have a lower interest rate
than a straight fixed interest loan.
2. Graduated Payments - Graduated Payment Mortgages are loans
that, well, have a graduated payment schedule. Depending on the
specific lender, the first five to seven years of mortgage
payments will be 10 to 20 percent lower than a fixed rate
mortgage. After the prescribed time, the payments will actually
be higher than a fixed rate loan. The advantage of this loan is
two fold. First, it lets you borrow more money than a fixed loan
because you can qualify for the lower initial payments. Second,
the loan is optimal if you are expecting to sell the house
within the initial five-year period after significant
appreciation.
3. Sharing Appreciation - Shared Appreciation Mortgages are
typically provided by private investors and even family members.
In essence, you borrow money to purchase a home by agreeing to
"share" a percentage of future appreciation in the home with the
lender. Private lenders can want as much as fifty percent of the
appreciation, but they will significantly lower the interest
rate on the loans. SAMs should really only be used if you have
horrible credit and no other options.
There three loan options are only the tip of the iceberg when it
comes to mortgages. If you need to get creative, find a
reputable mortgage broker in your area and see what they can
come up with for you.
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